Court treats sale of import entitlements as business profits, not capital receipt, following Bombay High Court decision.

The court held that the sale of import entitlements by an exporter should be treated as business profits, following the decision of the Bombay High Court. The court rejected the argument for a reference and upheld the treatment of the sale proceeds as revenue, not capital receipt. The sale of import licenses without actual importation was deemed to be part of the business profits, emphasizing that exploiting entitlements through sale does not change the nature of the receipt.

---

---

Issues:
1. Taxability of premium received on the sale of import entitlements under section 28(iv) of the Income-tax Act.
2. Distinction of the decision of the Supreme Court in CIT v. Madan Gopal Radhey Lal by the Tribunal.
3. Whether the premium received on the sale of import entitlements can be considered as capital gain and not liable to tax based on the decision of the Madras High Court in Addl. CIT v. Sheik Mohideen.

Analysis:
The case involved an exporter of fish and fish products who received import entitlement based on its exports. The exporter sold the import licenses without actually importing the goods, resulting in sale proceeds of Rs. 5,80,436.89. The Income-tax Officer treated this amount as a revenue or business receipt. The Commissioner of Income-tax (Appeals) upheld this treatment, considering the close nexus between exports and import entitlement. The matter was then taken to the Tribunal, which, following a decision of the Bombay High Court, deemed the sale proceeds as a revenue receipt, not a capital receipt.

The main contention raised by the assessee was the absence of a specific decision by the court on the matter, seeking a reference for an authoritative ruling. However, the court, in agreement with the Bombay High Court decision, held that the sale of import entitlement should be considered a revenue receipt. The court emphasized that exploiting the import entitlement through sale, instead of actual import, does not change the nature of the receipt. The court supported its decision by quoting the Bombay High Court's reasoning that import entitlements obtained in the course of business constitute profits and gains of the business, making the sale proceeds also part of the business profits.

Ultimately, the court rejected the petition, stating that the sale of import entitlements should be treated as profits of the business, aligning with the Bombay High Court's view. The court concluded that there was no justification for a reference in this case, thereby upholding the treatment of the sale proceeds as a revenue receipt and not a capital receipt.

---