Business income from foreign exchange sales taxed where receipts were linked to normal trading operations and not casual gains.

In a section 66 reference, a new factual or legal contention not raised before the Income-tax Officer, the Appellate Assistant Commissioner or the Tribunal cannot be entertained because it does not arise from the Tribunal's order. The court therefore rejected the assessee's attempt to argue, for the first time in reference, that the profit came from an unsuccessful attempt to start a new business. On the taxability issue, surplus from sale of dollars and sterling was treated as business income where the Tribunal found the foreign exchange transactions were incidental to the assessee's normal trading operations and supported by the record. The receipt was not regarded as a casual and non-recurring receipt and was not exempt under section 4(3)(vii).

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Issues: (i) Whether the assessee could raise for the first time in reference the contention that the profit arose from an unsuccessful attempt to start a new business. (ii) Whether the surplus from sale of dollars and sterling was business income and not exempt as a casual and non-recurring receipt.

Issue (i): Whether the assessee could raise for the first time in reference the contention that the profit arose from an unsuccessful attempt to start a new business.

Analysis: The contention had not been raised before the Income-tax Officer, the Appellate Assistant Commissioner, or the Tribunal. In a reference under section 66(1), the Court cannot decide a question that does not arise out of the Tribunal's order and was not in issue before it.

Conclusion: The contention was not entertainable in the reference and was rejected.

Issue (ii): Whether the surplus from sale of dollars and sterling was business income and not exempt as a casual and non-recurring receipt.

Analysis: The Tribunal's finding was that the profit was incidental to and earned in the course of the assessee's normal business. The record showed that the assessee was a general importer, kept one set of accounts for all its trading activities, and the foreign exchange transactions were connected with the trading venture entered into during the relevant year. There was material supporting the finding that the receipt arose from business and was not a mere capital appreciation or casual receipt.

Conclusion: The amount was held to be taxable business income and not exempt under section 4(3)(vii).

Final Conclusion: The reference was answered in favour of the revenue, and the assessee's objection to taxability failed.

Ratio Decidendi: In a section 66 reference, a new factual or legal contention not raised before the Tribunal cannot be entertained, and a receipt connected with the assessee's trading operations is taxable business income where the finding of business nexus is supported by material on record.

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