Export entitlement sale proceeds treated as revenue receipts when earned through ordinary business operations and business nexus.

Sale proceeds from transfer of import entitlements under an export promotion scheme were held to be revenue receipts, not capital receipts. The Calcutta HC noted that the entitlements arose directly from the assessee's export business and could be used by the exporter or transferred to another eligible member for cash. Because the right was acquired in the course of carrying on the export business, the profit derived from dealing with that right formed part of the assessee's commercial operations. The decisive test was the nexus between the receipt and the business carried on, rather than whether the assessee was separately engaged in trading import entitlements. The receipts were therefore assessable as business income.

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Issues: Whether the sale proceeds realised by the assessee on transfer of import entitlements obtained under the export promotion scheme were capital receipts or revenue receipts assessable to tax.

Analysis: The import entitlements arose directly from the assessee's export business under the scheme and could be used by the exporter or transferred to another eligible member for cash. The right was acquired in the course of carrying on the export business and the profit arose from dealing with that right in the ordinary course of the assessee's commercial operations. The decisive test was the connection of the receipt with the business carried on by the assessee, not whether the assessee was separately engaged in trading in import entitlements.

Conclusion: The receipts were revenue in nature and assessable as business income; the answer to the question was in favour of the Revenue and against the assessee.

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