Import entitlement sale proceeds treated as business income when the entitlement arises from export activity and is sold for consideration.

A transferable import entitlement earned under an export promotion scheme was treated as a business-linked receipt because it arose directly from export activity and was sold for consideration. The Tribunal held that the right was not a bounty or gift, and its self-generated character or lack of separate cost of acquisition did not convert the sale proceeds into a capital receipt. The amount was therefore includible as business income under section 28(i) of the Income-tax Act, 1961, while the separate question under section 28(iv) was not decided.

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Issues: Whether the amount realised on sale of import entitlements obtained under the export promotion scheme was assessable as business income.

Analysis: The import entitlements arose directly from the assessee's export activity under a statutory export promotion scheme and were transferable for consideration. The Tribunal held that the entitlement was not a bounty or gift, but a valuable right arising in the course of business. The fact that the right was self-generated and had no separate cost of acquisition did not alter its character as a business-linked receipt when it was sold. The Tribunal also noted that the question referred to it was limited to inclusion as business income, and it therefore did not decide the separate issue of taxability under section 28(iv).

Conclusion: The amount of Rs. 1,35,020 was held to be includible as business income and the assessee's contention that it was a non-taxable capital receipt was rejected.

Final Conclusion: The receipt from sale of import entitlements was treated as a taxable business receipt, and the Commissioner (Appeals)'s view was reversed.

Ratio Decidendi: A transferable entitlement received as an incident of carrying on export business and sold for consideration constitutes a business receipt under section 28(i) of the Income-tax Act, 1961, and is not a capital receipt merely because it is self-generated.

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