Dipak Kumar Sen, J. - (1.) Davidson of India (P.) Ltd., Calcutta (which has since been amalgamated with Andrew Yule & Co. Ltd.), the assessee, was assessed to income-tax in the assessment year 1967-68, the corresponding accounting year ending on September 30, 1966.
(2.) At the material time, the assessee carried on the business, inter alia, of manufacture of tea garden machinery, a priority industry within the meaning of Section 80E of the Income-tax Act, 1961. On export of machinery manufactured by it, the assessee became entitled to and obtained import entitlements which were sold during the relevant assessment year. The assessee contended that the profit arising from the sale of the import entitlements was also part of the profit derived from the priority industry, namely, manufacture of tea garden machinery carried on by it, and deduction provided under Section 80E should be allowed on such profit. The contention of the assessee was not accepted by the Income-tax Officer who included the entire amount arising from the sale of the import entitlements in the income of the assessee.
(3.) On an appeal by the assessee, the Appellate Assistant Commissioner held that the profit on sale of the import entitlements had been derived as a result of manufacture and export of the products of a priority industry in which the assessee was engaged and, in the circumstances, the income from sale of such entitlements would form part of the appellant's income from a priority industry. He directed the Income-tax Officer to allow appropriate deduction under Section 80E of the Act.;