B.R. Arora, J. - (1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, at the instance of the Revenue, under Section 256(1) of the Income-tax Act, 1961, has referred the following question of law for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in allowing the claim of the assessee holding that cash compensatory receipt cannot be treated as revenue receipt for taxation and thereby in entertaining additional ground of appeal without affording the Assessing Officer an opportunity to examine the claim before directing to allowing the same ?"
(2.) AFTER the reference made by the Tribunal, the law on the point has been amended and an Explanatory Note on the provisions of the Finance Act, 1990, was issued modifying the provisions relating to exemption of income from export. Circular No. 572 (see [1990] 186 ITR (St.) 81), dated August 3, 1990, issued in this regard reads as under (page 100) : " Explanatory notes on the provisions of the Finance Act, 1990.--Modification of provisions relating to exemption of income from exports.--27. At present exporters are given incentives by way of Cash Compensatory Support (CCS), drawback of duty and import entitlement licences. The taxation of CCS has been a subject-matter of litigation. The Calcutta High Court in the case of Jeewanlal (1929) Ltd. [1983] 142 ITR 448 (Cal) held that the CCS received by an exporter was a revenue receipt and was subject to income-tax. The Special Bench of the Tribunal has, however, in a case, distinguished the aforesaid decision and come to the conclusion that the CCS was a capital receipt and hence not subject to tax. The Department's view all along has been that CCS or any other subsidy received by an exporter as an export incentive is a revenue receipt and hence, taxable. 27.1. Similarly, the Department's view as regards drawback of duty and profit on sale of import entitlement licences has been that these are revenue receipts and hence liable to tax. There are many court decisions supporting this view. 27.2. To put an end to litigation which may arise regarding the taxability of these incentives received by exporters, new Clauses (iiia), (iiib) and (iiic) have been inserted in Section 28 of the Income-tax Act to provide that profit on sale of import entitlement licences, CCS and drawback of duty respectively shall be chargeable to income-tax under the head 'Profits and gains of business or profession'. These have further been included in the definition of the term 'income' in Clause (24) of Section 2. 27.3. These amendments will take effect retrospectively from the dates from which these incentives were introduced. Thus, amendment with regard to profit on sale of import entitlement licences will apply from 1st April, 1962 ; cash assistance from 1st April, 1967, and drawback of duty from 1st April, 1972, and will, accordingly, apply in relation to the assessment years 1962-63, 1967-68 and 1972-73, respectively, and subsequent years." In view of the amendment made in the taxing provision regarding the taxability of these incentives received by the exporters, new Clauses (iiia), (iiib) and (iiic), have been inserted in Section 28 of the Income-tax Act to provide that profit on sale of import entitlement licences, CCS and drawback of duty respectively shall be chargeable to income-tax under the head "Profits and gains of business or profession". These have further been included in the definition of the term "income" in Clause 24 of Section 2 and, hence, it is not necessary to go into the merits of the case. The law has been amended with retrospective effect from the dates from which these incentives were introduced. In view of the amended provisions of Section 28 of the Act relating to exemption of income from exports (item No. 27.2. above), the reference is answered in favour of the Revenue and against the assessee.;