Important Point
The receipt from the sale of import entitlements could not be included in the income of the assessee for the purpose of computing the relief under Section 80HH of the Income-tax Act, 1961.

Judgment

Bharucha, J.-The judgment and order under appeal (190 ITR 274)1 was pronounced by a Division Bench of the Karnataka High Court on a refer­ence made by the assessee, and the Revenue is in appeal. The High Cout answered in favour of the assessee the following question:

“Whether, on the fact and circumstances of the case, the Tribunal was justified in law in holding that the receipt from the sale of import entitlements could not be included in the income of the assessee for the purpose of computing the relief under Section 80HH of the Income-tax Act, 1961?”

2. The identical question had arisen in respect of the same assessee for an earlier year and the High Court had then answered the question against the assessee (150 ITR 293)2. The assessee had not carried the matter further. Ordinarily, therefore, the Division Bench hearing the assessee’s appeal for the later assessment year would have been bound by the earlier decision. However, it chose not to do so relying upon the fact that Section 28 of the Income Tax Act, 1961 had been amended in the meanwhile by the Finance Act, 1990 with effect from 1st April, 1962 by insertion of clause (iiia) and clause (iiib) with effect from April 1, 1967, which read as follows:

“(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947).

(iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India.”

3. As we shall point out, these amended provisions have no relevance to the point at issue and the High Court was in error in relying thereon and not following the earlier judgment.

The facts are:

The assessee firm is engaged in processing prawns and other sea food, which it exports during the Assessment Years 1975-76 and 1976-77. It also earned some import entitlements granted by the Central Government under an Export Promotion Scheme. The assessee was entitled to use the import entitlements itself or sell the same to others. It sold the import entitlements that it had earned to others. Its total income for the aforementioned assessment years included the sale proceeds for such import entitlements and it claimed relief under Section 80HH of the Act in respect also of the sale proceeds of the import entitle­ments.

Section 80HH, so far as it is relevant, read at all relevant times thus:

“80HH. Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas.-(1) where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, he allowed, in computing the total income of the assessee, a deduction from such profits and against of an amount equal to twenty per cent thereof.”

4. To analyse the provision so far as it is relevant here, if the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, the assessee is entitled to be allowed, in the computation of his total income, a deduction from the profits and gains derived from the industrial undertaking of an amount equal to 20% thereof.

5. The question, therefore, was whether the income derived by the assessee by the sale of the import entitlements was profit and gain derived from its industrial undertaking of processing sea food. The Division Bench of the High Court came to the conclusion that the income which the assessee had made by selling the import entitlements was not a profit and gain which it had derived from its industrial undertaking. For that purpose, it relied upon the decision of this Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT3. It was there held that the expression “attributable to” was wider in import than the expression derived fr