The main legal point established in the judgment is that the amount received from the sale of import entitlements is business income and must be included in the total income of the assessee. The amendments made to section 28 of the Income Tax Act, 1961, also influenced the decision in favor of the assessee.

M.P. Chandrakantharaj Urs., J.—In this Income Tax reference case, the following question is referred to us for our answer :

"Whether, on the facts and in the 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. In the assessment year 1979-80, Messrs. Sterling Foods, Mangalore, received a sum of Rs. 3,09,800 by way of sale of import licences and export commission. In the return filed, they claimed relief in respect of that receipt under section 80HH in respect of sale of import licences. The Income Tax Officer held that since the profit derived from the industrial undertaking results in a negative figure, no deduction under section 80HH was admissible. Therefore, he rejected the claim of the assessee. On appeal, the Commissioner of Income Tax (Appeals) held that the receipts on sale of import licences were revenue receipts and as such there was no question of relief under section 80HH on such receipts. To come to that conclusion, he followed the order of the Tribunal in the earlier year in the case of the assessee itself. On appeal filed against the order of the Commissioner, the Tribunal, following its earlier order dated January 7, 1981, in I.T.A. Nos. 190 and 191/Bang of 1979, upheld the order of the Commissioner and dismissed the appeal. Therefore, it referred the question extracted above for answer by this court.

3. In the case of Sterling Foods Vs. Commissioner of Income Tax, Karnataka, (1984) 150 ITR 292 KAR, this court, on identical facts and circumstances, ruled as follows (headnote) :

"(i) that the amount received by an assessee by the sale of import entitlements is business income and not capital proceeds and that income must be included in the total income of the assessee under section 5 of the Act. The total income of any previous year of the assessee includes income from whatever source derived. Therefore, the fact that the income from the sale of import entitlements falls to be included in the total income chargeable to Income Tax, could not be itself confer any right on the assessee to claim relief under section 80HH.

(ii) The import entitlements were awarded by the Government under a scheme to encourage exports. The source referable to the profits and gains arising out of the sale proceeds of the import entitlements would, therefore, be the scheme of the Government and not the industrial undertaking of the assessee."

4. In the normal course, we would have had no choice but to follow the answer rendered by this court to the identical question raised for an earlier assessment year but for the fact that section 28 of the Income Tax Act, 1961, has been amended by the Finance Act of 1990 with effect from April 1, 1962, by the insertion of clause (iiia) and clause (iiib) with effect from April 1, 1967, and they 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;"

5. Section 28 provides for what income shall be chargeable to Income Tax under the head "Profits and gains of business or profession". Therefore, by the amendment effected to section 28, what was held by this court not to be an income arising out of profits and gains of business or profession, by operation of law, has become such income. Therefore, once it becomes income, automatically, the benefits conferred by section 80HH will be attracted to the case of the assessee.

6. The matter should have ended there by our proceeding to answer the question in favour of the assessee, but Mr. Chander Kumar has raised certain doubts and, therefore, we shall meet the contentions adva