The requirement of filing the audit report along with the return under Sub-section (4) of Section 80HHC is directory and not mandatory.

( 1 ) THE following four questions have since been referred before this court under Section 256 (1) of the Income-tax Act, 1961 :" (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sale proceeds of Rs. 7,25,854 received by the assessee on the sale of the export licence represented capital receipt and was exempt from income-tax ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of Section 28 (iiia) were not applicable to the receipt of the aforesaid sum ? (3) If the answer to the above questions are in the affirmative, whether the Tribunal was right in law in holding that the export licence had no cost of acquisition and the sale proceeds thereof were not liable to capital gains tax ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to the deduction under Section 80hhc in spite of the fact that the audit report in Form No. 10cc-AC required to be filed along with return of income under Sub-section (4) of Section 80hhc was filed only before the Tribunal. "question No. 2 :

( 2 ) MR. Sumit Chakravarty, learned counsel for the Revenue, in his usual fairness, has pointed out with regard to question No. 2 that Section 28 (iiia) of the Income-tax Act, 1961, has no manner of application in the present case. In fact, we find from the records that the receipt, which was sought to be brought within the tax net was received out of a transfer of an export licence granted under the Export Control Order, 1977. Whereas Clause (iiia) of Section 28 relates to profit on sale of a licence granted under the Imports (Control) Order, 1955, framed under the Imports and Exports (Control) Act, 1947. Thus, as rightly contended by Mr. Chakravarty on behalf of the Revenue, the profit out of sale of the export licence granted under the Export Control Order, 1977, cannot be brought within the purview of Section 28 (iiia ). Therefore, this question is answered, as fairly conceded by learned counsel for the Revenue, against the Revenue in the affirmative and in favour of the assessee. Question No. 3 :

( 3 ) QUESTION No. 3 relates to the charging of the receipt under capital gains. Capital gains are charged under Section 45 computed in terms of Section 55 after arriving at the cost of acquisition. Till 1995, Section 45, as it stood, did not include transfer of a capital asset in the form of a licence granted under the Export Control Order, 1977. That apart, the cost of acquisition could not have been calculated within the method of computation provided thereunder since the cost of acquisition was unascertainable. We had occasion to deal with such question in Income-tax Reference No. 36 of 1998 CIT v. General Industrial Society Ltd. disposed of by us on March 25, 2003. Therefore, the receipt on transfer of the capital asset could not be brought within the purview of capital gains when the cost of acquisition is unascertainable. As such, as rightly contended in his usual fairness by learned counsel for the Revenue, this question is also answered in the affirmative against the Revenue and in favour of the assessee.

( 4 ) MR. Chakravarty, learned counsel for the Revenue, has insisted on questions Nos. 1 and 4. We shall deal with question No. 1 first. Question No. 1 :

( 5 ) MR. Chakravarty, learned counsel for the Revenue, has attempted to point out that the receipt on transfer of the licence is an income to be included in computing the total income in view of Section 10 (3) in excess of Rs. 5,000. As soon it is an income it has to be included in the income and be taxed.

( 6 ) MR. R. K. Murarka, learned counsel for the assessee/respondent, on the other hand, has contended that Section 10 (3) provides for some exception. It is not a charging section. Therefore, this cannot be applied for charging the said receipt. According to