Law: Income Tax Act, 1961

Section: 2(24)(vb),28(iiib)

(a) Income-tax---Income---Business income--Cash compensatory receipts from Government---Law applicable---Effect of insertion of cl. (iiib) in S. 28 and cl. (vb) in S.2(24)--Cash compensatory receipts are assessable as business income---Indian Income Tax Act, 1961, Ss. 2(24)(vb) & 28(iiib). The Finance Act, 1990, incorporated clause (iiib) to section 28 of the Income Tax Act, 1961, with effect from April 1, 1967, to the effect that cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government shall be chargeable to income-tax under the head "profits and gains of business or profession". This amendment has been made retrospectively with effect from April 1, 1967. Sub-clause (vb) in clause (24) of section 2 of the Income Tax Act, 1961, was also incorporated by the Finance Act, 1990, with effect from April 1,s 1967, that income includes any sum chargeable to income-tax under clause .(iiib) of section 28. Hence cash compensatory support receipts received from the Government would be taxable receipts in the hands of the assessee and constitute profits and gains: CIT v. Smarts (P.) Ltd. (1998) 233 ITR 243 (Delhi) fol. (b) Income-tax--- ----Income or capital--Drawback of duty received from Central Government-¬Gains from sale of import entitlements---Revenue, receipts, Indian Income Tax Act, 1961. The drawback of duty received from the Central Government and gains from sale of import entitlements are revenue receipts. (c) Income-tax--- ----Assessment---Appeal to CIT (Appeals)---Enhancement of assessment¬ Powers of CIT (Appeals)---Notice has to be given before considering question of enhancement---Indian Income Tax Act, 1961, S-451(2). The power for enhancement by the Commissioner of Income-tax is subject to the limitation as provided in subsection (2) of section 251 and such question could be considered only if notice was given in that regard. CIT v. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) fol. (d) Income-tax--- ----Appeal to Appellate Tribunal---Powers of Tribunal---Power to allow additional grounds of appeal---Income Tax Act, 1961, S.254, The Tribunal has discretion to allow…

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