Case: Hindustan Lever Limited Vs. Commissioner of Income Tax

1. The assessment years involved in these matters are 1962-63 and 1963-64. The assessee is a manufacturing company. In the relevant years of account, it made large profits. The assessee had also exported groundnut oil which resulted in an apparent loss of Rs. 3.44 lakhs. However, for the exports made at a loss, the assessee was rewarded with import entitlements. It utilised the import entitlements in purchasing palm oil from foreign countries. The imported palm oil was consumed internally by the assessee for manufacturing other products. The particulars of the products manufactured by the assessee utilising palm oil have not been given in the order of the Tribunal.

Court's reasoning:
10. In the instant case, the immediate source of the profit is sale of goods. The export of other goods is not even the second degree but it has to be traced to an even more remote degree. The import was of palm oil. The import was possible because of earlier export of goods at loss. In the chain of sequence the earlier export would be four degrees away