1.       JOINT C.I.T., MUMBAI VS. M/S ROLTA INDIA LTD., CIVIL APPEAL NO. 135 OF 2011, SUPREME COURT OF INDIA

Even s. 115J / 115JA Book Profit Cos liable for advance-tax & s. 234B interest

The Supreme Court had to consider whether advance tax was payable on book profits u/s 115JA and whether for default interest u/s 234B could be charged on the tax calculated on book profits u/s 115JA. HELD deciding the issue against the assessee:

S. 115J/115JA are special provisions. For purposes of advance tax the evaluation of current income and the determination of the assessed income had to be made in terms of the statutory scheme comprising s. 115J/115JA. Hence, levying of interest was inescapable. The assessee was bound to pay advance tax under the scheme of the Act. S. 234B is clear that it applies to all companies. There is no exclusion of s. 115J/115JA in the levy of interest u/s 234B (Kwality Biscuits Ltd vs. CIT 243 ITR 519 (Kar) (SLP dismissed in 284 ITR 434) considered). 

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2.      THE CENTRAL INDIA ELECTRIC SUPPLY CO. LTD. Vs. INCOME TAX OFFICER, COMPANY CIRCLE – X, NEW DELHI & ANR., ITA NO. 17/1999, HIGH COURT OF DELHI, DATE OF DECISION 28.01.2011

The questions of law, which arise for consideration before us in the present appeal, are:  

(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that re-assessment proceedings under Section 147(a) read with Section 148 of the Income-tax Act, 1961 had been rightly initiated against the assessee?  

(2) Whether the Tribunal was right in holding that valid approval had been accorded by the Central Board of Direct Taxes under Section 151(i) of the Income-tax Act for re-opening of the assessment of the assessee?  

Since the amount of enhanced compensation was deposited by the assessee in a nationalized bank, the benefit of Section 54-E of the Income Tax Act, was claimed by the assessee. Since income had accrued to the assessee company under the head of „Long Term Capital Gains (LTCG) on transfer of assets in respect of its two units, it was liable to tax in the same assessment year when the transfer took place and escaped assessment. Any profit or gain arising from transfer of capital assets affected in a previous year was chargeable to tax under the head of Capital Gains as income of the previous year when the transfer took place, i.e., 1964. Therefore, the assessee was liable to pay additional tax on the income that escaped assessment.  

In order for the provisions of Section 147 of the IT Act to apply, the ITO has to have reason to believe that income chargeable to tax had escaped assessment for that year as a consequence of „omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for assessment for that year. It was submitted that all the necessary facts were, in fact, set out and the factum of the litigation pending and reference to the Award formed a part of the Report of the Board of Directors, which was filed along with the returns.

The appellant as assessee had disclosed the enhanced amount of compensation received in the relevant assessment year. Just because the appellant could avail of the benefit of the then existing provisions of Section 54–E by depositing the amount and, thus, not incur the liability of capital gains would not imply that the same can be reason to re-open the closed chapter of the assessment year 1965–66.  

Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority.  The twin condition of the satisfaction of the ITO, i.e., (i) there must be a reason to believe that income chargeable to tax has escaped assessment; and (ii) the ITO must also have reason to believe that such escapement of income from assessment is by reason of omission or failure on the part of the assessee to disclose fully and truly material facts necessary for assessment of that year, have to be satisfied.

In the present case, there was no lack of disclosure by the assessee. This is, of course, apart from the fact that the assessee could hardly disclose as to what would be the compensation, which he may get ultimately if the plea of enhancement is sustained.  

CONCLUSION:  

For all the aforesaid reasons, we find that the impugned order of the Tribunal is not sustainable and is accordingly set aside. The notice issued under Section 148 of the IT Act is quashed and all proceedings pursuant thereto are also accordingly quashed. Consequently, both the questions are answered in favour of the appellant / assessee and against the respondent / Department. 

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3.      CIT VS. M/S INTERNATIONAL RESEARCH PARK LAB. LTD., ITA NO. 8/2001 & 16/2001, HIGH COURT OF DELHI, JUDGEMENT DELIVERED ON : 06.01.2010 

In these two references for the assessment years 1990-1991 and 1991-1992, the following questions were referred to us for our decision:

(1) Whether the Tribunal is right in holding that for determining the quantum of deduction in respect of profits derived from export u/s 80HHC, the entire profits computed under the head “profits and gains of business or profession” including the income of the nature of commission is to be taken into account?  

(2) Whether the Tribunal is right in holding that commission received by the assessee on assignment of export orders to another party in India will form part of profits eligible for deduction u/s 80HHC?

It is not necessary for us to examine these questions in detail in as much as the same are covered in favour of the assessee and against the revenue in view of the Supreme Court decisions Consequently, both the questions referred to us in these references are decided against the revenue and in favour of the assessee, following the Supreme Court decision referred to above.

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