Court rejects appeals on franchisee deposits, upholds income addition. Litigation policy key in decision.

The Court rejected the appeals regarding the addition to income of amounts deposited by franchisees for freezers supplied by the assessee. Despite a strong case presented by the respondent's counsel, the Court decided to reject all appeals, including the two cases not marked for withdrawal, based on the litigation policy. The Court emphasized that the demands were below Rs. 50 lakhs, and even though there were appeals with higher demands, they were also rejected in line with the litigation policy, preserving legal questions for potential future review.

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Issues:
1. Addition to income of amounts deposited by franchisees for freezers supplied by assessee.
2. Continuance of appeals based on litigation policy.
3. System of supplying freezers to franchisees and depreciation on value.
4. Warrant for addition made in the year of franchisee agreement.
5. Rejection of appeals based on litigation policy.

Analysis:

1. The primary issue in the batch of cases involved the addition to income of amounts deposited by franchisees for freezers supplied by the assessee. The franchisees were required to deposit the value of the freezers they received. The contention was that the demand in all cases was less than Rs. 50 lakhs, and the appeals' continuation based on the current litigation policy was questioned.

2. The learned Standing Counsel was directed to obtain instructions regarding the withdrawal of the appeals. It was revealed that written instructions had been received for the withdrawal of all appeals except two specific cases, identified as ITA Nos. 233 of 2012 and 245 of 2012.

3. The respondent's counsel explained the system of supplying brand new freezers to franchisees, with depreciation on the value each year. The depreciated amounts were treated as income for that year. If a franchisee terminated the agreement, the balance written down value was refunded. It was argued that income was returned in phases, and there was no justification for adding it in the agreement year as it did not accrue as income to the assessee.

4. Despite the respondent's counsel asserting a strong case on merits, considering the Revenue's request for withdrawal of almost all cases, the Court decided to reject even the two cases for which instructions had not been received. The rejection was based on the litigation policy introduced by the Central Government. The demand in ITA No. 233 of 2012 was approximately Rs. 17 lakhs, and in ITA No. 245 of 2012, it was around Rs. 25,44,000.

5. Additionally, there were other appeals in the batch with demands exceeding Rs. 50 lakhs but less than Rs. 50,00,000. In light of this, the appeals were rejected based on the litigation policy, while preserving the raised legal questions for future consideration.

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