TaxTMI 
TaxTMI 
2008 (4) TMI 673
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....e hands of the three appellants. 3. And further, the appellants had received a sum of Rs. 16,85,000 as co-owners from their tenant who had occupied two shop units separated by a common wall - the above amount was paid as consideration for permitting the tenant to create an opening in the wall for the tenant's convenience. This amount was treated as a revenue receipt and one-third share of each of the appellants was assessed to tax by the department, out of the said amount of Rs. 16.85 lakh (Rs. 5,61,667). 4. The appellants challenged the assessment orders by way of individual appeals before the Commissioner of Income-tax. By a common order dated 31-3-1997 the Appellate Commissioner reduced the estimate of cost of construction to Rs. 55,69,015. One-third of the said amount (Rs. 4,33,458) in respect of each assessee, was directed to be taxed. Insofar as the receipt of Rs. 16.85 lakh was concerned, it was held not to be a revenue receipt and one-third of the amount in each assessee's case was directed to be deleted. The assessee's as well as the revenue's preferred appeals before the Income-tax Appellate Tribunal challenging the above common order. 5. During the pendency of t....
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....of the assessees. And proceeding to consider the appeals of the revenue on merits has reversed the order of the first appellate authority to the effect that any consideration received by an owner of property in return for the occupation and permission for usage of the property is taxable as rent receipts under the Income-tax Act and cannot be taken to be capital in nature. While rejecting the other contention regarding the computation of estimated cost of construction as being erroneous. 9. It is in the above background that the present appeals are filed. While admitting the appeal to file, this Court had opined that the questions of law as framed in the memorandum of appeal do arise for consideration. The questions of law are as follows : "(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in allowing the revenue's appeal in respect of receipt of Rs. 16,85,000 by Co-owners contrary to instruction dated 26-11-1998 issued under section 96(1) of Finance Act (2) of 1998/K.V.S.S. 1998, which is binding on revenue, (vide Annexure 'E' - page) [234 ITR (st.) 62] (2) Whether the Tribunal was corre....
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....ayment for a convenience provided to the tenant and was in the nature of a capital receipt. 11. The counsel would place reliance on the following authorities in support of the appeals. (a)A clarification issued by the Central Board of Direct Taxes bearing No. 149/145 98-TPL (See: 233 ITR (st.) 50 wherein it has been clarified that the Department understands the scheme to be a .......... "Package for settlement of tax arrears of a particular assessment year in entirety......" And that an assessee could not seek settlement of part of arrears towards interest, under the scheme while reserving a right of appeal against the quantum of income or tax. (b) All India Federation of Tax Practitioners' case (supra). (c)Press Release dated 26-11-1998 issued by the CBDT to State that the Central Government has decided to accept the decision of the Delhi High Court in All India Federation of Tax Practitioners' case (supra) (d) Killick Nixon Ltd. v. Dy. CIT [2002] 258 ITR 6271. Wherein it is held : "The order to be made by the designated authority under the....
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....; (a)CBDFs clarification No. 149/152/98-TPL, dated 17-12-1998; (b) Union of India v. Onkar S. Kanwar [2002] 258 ITR 7612 (SC) wherein on the following facts it was held as follows : "A & T Limited, company, was clearing, for purposes of excise duty, certain tyres on the basis that the tyres were for use in trailers. It was found that these tyres were being fitted to light commercial vehicles. The Commissioner of Central Excise issued show-cause notices to the company as to why excise duty and penalty should not be levied. In the same show-cause notices the directors/officers of the company were also called upon to show cause as to why penalty be not imposed on them. The company and its directors/officers replied to the show-cause notices. The Commissioner adjudicated the show-cause notices and called upon the company to pay excise duty and also a penalty. The Commissioner also required each director/officer to pay a penalty. Appeals were preferred by the company as well as the directors/officers to the Customs, Excise and Gold (Control) Appellate Tribunal. Pending the appeals, the company as well as the directors/officer....
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.... construed as the whole of such disputed chargeable expenditure, disputed chargeable interest or disputed income as is relatable to the disputed tax which is contemplated; -'Disputed tax' is defined as follows : "(It) means the total tax determined and payable in respect of an assessment year under any direct tax enactment but which remains unpaid as on the date of making the declaration under section 88." -'Tax arrears' is defined as :- "(i )In relation to direct tax enactment, the amount of tax, penalty or interest determined on or before 31-3-1998, under that enactment in respect of an assessment year as modified in consequence of giving, effect to an appellate order but remaining unpaid on the date of declaration;" Under the scheme, where any person makes a declaration, after 1-9-1998 but on or before 31-12-1998, in respect of his tax arrears-the amount payable under the scheme was to be determined at the rates specified under section 88. In the case of a declarant being a person as in the instant case, was at thirty per cent of the disputed income. When a declaration is made under section 88 before the designa....
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....List-I of the VII Schedule to the Constitution, in the case of All India Federation of Tax Practitioners (supra ) with particular reference to the Proviso to section 92, the Court has, by way of an example, explained the unfairness of the classification made in the class of litigating assessees where the litigating assessee is in arrears merely by reference to the fact whether they are prosecuting the litigation, or defending themselves, as follows :- "There are two assessees A and B identically situated in all respects in the matter of nature of income, quantum of taxable income and the category of tax but they are situated at two different places, say X and Y, respectively. Two Assessing Officers finalising their assessments at X and Y find their incomes and taxable incomes identical and levy an identical amount of tax on the two. Both file appeals before the Commissioner (Appeals). The legal plea raised by A before the Commissioner at X finds favour with him and the appeal is allowed. The Commissioner at Y does not agree with the same plea raised by B as an appellant and dismisses the appeal. B prefers his appeal before the Income-tax Appellate ....
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....at is owed. Wharton's Law Lexicon (Fourteenth edition) defines 'arrears' to mean - 'money unpaid at the due time : as spent behind; ...money in the hands of an accounting party'. It is true that 'tax arrears' has been defined as the amount of tax, penalty or interest 'determined' on or before 31-3-1998, under clause (m) of section 87. Still it cannot be denied in the illustration given hereinabove that at one point of time the tax was determined though such determination was reversed in appeal by the Commissioner (Appeals). The determination is sought to be restored in the appeal preferred by the Department before the Tribunal. Once the appeal is allowed, the determination would relate back to the date of originating the same. Under the scheme of the Income-tax Act, it is well known that a determination of liability to pay tax does not necessarily call for an order of adjudication. Take the cases of self-assessment, payment of advance tax, deduction of tax at source and so on. Several provisions, prescribe for penalty or interest which liability is incurred automatically and by operation of law, even when an order of adjudication has not been made, though there may be need for quan....
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....eference to the declarations filed by the assessees under the Scheme and the manner in which they shall be regulated, as under :- "(i)The assessee has the option of filing declaration either in respect of arrears disputed in his appeal or of taxes involved in Departmental appeal or for both independently of each other. (ii)For declaration relating to Departmental appeals also the existing Form No. IA can be used. In such cases, there are no outstanding taxes and hence the process of working out "disputed income" from outstanding taxes is not involved. The entire income under dispute in various grounds of appeal may constitute "disputed income" on which the sum payable can be determined. In respect of Departmental appeals, the declaration has to be for the entire income disputed in such appeals. (iii)Where the declaration in respect of Departmental appeals are accepted by the designated authority, the CIT may proceed to withdraw such appeals on passing of the order under section 90(2). (iv)In the event of cross-appeals on same issue, if the assessee does not opt to declare....
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....mination have been set aside, but such setting aside has not been accepted by the department and continues to remain under challenge before a Court or Tribunal. Section 90 requires the designated authority to determine the amount payable by the declarant in accordance with the provisions of the Scheme and grant a Certificate setting forth the particulars of the tax arrears and the sum payable after such determination towards full and final settlement tax arrears. And upon payment of such amount determined and on an order having been passed under sub-section (1) of section 9, it is conclusive and shall not be reopened. In the instant case, the Designated Authority having issued such a Certificate, the same attains finality. The contention sought to be put forth that there ought to be an independent declaration insofar as the tax arrears that are subject-matter of the appeals by the department is, therefore, not tenable. The decision of the Delhi High Court having categorically laid down that there cannot be a classification of the litigating assessees in arrears, merely by reference to the fact whether they are prosecuting litigation or defending themselves on the determination o....