TaxTMI 
TaxTMI 
2011 (8) TMI 21
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.... of the assessee at Rs.88,582/- being interest chargeable to tax under the head „income from other sources‟. The CIT (Appeals) vide order dated 31.10.2002 upheld the view taken by the Assessing Officer. CIT (Appeals), while examining the issue noticed that a sum of Rs.3 crores received by the assessee on 02.03.1998 from M/s Daewoo Motors India Ltd by virtue of clause 8 to 11 of the MOU between the DMIL and the assessee were shown in the balance sheet as on 31.03.1998 under the head „trade deposits‟ in the liability side. The CIT (Appeals) after examining the said agreement was of the opinion that the receipt of Rs.3 crores was in the nature of revenue receipt pertaining to the assessment year 1998-1999 and since it has not been disclosed and offered for taxation by the assessee in return on income, CIT (Appeals) proceeded the matter by issuing notice under Section 251(2) of the Act for enhancement of income. 3. After giving due opportunity to the assessee, the matter was considered and the CIT (Appeals) held that the receipt of Rs. 3 crores was in the nature of income and should be taxed in assessment year 1998-1999. Consequent to this, CIT (Appeal....
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....ll not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income" 9. The counsel for the Revenue has drawn our attention to the financial terms of the MOU which are as under:- ""8 That in consideration of the work, duties and functions undertaken by MIL to be performed under this MOU, DMIL will pay to MIL fee in the sum equal to 1% of the value of the contract that may be awarded by the DTC to DMIL pursuant to the DTC Tender, subject to a minimum of Rs.3 crores. 9 That the fee payable by DMIL to MIL in terms of clause 8 ante, will be deemed to accrue on the date on which the contract between the DTC and DMIL is signed or on which the DTC places an order on the DMIL for the supply of the buses, as the case may be, and DMIL under to make payment of the fee to MIL within 15 days of its accrual. 10 That DMIL will make an interest free deposit of Rs. 3 crores with MIL within six months from the date of this MOU that this deposit will be adjusted against the fee that may become payable to MIL in terms of Clause 8 ante. 11 That in the event of DMIL withdraw....
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....s not a case of imposition of penalty. 14. We have considered the submissions of counsel for both the parties. No doubt, in the first blush, the argument of the learned counsel appears to be convincing when one goes into the circumstances in which, in the first round of litigation relating to quantum proceedings, the receipt of Rs. 3 crores by the assessee from DMIL was treated as income. The Tribunal while confirming the quantum addition had interpreted the provisions of the MOU and particularly clause 11 on which the Tribunal commented that this clause was a clever piece of drafting and the syntax of this clause had been so structured so as to give impression that except only on the happening of one of the two contingencies stipulated therein, the security deposit could not be appropriate by the assessee as its income. We may also mention at this stage that the aforesaid decision of the ITAT was upheld by this Court in the appeal filed by the assessee and vide orders dated 11th October, 2006, the said appeal (ITA No.255/2002) was dismissed, inter alia, observing as under:- "There is no room for controversy that so far as the present payment is concerned it was a minimum pay....
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....lars of income. In this respect, it would be interesting to point out that not only the assessee had disclosed the receipt of aforesaid amount of Rs.3 crores from M/s. DMIL, albeit, showing it as a liability at that time (as according to the assessee the same had not been converted into income) the Assessing Officer, in fact, went into this aspect specifically and accepting the stand taken by the assessee, did not treat the said receipt as income. The issue was dealt with by the AO in the quantum proceedings. The assessment order makes an explicit reference to the receipt of Rs. 3 crores in the following words:- "During the year under consideration, there is an increase of Rs.3 as security deposit. The assessee was asked to explain the same. As regard the deposit of Rs. 3 crores is reflected in the bank account as per photocopy submitted by the assessee, it has been explained by the assessee vide its letter dated 05.03.2001 as under:- The receipt of Rs. 3 crores as security deposit by the assessee company from M/s Daewoo Motors (I) Ltd flows from the MOU entered into between them. The relevant clasue 8, 9, 10 and 11 of the MOU have been reproduced in our letter dated 06.0....