TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 1828
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....r the "joint structure agreement" (JSA) dated January 17, 1965. The parties to the Joint Structure Agreement were National Iranian Oil Company (NIOC) ; ACIP ; SPA of Italy ; Phillips Petroleum Company, USA and Oil and Natural Gas Commission of India. Under the joint structure agreement, the aforementioned parties were required to carry on the business of drilling, extracting, producing and selling petroleum and other crude oil products in the Persian Gulf. Under the joint structure agreement it had been agreed that 50 per cent. of the produce would be owned by National Iranian Oil Company and the balance would be shared among the remaining three parties in equal proportion. After incorporation of the assessee, the rights under the joint structure agreement which were available to Oil and Natural Gas Commission of India were assigned to the assessee. On account of revolution in Iran in 1978, the then Iranian regime got overthrown and, as a result, the assessee was unable to carry on its business beginning with the period commencing from the previous year relevant to the assessment year 1980-81. The assessee entered into a settlement on December 26, 1983 with National Iranian Oil Com....
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....ought before it the Revenue has sought a reference on five questions and similarly the assessee has also sought a reference on five questions. The hon'ble High Court further notes that one of the questions referred to it by the assessee had a larger impact on the disposal of the appeals before it. The hon'ble High Court framed the said question as under : "Whether on the facts and circumstances of the case, the hon'ble Tribunal was justified in rejecting additional ground of appeals having accepted the fact that settlement agreement dated December 26, 1983 was effective from January 1, 1984 and not relevant for consideration in assessment year 1984-85 on the basis of accounting year of the assessee being December 31, 1983 ?" 1.6 The principal grievance made out by the assessee before the hon'ble High Court was that the Income-tax Appellate Tribunal, in the original proceedings, had erred in not admitting and adjudicating upon the additional ground of appeal. 1.7 The hon'ble Delhi High Court, while remanding the appeals to the Income-tax Appellate Tribunal has observed as under : "7. Therefore, according to us, if the facts and material available with the....
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.... appeal : "Whether on the facts and circumstances, the Assistant Commissioner of Income-tax (Assessment) was justified in making various addition in terms of settlement agreement dated December 26, 1983 even though the same was not effective during the year under reference ?" 4.2 Vide order dated October 31, 1991 the Income-tax Appellate Tribunal held that the additional ground of appeal cannot be admitted for the following reasons : "8. We have considered the rival submissions on the admission of new ground. On the point of admission of new ground we are of the opinion that the decision of the Supreme Court in the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC) is latest authority where the hon'ble Supreme Court has held that the power to raise additional ground is there but there should be sufficient rea sons and bona fide on the part of the assessee to show that the ground could not have been raised earlier for good reasons. In the present case, we find that in the application the assessee has not given any good reason for not raising this ground earlier. Therefore, applying the ratio of the above cited decision of the hon'ble Supreme Court, t....
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....amine the ground based on the reasoning that : the application moved by the assessee before the Tribunal, did not set out any good reason why the ground had not been taken earlier ; the ground raised was not bona fide ; and lastly, further investigation into facts was necessitated. 4. We had put the last part of the Tribunal's reasoning to Mr. Syali who appears for the assessee. Mr. Syali has accepted before us that he does not wish to rely upon any additional material apart from that which is already on record. Even otherwise, the Tribunal has given no clue as to what are these additional facts which require investigation. 4.1 That leaves us with the first two limbs of the reasoning. According to us, the other two aspects do not impress us, for the rea son that, ultimately the Tribunal, in our view, is the final fact-finding authority and is thus vested with a full panoply of powers which are conferred on the authorities subordinate to it . . . . 5.6 The Tribunal, in the instant case seems to have picked up, out of context, some of these observations, to deny the relief sought by the assessee in the instant case for adjudicating upon the additional ground raised before i....
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....l. 7.1 Needless to say that this would also not entitle the assessee to seek indulgence of the Tribunal for further investigation, by which we mean gathering material apart from that which is already on record. In so far as the material which is already on record is concerned, the Tribunal will most certainly consider the same in deciding the additional ground." 4.4 Considering the above directions, wherein it is categorically held by the hon'ble High Court, ". . . The Tribunal having found in favour of the assessee that the settlement agreement was operable from January 1, 1984, it ought to have taken this fact into account and entertain the plea of the assessee to agitate the additional ground of appeal, we do not find any merit in the preliminary objections raised by the learned Commissioner of Income-tax (Departmental representative). As such we directed both the parties to first address on the merits of the additional ground of appeal. However, it was made clear that the assessee will not be entitled to rely upon any material apart from that which is already on record. 5. Addressing on the merits of the additional ground, the learned authorised representative submitte....
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....against the other as well as any and all eventual claims, rights and interest which HIL may claim in respect of the nullified IMINOCO agreements and to release each other's obligations in connection with or related to the nullified IMI NOCO agreements ; Article 1.-Subject to the provisions of this settlement agreement, HIL hereby waives any eventual rights and interest it may claim to have against National Iranian Oil Company and/or IRAN and each party released the other party's obligations in connection with or related to the nullified IMINOCO agreements and each party covenants that it will not directly or indirectly at any time, hereinafter take or bring any action or proceedings, legal or otherwise, or make any claim whatsoever on account of the claims settled herein and of those claims which may in any way be connected with or related to the nullified IMINOCO agreements. Article 2.-In consideration of a final settlement of all or any eventual claims, rights and interest HIL may claim to have in connection with or related to the execution, fulfilment and nullification of IMI NOCO agreements National Iranian Oil Company shall pay to HIL within thirty (30) days from t....
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....#39;s report for the financial year 1984-85 as under : "Finance and accounts On the lines suggested by the Ministry and with the approval of Income-tax authorities, the accounting year of the company has been changed from calendar year to financial year to synchronize it with that of the Government. The accounts of the company for the year 1984-85 therefore, include transactions for 15 months from January 1, 1984 to March 31, 1985." 5.3 The learned authorised representative submitted that section 3 of the Income-tax Act, 1961 (hereinafter called "the Act") and as applicable at that time gave an option to the assessee to select a previous year different from the financial year provided its annual accounts were drawn up in line with the option selected by the assessee. It was submitted that since the annual accounts of the assessee were drawn up for calendar year 1983 with the year ending December 31, 1983, therefore, the previous year of the assessee should be taken as the period starting from 1st of January, 1983 to 31st December, 1983. The learned authorised representative submitted that an option for taking the calendar year as the "previous year" was specifically exercised....
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....judicated upon by the Commissioner of Income-tax (Appeals) (pages 27/28/29/Commissioner of Income-tax (Appeals)). In fact the date of agreement as December 26, 1983 has been accepted as a matter of course by all concerned authorities and adjudication has been made keeping this premise in mind. Books of account of the assessee The assessee has gravely erred in raising the issue of settlement date and hence taxability in the year 1984-85 at such a late juncture after finalisation of books of account of both 1984-85 and 1985-86. It is strange that the assessee-company after reflecting the said disputed receipts in his books of account is now raising a ground that the receipt does not pertain to the assessment year 1984-85. A quick perusal of volume 2 of the assessee's paper book shows : * Director's report in annual report for the assessment year 1984- 85 on page 60 of the paper book clearly makes a mention of the settlement with IMINOCO and AGIP as an event that has happened during the calendar year ending on December 31, 1983. * Page 73 which is the schedule of reserve and surplus annexed to forming a part of the balance-sheet as at December 31, 1983 reflects the a....
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....e to the above submissions, it was also submitted by the learned Commissioner of Income-tax (Departmental representative) that if the date of settlement is taken to be as January 1, 1984, then necessary directions be issued by the Bench for assessment of the income in the ensuing assessment year. 7. In the rejoinder, it was submitted by the learned authorised representative that, even before the hon'ble High Court, it was an undisputed fact that the effective date of settlement agreement is January 1, 1984. It was submitted that this fact has also not been disputed by the Assessing Officer and the learned Commissioner of Income-tax (Appeals). It was submitted that the mere fact the grievance now being raised in additional ground was not raised before the lower authorities is not detrimental to the claim now being made before the Income-tax Appellate Tribunal. It was further sub- mitted by the learned authorised representative that the annual accounts for the year ending December 31, 1983 were signed on October 6, 1984 and, therefore, the assessee rightly took cognizance of a subsequent event to depict a true and fair view of its financial position as on December 31, 1983. In s....
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....ent agreement is January 1, 1984. Further, note 6 of the audited financial statements further fortifies this fact wherein it is stated : "6. Considering the fact that the settlement was reached and given effect from January 1, 1984 the company has charged profit and loss account share of exploration expenditure and development expenditure as was done in past." 8.2 Even the auditors in the audit report have acknowledged this fact by certifying as under : "4. The matter relating to the joint structure agreement in Iran was settled with National Iranian Oil Company (NIOC) in terms of settlement agreement dated December 26, 1983 effective date January 1, 1984. Consequent to this settlement various balances left over in the books of account (as detailed in notes to accounts) have been adjusted and the resultant credit balance along with the amount received from National Iranian Oil Company in terms of the settlement agreement have been treated as capital receipts. Since the company has been advised that no Income-tax is payable on these amounts, no provision for taxation has been made in the accounts in this regard." 8.3 The learned Commissioner of Income-tax (Departmental repre....
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....ut of appeal before the Commissioner of Income-tax (Appeals) is too narrow a view. 8.5 We also do not find any merit in the submissions made by the learned Commissioner of Income-tax (Departmental representative) that as the assessee has already given effect to the settlement in its annual accounts for year ending December 31, 1983 it would debar the assessee from raising its claim made in additional ground before us. The hon'ble apex court in the case of Tuticorin Alkali (supra) has opined as under (page 183 of 227 ITR) : "It is true that this court has very often referred to accounting practice for ascertainment of profit made by a company or value of the assets of a company. But when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accounting practice. Accounting practice cannot override section 56 or any other provision of the Act, as was pointed out by Lord Russell in the case of B. S. C. Footwear Ltd. v. Ridgway (Inspector of Taxes) [1970] 77 ITR 857 (CA) at 860, the Income-tax law does ....