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2024 (5) TMI 955
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....that the interest-income of Rs. 23,28,73,578/- which is 54% of the interest of Rs. 43, 12,47,366/- claimed by the U.P. Forest Corporation, Lucknow, to have been diverted at source in favour of the assessee, therefore, it is liable to be assessed in its hands. 2. BECAUSE the Id. Commissioner of Income-tax (Appeals) has erred on facts and in law in not appreciating that the U.P. Forest Corporation, Lucknow, is disputing its liability to pay even Rs. 229.55/- crores being 54% of the principal amount of Rs. 425.11 crores as on 31.03.2001 as per notification dated 13.02.2004 issued by the Government of India. 3. BECAUSE the Id. Commissioner of Income-tax (Appeals) has erred on facts and in law in not appreciating that the assessee- Corporation had gone to the Hon'ble High Court in Writ Petition No. 1959 of 2007 for a mandamus to U.P. Forest Corporation for release of its funds along with interest. 4. BECAUSE the Id. Commissioner of Income-tax (Appeals) has erred on facts and in law in not appreciating that the following relevant evidence in the factual matrix of case- (iv) That the U.P. Forest Corporation by its supplementary affidavit dated 15.7.....
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....section 11 (1) that envisages application of income in the year of its actual receipt. 9. The appellant-assessee craves for addition and/or alteration of any ground stated hereinabove." 3. There is a delay of 248 days in filing the Appeals in ITA Nos. 520, 521 and 522/Del/2018 and two days delay in filing the Appeal in ITA No. 523/Del/2018. The assessee filed applications for condonation of delay in filing the present Appeals contending that the assessee had been advised to file an application u/s 154 of the Income Tax Act, 1962 ('Act' for Short) to get clarification from the CIT(A) regarding treatment of the income in view of provisions of Explanation (2) (i) (a) of Section 11 (1) of the Act which envisages of application of the income in the year of its actual receipt. As the application of the Assessee has not been decided by the Department and ultimately the assessee decided to file the present appeals, which caused delay, therefore, sought for condoning the delay in filing the above Appeals. 4. Ld. Departmental Representative vehemently opposed for condoning the delay in filing the above Appeals. 5. We have heard on the delay in filing the Appeals. For the re....
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....t appears that the FDRs were purchased from the undivided funds in undivided State of UP by the Forest Corporation and the same were kept in the Commercial Bank to earn the interest. By virtue of notification, the State was divided and funds were also divided in the ratio of 46:54%. The Tribunal vide its impugned order has observed that the interest income has to be divided in the ratio of 46:54% and on 46% thereof has to be taxed in the hands of the present assessee. The rest of 54% is taxable in the hands of Uttaranchal Forest Development Corporation. view of the aforesaid notification and above discussion, we find no reason to interfere with the impugned order passed by the Tribunal The same appears reasonable and is hereby sustained along with the reasons mentioned therein." During the year under consideration, the total interest on FDRs before the division of the erstwhile state of UP was at Rs. 43,12,47,366 and out of which after division, 54% of the said interest of Rs 23,28.73,578/- came in the hands of the assessee. The AO in this case has assessed the said amount of 23,28,73,578/- in the assessee's hand as assessee's corporation Income. During the assessm....
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....r challenged before us. 8. The Ld. Counsel for the assessee submitted that, the Ld. CIT(A) erred on fact and in law in upholding the order of the A.O. observing that 'the interest income which is 54% of the interest claimed by the UP Forest Corporation, Lucknow, which have been diverted at source in favour of the assessee, therefore, the same is liable to be assessed in the hands of the assessee' without appreciating the fact that UP Forest Corporation, Lucknow has disputed the entitlement of even the principal amount payable to the assessee and the assessee has not been paid with the said amount of 54% of the total amount in principal. The assessee has also approached Hon'ble High Court in writ petition No. 1959/2007 for writ of mandamus to UP Forest Corporation for release of its fund along with interest. Further submitted that, the Ld. CIT(A) and the A.O. have not appreciated the material available on record and the affidavit filed by the UP Forest Corporation before the Hon'ble High Court, wherein the U.P Forest Corporation contended that the assessee is liable to received only Rs. 11.25. Therefore, the authorities below have committed error in making the entire inte....
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....rincipal amount or any interest on FDRs to the share of the assessee at that point of time. After the lapse of six years, the assessee approached Hon'ble High Court of Uttarakhand in writ petition No. 1959 of 2007 for release of its fund along with interest. 12. It is pertinent to note that the when exemption u/s 11 and registration u/s 12A was not granted to the UP Forest Corporation, the same has been challenged by the UP Forest Corporation before the Tribunal of Lucknow Bench for Assessment Year 2002-03, 2003-04 and 2004-05 in ITA No. 785/Luc/2005, 243/Luc/2006 and 619/Luc/2007. The Lucknow Bench of the Tribunal observed that the interest income has to be divided in the ratio of 46:54% between UP Forest Corporation and the Assessee herein and only 46% thereof has to be taxed in the hands of UP Forest Corporation and rest of 54% is liable to be taxed in the hands of Uttarakhand Forest Corporation (Assessee herein). The said orders of the Tribunal were challenged by the Department in Income Tax Appeal Defective No. 2 of 2013, No. 3 of 2013 and No. 4 of 2013. The Hon'ble High Court of Lucknow Bench, Lucknow, confirmed the orders of the Tribunal by dismissing the Appeal o....
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....f asset and liabilities has been decided by the Single Bench of the Hon'ble Uttarakhand High Court in writ petition No. 1959/07 wherein vide Judgment dated 23/11/2016 the following directions have been issued: "27....Respondent corporation is directed to release a sum of Rs. 229.55 crores in favour of the petitioner corporation without further loss of time and, in any case, within six months of the date of this judgment, failing which the respondent corporation shall be liable to pay corresponding interests earned by it from time to time, as per RBI guidelines, to the petitioner corporation, from the date of filing of the writ petition." 15. Aggrieved by the Judgment dated 23/11/2016 of the Single Bench (supra) of the High Court of Uttarakhand, the UP Forest Corporation filed Special Appeal No. 51/17 before the Division Bench of the High Court by once again reiterating denial of the liability to pay the amount to the assessee. It is brought to the notice of the Bench that the assessee has also filed S.A No. 17/17 against the direction of the High Court (supra) to pay higher interest from the date of default if the amount of Rs. 229.55 Crore was not paid within six month....
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....me", which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however the income can be said not have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of accounts. The relevant portion of the order of the Hon'ble Supreme Court are reproduced as under:- "Two questions were, however, referred at the instance of the Commissioner of Income-tax to the High Court, and they were : "(1) Whether the two sums of Rs. 1,36,903 and Rs. 2,00,625 income of the 'previous year' ended March 31, 1948 ? (2) If the answer to the first question is in the affirmative, whether they represent an item of expenditure permissible under the provisions of section 10(2)(xv) of the Indian Income-tax Act, 1922, in computing the assessee's income of that 'previous year' from its managing agency business ?" 7. The High Court agreed with the view of the President, and answered th....
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....and the principle applied by the Bombay High Court governs this case. The reason is plain. Income tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income, if income does not result at all, there cannot be a tax, even tough in book-keeping, an entry is made about a " hypothetical income " which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there s obviously neither accrual nor receipt of. Income, even though an entry to that, effect might,, incineration circumstances, have been made in the books of, account. This is exactly what has happened in this case, as it happened in the Bombay case, which was approved by this court. Here too, the agreements within the previous year replaced the earlier agreements, and altered the rate in such a way as to make the income different from what had been ....
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....rty to pay the amount. Only then can it be said that for the purpose of taxability that the income is not hypothetical and it has really accrued to the assessee. The Hon'ble Supreme Court considering the various judicial precedents held as under:- "17. First of all, it is now well settled that income tax cannot be levied on hypothetical income. In Commissioner of Income Tax v. Shoorji Vallabhdas and Co., [1962] 46 ITR 144 (SC) it was held as follows:- "Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though ....
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....e consumption charge in dispute at the enhanced rate from the consumers. 24. This Court did not accept the view taken by the High Court on facts. Reference was made in this context to Commissioner of Income Tax v. Birla Gwalior (P.) Ltd., [1973] 89 ITR 266 (SC) wherein it was held, after referring to Morvi Industries that real accrual of income and not a hypothetical accrual of income ought to be taken into consideration. For a similar conclusion, reference was made to Poona Electric Supply Co. Ltd. v. Commissioner of Income Tax, [1965] 57 ITR 521 (SC) wherein it was held that income tax is a tax on real income. 25. Finally a reference was made to State Bank of Travancore v. Commissioner of Income Tax, [1986] 158 ITR 102 (SC) wherein the majority view was that accrual of income must be real, taking into account the actuality of the situation; whether the accrual had taken place or not must, in appropriate cases, be judged on the principles of real income theory. The majority opinion went on to say: "What has really accrued to the assessee has to be found out and what has accrued must be considered from the point of view of real income taking the probabili....
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.... to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue. 29. In Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax, [1992] 193 ITR 321 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same "fundamental aspect" permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said: "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litig....
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....esent assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. 33. For the aforesaid reasons, we dismiss the civil appeals with no order as to costs, but with the hope that the Revenue implements its litigation policy a little more practically and a little more seriously." 21. In the present case, as per the negotiation between two state governments, the UP forest Corporation has paid FDRs to the amount of Rs. 77.37 crores only without interest to the Assessee, the interest income on FDRs were neither crystallized nor any interest amount paid to the assessee as no final conclusion came out regarding the payment of interest income to the assessee. This is a clear case where there is no certainty reached between Chief Secretaries of respective States to arrive at the agreement regarding payment of interest. Once it is established that there is no c....