COMMISSIONER OF INCOME-TAX VS JAHANGANJ COLD STORAGE
1991 P T D 726
[Allahabad High Court (India)]
Before R.M. Sahai arid R.K. Gulati, JJ
COMMISSIONER OF INCOME-TAX
versus
JAHANGANJ COLD STORAGE
Income Tax Application No.287 of 1988, decided on 27/02/1989.
Income-tax---
---Reference--Reference not permissible where answer to question is self-evident concluded by decision of Supreme Court--Receipt of income--Decision of Supreme Court that if income does not result at all there can be no tax--'Tribunal applying decision of Supreme Court and holding that income was not assessable- Reference not permissible from order of Tribunal.
Where the answer to a question is self-evident or is concluded by a decision of the Supreme Court, it would be futhe to make a reference and in such a case to decline the request for a reference would be well-justified. Income-tax is a levy on income. Though 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, yet 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. This principle has been reiterated by the Supreme Court in C.I.T. v. Shoorji Vallabhadas & Co. (1962) 46 I.T.R. 144 and C.I.T. v. Birla Gwalior (P.) Ltd. (1973) 89 I.T.R. 266.
Held, that, in the instant case, the findings recorded by the Tribunal were that the disputed amount had not accrued to the assessee during the year under consideration. The assessee was allowed to collect the entire amount as rent as a result of the interim order passed by the High Court and there was nothing to indicate that the assessee was permitted to receive that amount as its income. In fact the assessee had no enforceable right in respect of the excess amount collected by it at the direction of the High Court. The amount collected was handed over to the District Magistrate and the assessee had no access to it nor any control or jurisdiction over that amount. Hence, the amount was not assessable. The view taken by the Tribunal was in line with the decisions of the Supreme Court. Hence, the Tribunal could not be directed to make a reference to the High Court from its order.
C.I.T. v. Birla Gwalior (Pvt.) Ltd. (1973) 89 ITR 266 (SC) and C.I.T. v. Shoorji Vallabhdas & Co. (1962) 46 ITR 144 (SC) applied.
C.I.T. v. Hindustan Housing and Land Development Trust Ltd. (1986) 161 ITR 524 (SC) and C.G.T. v. Kusumben D. Mahadevia (Smt.) (1980) 122 ITR 38 (SC) ref.
JUDGMENT
R.K. GULATI, J.---This is an application under section 256(2) of the Income-tax Act, 1961 (for short "the Act"), at the instance of the-Commissioner of Income-tax, Agra. The Appellate Tribunal may be directed to refer the following question, said to be a question of law, for the opinion of this Court:--
"Whether, in view of the facts and circumstances of the case, the Hon'ble Tribunal is legally correct in holding that the entire amount of the rent receipts is not taxable in the year of collection?"
The assessee, during the assessment year 1983-84 was running a cold storage for storing potatoes and other agricultural produce and its activities were governed under the U.P. Regulation of Cold Storage Act, 1976. By section 26 of that Act an owner, a licensee, is prohibited from taking or receiving for storage or any other service rendered to the hirer, any amount over and above the charges fixed by the State Government under section 9 of that Act.
In 1982, prior to the commencement of the previous year relevant to the assessment year in question, i.e. from February 1, 1982, to January 31, 1983, the Government had fixed the maximum charges at the rate of Rs.17 per quintal. Till July, 1982, the Government did not issue any order fixing the charges for the season which season fell in the previous year relevant for the year under consideration. The assessee raised the rate of storage to Rs.18.50 per quintal as against Rs.17 per quintal fixed earlier. It appears that the Agricultural Production Commissioner, U.P., issued certain directions to all the District Magistrates to persuade cold storage owners not to charge a rate higher than that fixed in the earlier season in 1981. The assessee and certain other cold storage owners, similarly situated, filed writ petitions before this Court against the directions of the Agricultural Production Commissioner. This Court, vide its order, dated 20th July, 1982, stayed the operation of the directions issued by the Commissioner. On August 26, 1982, the State Government issued a notification fixing the maximum rate at Rs.17 per quintal from February 15, 1982 to November 15, 1982. Another writ petition was filed against the notification issued by the Government and under an interim order, the cold storage owners were permitted to realise charges at the rate of Rs.18.50 per quintal subject to the condition that they would file accounts in this Court and would deposit the difference of Rs.1.50 per quintal in this Court. The said order was subsequently modified to the extent that the amount directed to be deposited shall be deposited with the District Magistrates instead of in this Court before whom the accounts shall also be furnished by the petitioners.
Between the period September 4, 1982 to November 12, 1982, a sum of Rs.75,293 was collected by the assessee being the difference of Rs.1.50 per quintal and the said amount was deposited with the District Magistrate. This amount of Rs.75,293 was brought in tax in the hands of the assessee by the Income-tax Officer, which has been deleted by the Tribunal. It is in the background of the aforesaid facts that the present application has been moved by the Revenue seeking a reference of the question set out earlier.
We have heard learned standing counsel appearing for the Revenue.
The case of the assessee throughout was that he had wrongly been taxed on the disputed amount and no part of that amount had accrued to it as its income. According to the assessee, it had been permitted by the High Court pending final decision, to realise an excess amount of Rs.1.50 per quintal and to deposit the same initially with this Court and subsequently with the District Magistrate. At no point of time, was the status of the assessee better than that of a trustee, in respect of the amount in question and neither the realisation nor the manner of entry in the account books of the assessee regarding that amount was decisive of the character of the receipt, much less could be same be held to be the income of the assessee.
The Tribunal has dealt with the question in issue in a very exhaustive manner and has referred to a large number of authorities both of this Court and of the Supreme Court for the view it has taken.
It may be observed that pending appeal before the Tribunal, the writ petition filed in this Court by the petitioner and other persons similarly situated were dismissed by an order, dated October 7, 1987, with the directions that the amount deposited with the District Magistrates should be disbursed to the cold storage hirers concerned.
It is settled that all receipts by an assessee may not necessarily be income i of the assessee for the purpose of Income-tax Act. Only those receipts, that amount to "income" are liable to tax under the Act. In C.I.T. v. Shoorji Vallabhdas & Co. (1962) 46 I.T.R. 144 the Supreme Court has observed as under (headnote):
"Income-tax is a levy on income. Though 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, yet 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 materalise ....where, however, the income can be said not to 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 account:"
The above principle was reiterated by the Supreme Court in its later decision, in C.I.T. v. Birla Gwalior (P.) Ltd. (1973) 89 I T R 266 and referring to some of its earlier decisions, the Supreme Court pointed out that what was relevant is, whether the income had really accrued or not. It is not hypothetical accrual of income that has got to be taken into consideration, but the real accrual of income. There are other decided cases to the same effect, but it is not necessary to refer to them all, in view of the decisions already noticed. In the instant case, the findings recorded by the Tribunal are that the disputed amount had not accrued to the assessee during the year under consideration. The assessee was allowed to collect the entire amount as rent as a result of the interim order passed by this Court and there was nothing to indicate that the assessee was permitted to receive that amount as its income. In fact the assessee had no enforceable right in respect of that excess amount collected by it at the direction of this Court. The amount collected was handed over to the District Magistrate and the assessee has no access to it nor any control or jurisdiction over that amount.
In C.I.T. v. Hindustan Housing and Land Development Trust Ltd. (1986) 161 I.T.R. 524 (SC), the assessee was dealing in land. Some land was compulsorily acquired in respect of which additional compensation was fined by the arbitrator which was challenged in appeal by the Government and during the pendency of appeal, that amount was deposited in Court. However, the assessee was permitted to withdraw the same only on furnishing security. The question which fell for consideration before the Supreme Court was, whether the additional amount withdrawn by the assessee had accrued as income and was liable to tax at that stage. Holding in favour of the assessee, the Supreme Court observed as under (headnote):
"...the entire amount was in dispute in the appeal filed by the State Government and the dispute was regarded by the Court as real and substantial because the respondent was not permitted to withdraw the amount deposited by the State Government without furnishing security bond for refunding the amount in the event of the appeal being allowed. There was no absolute right to receive the amount at that stage. If the appeal were allowed in its entirety, the right to payment of enhanced compensation would have fallen altogether. The extra amount of compensation of Rs.7,24,914 was not income arising or accruing to the respondent during the previous year relevant to the assessment year 1956-57."
The view taken by the Tribunal in the instant case is in line with the decisions of the Supreme Court referred to earlier. No useful purpose would be served by directing the Tribunal to refer the proposed question for the opinion of this Court, assuming that any question of law arises out of the Tribunal's order. It is by now well-settled that every question of law arising from the order of the Tribunal need not be referred to the High Court. Where the answer to the question is self-evident or is concluded by the decision of the Supreme Court, it would be futhe to make a reference and in such a case to decline the request for a reference would be well-justified. (See C.G.T v. Smt. Kusumben D. Mahadevia (1980) 122 I.T.R. 38 (SC). In circumstances somewhat similar to those with which we are concerned, the Supreme Court refused to call for a statement of the case against the orders passed by the High Court rejecting the application under section 256 (2) of the Act (See (1984) 145 I.T.R. (St.) 5 (sic) and (1984) 150 I.T.R. (St.) 79 (sic).
For what has been stated above, no statable question of law arises in the instant case on which any directions could be issued to the Tribunal for stating the case to this Court.
Z.S./762/TOrder accordingly.