COMMISSIONER OF INCOME TAX VS PURE DRINKS (P.) LTD.
1999 P T D 2638
[228 I T R 535]
[Punjab and Haryana High Court (India)]
Before Ashok Bhan and N. K. Agrawal, JJ
COMMISSIONER OF INCOME TAX
Versus
PURE DRINKS (P.) LTD.
Income-tax Case NO. 11 of 1995, decided on 07/11/1996.
(a) Income-tax---
----Reference---Capital gains---Amount whether assessable as capital gains was a question of law---Indian Income Tax Act, 1961, Ss.45 & 256.
(b) Income-tax---
----Reference---Question not raised before or considered by Tribunal cannot be referred---Question whether amount was assessable as business profits not raised before or considered by Tribunal---Question could not be referred-- Indian Income Tax Act, 1961, Ss.28.& 256.
(c) Income-tax
----Reference---Reassessment---Tribunal whether right in quashing reassessment proceedings---Question of law---Indian Income Tax Act, 1961, Ss. 147, 148 & 256.
Held, (i) that the question whether the Tribunal was right in law in holding that the transactions in land entered into by the assessee did not involve "transfer" within the meaning of section 2(47) of the Income Tax Act, 1961, so as to attract liability- to tax as capital gains had to be referred;
(ii) that the case of the assessee as well as the Revenue was that the transactions entered into by the assessee resulted in capital gains. It was not the case of the Department before the Tribunal that it attracted liability to tax in respect of business profits. This question had not been considered by the Tribunal and did not arise from its order. It could not be referred; and
(iii) that the question whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in quashing the reassessment proceedings under section 147(a) read with section 148 had to be referred.
R.P. Sawhney with Mahavir Ahlawat for Petitioner.
C.S. Aggarwal, Senior Advocate with Ajar Mittal for Respondent.
JUDGMENT
ASHOK BHAN, J.---This petition has been filed by the Revenue under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for issuing a mandamus directing the Income-tax Appellate Tribunal, Delhi Bench "B", New Delhi (hereinafter referred to as "the Tribunal"), to refer the following two questions of law, alongwith the statement of the case to this Court for its opinion:
"(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal, was right in law in quashing the reassessment proceedings under section 147(a) read with section 148 of the Income-tax Act by holding that the assessee had disclosed fully and truly all material facts necessary for framing of the assessment for the assessment year 1982-83?
(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the transactions in land entered into by the assessee did not involve 'transfer' within the meaning of section 2(47) of the Income-tax Act, so as to attract liability to tax in respect of business profits/capital gains arising from the transaction?"
Counsel for the parties are agreed that question No. 1, in a modified form, which is to the following effect does arise from the order of the Tribunal arid needs to be sent to this Court for its opinion:
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in quashing the reassessment proceedings under section 147(a) read with section 148 of the Income-tax Act?"
Counsel appearing for the assessee conceded that question No.2 does arise from the order of the Tribunal but in a modified form. According to him, the, words in respect of "business profit" have to be deleted as this part of the question does not arise from the order of the Tribunal.
Counsel appearing for the Revenue insisted that question No.2 as framed be sent for. Counsel for the Revenue argued that the proceedings under section 147(a) read with section 148 of the Act were reopened as in the opinion of the Department business income/profit had escaped assessment and the Income-tax Officer had assessed the income as business profit and, therefore, the question as framed does arise from the order of the Tribunal.
As against this, counsel for the assessee contended that before the Tribunal, the only question argued was regarding the capital gains arising from the transaction and not regarding the business profit. It was further argued that only questions arising from the order of the Tribunal can be sent for and not the question arising from the order of the assessing authority or the First Appellate Authority.
We find substance in the submission made by counsel for the assessee.
Before the Tribunal, the case of the assessee as well as the Revenue was that the transactions entered into by the assessee resulted in capital gains case of the Department before the Tribunal that it attracted in respect of business profits. Rather, the argument raised by tai Khan, learned Departmental representative, before the Tribunal was that for the reasons recorded the belief of income escaping assessment had been formed as a consequence of the agreement for transfer of the land, resulting in capital gain.
On the basis of the arguments raised by counsel for the parties, the Tribunal recorded a finding that:
"The issue as raised relates to the taxability of the income from capital gains on the land, as discussed in the assessment year 1982 83, with the only difference of the assessee, offering it for taxation, now challenged in this appeal, as not taxable."
The Tribunal proceeded on the assumption that the matter related to capital gains arising from the transaction and did not attract liability to tax in respect of business profits. The Department did not move any rectification application.
Again, while declining the petition under section 256(1) of the Act filed by the Revenue, the Tribunal recorded the following finding in paragraph 3 of its order:
"In the light of the above facts, the Tribunal came to the conclusion that there was no escapement of income of any sort and that reopening was invalid. Since section 2(47) has given a specific meaning to the term 'transfer' and the present agreement does not result in exchange of hands of ownership from the assessee to the builder of the land, there is no transfer involved, which is the basic substratum for attraction of capital gains tax."
Here also, the Tribunal was treating it to be as if the transaction would have attracted capital gains tax. In the statement of the case as well as in the petition under section 256(2) of the Act, the Revenue has not stated that the findings recorded by the Tribunal were contrary to what was argued before it.
The questions arising from the order of the Tribunal can only be referred. The question as to whether the transaction attracted liability to tax in respect of business profit was not argued before the Tribunal. No finding to that effect has been recorded by the Tribunal. Under the circumstances, we are of the opinion that question No.2, as proposed by the Revenue, needs to be modified. Accordingly, we direct the Tribunal to refer the following two questions of law to this Court for its opinion alongwith the statement of the case:
"(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in quashing the reassessment proceedings under section 147(a) read with section 148 of the Income-tax Act?
(ii) Whether, on the facts and in. the circumstances of the case the Income-tax Appellate Tribunal was right in law in holding that the transactions in land entered into by the assessee did not involve 'transfer' within the meaning of section 2(47) of the Income-tax Act, so as to attract capital gains arising from the transactions?"
No costs
M.B.A./3014/FC Order accordingly