COMMISSIONER OF INCOME TAX vs. DINESHBHAI M. AMIN

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ITR/73/1996HC GujaratGJHC24021753199604 September 2006Author: HONOURABLE MR. JUSTICE D.H.WAGHELA,HONOURABLE MR. JUSTICE R.S.GARG4 pages

AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was justified in its order. The court noted that the facts of the present case were identical to those in the case of Nirang Specific Family Trust, which had already been decided by the same High Court in favour of the trust. The revenue's counsel could not establish any distinguishing features between the two cases. Therefore, following its own precedent, the High Court ruled against the revenue. The question referred to the court was answered against the interest of the revenue. The reference was disposed of accordingly, with no costs.

What were the facts?

The assessee is Dinesh M. Amin (referred to as the Assessee-Trust). The revenue is the Commissioner of Income Tax. The assessment year in question is 1986-87. The order under challenge is a reference made by the Income-Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'C', to the High Court. The Assessee-Trust was initially a proprietor of M/s. Nirang Industries, manufacturing plastic bags. This business was converted into a partnership in 1984 with Shri Uma Shiv Trust as another partner. Upon dissolution of the firm on January 1, 1986, the Assessee-Trust retired, granting a license to Shri Uma Shiv Trust to use the business name and goodwill for a monthly compensation of Rs. 25,000/-. The Assessing Officer treated this compensation as income from other sources. The ITAT, following its own prior decision, allowed the assessee's appeal.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in treating the income under the head 'other sources' and directing allocation thereof amongst the beneficiaries? (Question of law and fact, concerning the head of income and allocation). Assessee's Contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, the ITAT's decision, which was upheld by the High Court, implies the assessee argued that the compensation received for the license of name and goodwill should not be treated as income from other sources, or at least not allocated in a particular manner. Revenue's Contentions: The revenue contended that if there were two Trust Deeds, each should have been examined on its own merits. However, the revenue's counsel was unable to demonstrate any difference or distinctive feature between the facts of the present case and a previously decided identical matter concerning Nirang Specific Family Trust.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

ITR/73/1996 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE NO. 73 OF 1996 For Approval and Signature: HONOURABLE MR.JUSTICE R.S.GARG HONOURABLE MR.JUSTICE D.H.WAGHELA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the Civil Judge? ========================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus DINESHBHAI M. AMIN - Opponent(s) ========================================================= Appearance : MR. MANISH R. BHATT for Applicant(s). MS. JOLLY PARIKH for MR. S.N. SOPARKAR for Opponent(s). ========================================================= CORAM : HONOURABLE MR.JUSTICE R.S.GARG and HONOURABLE MR.JUSTICE D.H.WAGHELA Date : 04/09/2006

ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE R.S.GARG) The Income-Tax Appellate Tribunal, Ahmedabad

ITR/73/1996 2/4 JUDGMENT Bench “C”, in relation to Income-Tax Appeal No.2134/Ahd/1990 relating to Assessment Year 1986-87, has referred the following questions to this Court for its opinion: “Whether the Appellate Tribunal is right in law and on facts in treating the income under the head other sources and directing allocation thereof amongst the beneficiaries?”

It appears that the appellant-Trust was constituted during the accounting year relevant to Assessment Year 1982-83, it engaged itself in the business of manufacturing and supply of plastic bags to Nirma Group of Concerns, manufacturing detergent soaps. The business was being carried on in the name and style of M/s.Nirang Industries, of which the proprietor was the said Trust. The said business was converted into a partnership firm in the name and style of M/s.Nirang Industries as per the Partnership Deed dated 10th June, 1984 and yet another partner, Shri Uma Shiv Trust, was admitted. The said Shri Uma Shiv Trust happened to be a specific family trust. As per Clause-(1) of the Partnership Agreement, the goodwill of the business owned by Shiv Trust was not to be encashed or used during the subsistence of the partnership or on dissolution thereof.

ITR/73/1996 3/4 JUDGMENT The firm came to be dissolved vide Deed dated 1st January, 1986 and the Assessee-Trust retired from the firm and the other partner, Shri Uma Shiv Trust, became the sole proprietor of the business with its assets and liabilities except the goodwill. According to Clause-(3) of the Retirement Deed, Shri Shiv Trust granted license to Shri Uma Shiv Trust to use the name and goodwill of the business for a monthly compensation of Rs.25,000/-. The Assessing Officer, taking into consideration the totality of the circumstances, held that the payment of the said amount could be taken to be the income from other sources. The matter ultimately went to the Tribunal, which relying upon its decision dated 13th October, 1992 in Income Tax Appeal No.1387/Ahd/89 for the Accounting Year 1985-86 in case of Nirang Specific Family Trust, allowed the appeal in favour of the Assessee, observing that the facts of the cases were similar and identical.

It appears that a reference was made by the Tribunal to this Court in the matter of Nirang Specific Family Trust, which was registered as I.T.R. No.83 of 1994. A Division Bench of this Court, vide its judgement dated 27th September, 2005, has decided the issue in favour of the said Trust.

ITR/73/1996 4/4 JUDGMENT

We had asked Mr.M.R.Bhatt, learned Counsel for the Revenue, that the facts floating on the surface of the record in the present case, are in any manner different from the facts in the matter of Nirang Specific Family Trust. Though the learned counsel for the Revenue submitted that if there were two Trust Deeds, then, each Trust Deed should have been examined on its own merits, but, he was unable to submit to the Court that there was any difference or distinctive feature in the matters of two Trust Deeds.

As in an identical matter, this Court has already held against the interest of the Revenue and nothing special has been brought on record to take a different view, we must hold that the Tribunal was justified in making the order against the interest of the Revenue. The question is answered against the interest of the Revenue. The Reference is, accordingly, disposed of. No costs. [R.S.Garg, J.] [ D. H. Waghela, J.] kamlesh*

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