C.I.T.UDAIPUR vs. M/S SWASTIK ENTERPRISES

Judgment 07/03/2017

By way of this appeal, the appellant has challenged the judgment and order passed by the Income Tax Appellate Tribunal, Jodhpur whereby the Tribunal has allowed the appeal preferred by the assessee. This Court, while admitting the appeal, has framed following questions of law: “(i) Whether in the facts and in the present circumstances of the case as well as in the law, the Tribunal was justified in setting aside of the order of the CIT(A) by reducing the addition of Rs.71,00,000/- to Rs.35,75,000/-? (ii) Whether in the facts and in the present circumstances of the case as well as in the law, the Tribunal was justified in deleting the entire addition of Rs.71,75,000/- made by the AO on account of it being in the nature of short term capital gain and commission accrued thereon?”

(2 of 3) [ITA-36/2009] The preliminary objection raised by the learned counsel for the respondent is that two appeals ought to have been filed and one appeal against two judgments is not permissible. Without going into technicalities, we have heard the matter on merits. The Tribunal has recorded specific finding in the impugned judgment and order which reads as under:

“11. The Revenue has also not brought on record any material to set aside the finding of fact reached by the ld. CIT(A) in his order where he has found that the amount of Rs.24 lakhs received from the appellant by JTFSPL stands utilized for the purpose of their own investment. Under such peculiar facts even though Shri Gajendra Porwal or his group companies may be engaged in the business of providing entries in the shape of loan etc., it cannot be accepted that the agreement under consideration did not give right to them to get the property transferred in their own name or in the name of any of its nominees. In fact, the AO himself vide Para 3 at internal page 4 of the assessment order has recorded a finding of fact as under: “The assessee in the year under consideration sold Hotel Park. However, it diverted the part of the profit (Rs. 71 lakhs) in the hands of JTFSPL which was set off against the loss arising out of sale of shares in the books of JTFSPL”. He also computed income at para 14 of the assessment order and treated the amount of Rs. 71 lakhs as diverted income but added the same to be taxed in the hands of the assesse. The AO nowhere made out a case that this was a case of application of income and not that of diversion of income by over- riding title. It however is also not disputed that the hotel building under consideration has finally been transferred at a sale consideration of Rs. 151.00 lakhs. The appellant M/s Swastik Enterprises under peculiar [ITA-36/2009] obligation to apply income in a particular way that results in diversion of income before it reaches the assessee. In that case, it was held as under:- “In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another’s income. The matter in the present case would have been different if such an overriding charge had existed either upon the property or upon its income, which is not the case”.

The appeal stands dismissed accordingly. (DR. PUSHPENDRA SINGH BHATI)J. (K.S. JHAVERI)ACTING C.J. Mohit Tak/Sudheer