ASHOK GIRI vs. THE ASST.COMMISSIONER OF INC

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TCA/132/2019HC Madras22 December 2020Bench: Hon`ble Mr Justice T. S. SIVAGNANAM8 pages
AI SummaryRemanded

What did the High Court hold?

The High Court did not decide the substantial questions of law. It noted the enactment of the Direct Tax Vivad Se Vishwas Act, 2020, which provides a mechanism for resolving disputed tax matters. The assessee informed the Court that they had filed a declaration under Section 4 of the said Act. Consequently, the Court found no useful purpose in keeping the appeal pending. The Tax Case Appeal was disposed of on the ground that the assessee had availed the benefit under the Vivad Se Vishwas Act. The assessee was granted liberty to restore the appeal if the decision on their declaration under the Act was not in their favour. The substantial questions of law were left open. The operative direction was to dispose of the appeal with liberty to restore.

What were the facts?

The assessee, Ashok Giri, filed a Tax Case Appeal before the High Court of Judicature at Madras against an order of the Income Tax Appellate Tribunal ('the Tribunal') dated 29.11.2017 for Assessment Year 2005-06. The appeal challenged the Tribunal's decision regarding the taxability of a Rs. 6.75 Crores payment received by the assessee as a 'non-compete' fee. The procedural history involves the assessee filing the appeal after the Tribunal's order. The High Court noted that the Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020, to resolve tax disputes.

What were the issues?

The Tribunal had to decide four substantial questions of law: 1. Whether the Tribunal was correct in not admitting additional evidence filed under Rule 29 of the Income Tax Appellate Tribunal Rules. 2. Whether the Tribunal was correct in holding that a sum of Rs. 6.75 Crores paid as a 'non-compete' fee was business income under Section 28(va) instead of Capital Gains, considering it was received for the right to carry on business. 3. Whether the Tribunal was correct in holding the Rs. 6.75 Crores non-compete fee as a revenue receipt assessable as income from other sources, after having held it as business income under Section 28(va). 4. Whether the Tribunal was correct in assessing the same amount of Rs. 6.75 Crores both as business income and income from other sources. The assessee contended that the payment was for the right to carry on business and should be treated under the proviso to Section 28(va). The revenue's contentions are not explicitly detailed but are implied by the Tribunal's findings which the assessee is challenging.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 28(va),Section 4

AI-generated summary — verify with the full judgment below

T.C.A.No.132 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.12.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.No.132 of 2019 Ashok Giri No.13, 32nd Cross Street, Besant Nagar, Chennai – 600 090. [PAN:AACPA 4186F] .. Appellant Versus The Assistant Commissioner of Income Tax, Corporate Circle – 3(2), Chennai – 600 034. .. Respondent Prayer:- Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, 'A' Bench, Chennai, made in I.T.A.No.2059/Mds/2017 dated 29.11.2017 relating to the Assessment Year 2005-06. For Appellant : Mr.R.Sivaraman

For Respondent : Mr.M.Swaminathan Senior Standing counsel assisted by Ms.V.Pushpa Junior Standing counsel 1/8 https://www.mhc.tn.gov.in/judis/ T.C.A.No.132 of 2019 JUDGMENT [Order of the Court was made by

T.S.SIVAGNANAM

, J.]

This appeal filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 29.11.2017 passed by the Income Tax Appellate Tribunal, 'A' Bench, Chennai ('the Tribunal' for brevity) in I.T.A.No.2059/Mds/2017 for the Assessment Year 2005-06. The assessee has raised the following Substantial Questions of Law for consideration: “1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in not admitting the additional evidences which were filed before the Tribunal under Rule 29 of Income Tax Appellate Tribunal Rules? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that a sum of Rs.6.75 Crores paid to the appellant as a “non-compete” fee as business income u/s.28(va) instead of Capital Gains, even though the sum was received as a right to carry on the business and hence proviso to Section 28(va) of the Act alone will apply. 3.Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the payment of Rs.6.75 Crores paid to the Appellant as a non- compete fee as a revenue receipt and assessable as income 2/8 https://www.mhc.tn.gov.in/judis/ T.C.A.No.132 of 2019 from other source, having held that the same is assessable as business income under Section 28(va) of the Act. 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in assessing the saem amount of Rs.6.75 crores both as business income and also as income from other sources.” 2. We have heard Mr.R.Sivaraman, learned counsel for the appellant/assessee and Mr.M.Swaminathan, learned Senior Standing counsel assisted by Ms.V.Pushpa, learned Junior Standing counsel for the respondent/Revenue. 3. It may not be necessary for this Court to decide the Substantial Questions of Law framed for consideration on account of certain subsequent developments. The Government of India enacted the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) to provide for resolution of disputed tax and for matters connected therewith or incidental thereto. The Act of the Parliament received the assent of the President on 17th March 2020 and published in the Gazette of India on 17th March 2020.

4.

In terms of the said Act, the assessee has been given an option 3/8 https://www.mhc.tn.gov.in/judis/ T.C.A.No.132 of 2019 to put an end to the tax disputes, which may be pending at different levels either before the First Appellate Authority or before the Tribunal or before the High Court or before the Hon'ble Supreme Court of India. Under Section 2(j) “disputed tax” has been defined. In terms of Section 3, where a declarant means a person, who files a declaration under Section 4 on or before the last date files a declaration to the designated authority in accordance with the provisions of Section 4 in respect of tax arrears, then, notwithstanding anything contained in the Income Tax Act or any other law for the time being in force, the amount payable by the declarant shall be determined in terms of Section 3(a-c) thereunder. 5. The First Proviso to Section 3 states that in case, where an Appeal or Writ Petition or Special Leave Petition is filed by the Income Tax authority on any issue before the Appellate Forum, the amount payable shall be one-half of the amount in the table stipulated in Section 3 calculated on such issue, in such a manner as may be prescribed. The second proviso deals with the cases, where the matter is before the Commissioner (Appeals) or before the Dispute Resolution Panel. The third proviso deals with cases, where the issue is pending before the Income Tax Appellate Tribunal. The 4/8 https://www.mhc.tn.gov.in/judis/ T.C.A.No.132 of 2019 filing of the declaration is as per Section 4 of the Act and the particulars to be furnished are also mentioned in the Sub Sections of Section 4. Section 5 of the Act deals with the time and manner of the payment and Section 6 deals with Immunity from initiation of proceedings in respect of offence and imposition of penalty in certain cases. Section 9 of the Act deals with cases, where the Act 3 of 2020 will not be applicable. 6. We are informed by the learned counsel for the appellant/assessee that the assessee has already filed the declaration under Section 4 of the Act. 7. In the light of the fact that the assessee has already availed the benefit under the Act, no useful purpose would be served in keeping this appeal pending. At the same time, safeguarding the interest of the assessee in the event the order to be passed by the Department under the Act is not in favour of the assessee. Accordingly, the Tax Case Appeal stands disposed of on the ground that the assessee has already filed a declaration and the Department shall process the application at the earliest in accordance with the said Act and communicate the decision to the assessee at the earliest. As 5/8 https://www.mhc.tn.gov.in/judis/ T.C.A.No.132 of 2019 observed, the assessee is given liberty to restore this appeal in the event the ultimate decision to be taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeal and on such request made by the assessee by filing a Miscellaneous Petition for Restoration, the Registry shall place such petition before the Division Bench for orders. 8. With this observation, the Tax Case Appeal stands disposed of with the aforementioned liberty and Consequently, the Substantial Questions of Law are left open. No costs. Connected miscellaneous petition is closed. (T.S.S.,J) (V.B.S.,J) 22.12.2020 Kak Index: Yes / No Internet: Yes / No Speaking Order/Non-Speaking Order 6/8 https://www.mhc.tn.gov.in/judis/ T.C.A.No.132 of 2019 To The Income Tax Appellate Tribunal, 'A', Chennai. T.S.SIVAGNANAM, J. AND 7/8 https://www.mhc.tn.gov.in/judis/ T.C.A.No.132 of 2019 V.BHAVANI SUBBAROYAN, J. Kak T.C.A.No.132 of 2019 22.12.2020 8/8 https://www.mhc.tn.gov.in/judis/

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