Karnataka High Court
The Commissioner Of Income Tax vs T Satish U Pai on 24 May, 2011
Bench: V.G.Sabhahit, Ravi Malimath
.1.
IN THE HIGH COURT OF KARNATAKA AT BANGALGRE
DATED THIS THE 24" DAY OF MY 2011
PRE§ENT 2 '
THE HGWBLE MR. JUSTICE v. G.SA.BH 2§i1j:~A.,::: 3
AND . % . 2 F'
THE HONBLE MR.3UST1_;:g :5;;2'xéf':'-M.aiL:%«i-:«ff§§v_"
I.T.A.NO.1'V€)'é.f 20_Q5
BETWEEN:
1.
The Comrzjissioncgffléfivf'Et3cc§rn:§gta;é:,3.
c.R.Bui§dir.';,.-Att:a--.\;a§a';'
A
The..A_S's~§Aéta'i*é:i;A_ C0m. m_iséio-nervfyf Income-tax;
filircle-"2.*:Z=R;BLsi3;i§';*:gg Attaxiara;
E
hiangaiaré';'ff- _ %
'~ * ' WAPPELLANTS
{By "Sri .VE;Eifilnii-ra ' Kumar, Senier Counsei for
, A Sré,»E.;LSé:nmath'i;.«w A§f_${o.cates)
Sr;;t_.$a£2sh U pay,
' 3"8,aA'nanth Nagar,
§'«2.a;r:§pa¥,
RESPQNDENT
(By E3ri.S.F*arthasarathi, Advecate)
This ETA fiied under Section 26{}~A ef 1.m»th:t,~:tf3;s§'es:
arising Gut of order dated 3o~e-2004 _;;i>"assied_: u :,i,n'y
I.T.A.No.:5S;'BN<3/1997 for the assessment--'.fy'earsVV'it-§§'9U}¥'e ' 4_
1991, praying to formuiate the substantiaf qu-esfti.Qn'sV:<;f "
stated therein and is anew the a-;;'p'ea¥'ar73e:f s4et'~e.3iae.i'the-.
order passed by the ETA? §?s.anfjga!_er'e I275.'
No.15S/BNG/199 dated 3{)~O8~2OC?4; eohfirm'i'h,g--.tVhe ";3i"d.e'r'w._
ef the Appeiiate Commissiener and "::onféri;'hp%:,he o';rder *
passed by the Assistant Comhatssiohet ef "Enéeh*:'e' 'Tax, '
C%r<:le~2, Mangalere.
This ITA comihgt _I'eh._fisfigyrthih':»Vh'eVef§.ng this day,
SABHAHIT 3., delivered 't_h_e»'_fQiivo_wi_ng':~,» ..
4 ~' . }g_%_pg"§ we
This a'pVp'e-a1§.;_:'yha's for consideration of
the fo¥i::;wi_eg Ast;--E3s«teVr:t§3Evt.pe'u.es--tien sf éaw:
ht VV..L4*"Whethe't5A' th'e.sV"«T:ribuna£ is justified in
hhwdéngt thetéection S0 of the Income Tax Act
eitracted and the capita! gain is to be
%.ee§4ee:.!,»eteVt§~'i:hdet Section SCLB at the Act?"
av
".3-
2. However; it was submitted by
Counsei appearing fer the appefiant and :Vtr}e°~._:r:*esie'eVVri<i'%~:~"n--tTK V'
that provision :31' Section SS-B of"flee";':g:ta_ha's.z,§§e--r_:j.eV"iVt}Vt<3"«
effect from 01.04.2080 and_agreeme'nf of s,2;iAeA'=%::
31.01.19§C*.
3. We have .?}eerd $'eVri'i'e;' Counsei
appearing for the a;:3;'3'eVf£e'Vr_1i--:"jer2;<;i Counsei
appearing Vegfitentions urged on
the finding :25? AfipéntjézfgiAA~ue:}..o'}gs:;yVsand the Tribunaf.
4;} """ H e_:;e_2eVstien cf Eaw that weuéd
arise foe'cerssiwdesefienp»is"-éfaeied as feliowsi
*i='x?.f:ietVh.er 'che' fim:i%ng of the Tribune! in
' :~--. :'heise5ing._thaeeéeefien 50 cf the Income Tax Act
and in confirming the erder of
A ;'$:;p::3§:se;!!ai:e Authority which has reversed the
e"r*r3_Aer of the Assessing Autherity is perverse
g,
,4-
and arbitrary and cafls for interference in
appear?"
5. The materiai facts of ;'the1'_'§:iase 'dTiea'd_é}'1géVdte'--thiévs
appeai are as foiiows:-
The respondentVi;.g§g.g;§.'_},ad~A.ff§»<d'L»»1;acterEes;A dne known
as packing unit styied aAs.'eh_e'V'"other is known as MICR alt its assets and liabilities the agreement of sate dated Power Press for a ednsideuratliea Hewex./er, as per she balance she'ef:Vea. VtheAd_afe"of safe there was a net deficit of \K%'E':iveh...2;vas aiso taken over by the purchaser v~;:_he:fevfe':'e, the tetaf consideratier: weuid be Though the respondent had shown capitai gaih" at"V.QVRs,'f§,3?,415[', a revised assessment was fiied Vs.V:s"i:a£:.ihgVV":hat the said income daes not constitute capitaé .' g;s:ns: and the respahden: is net: Eéabée :0 say the eaeitai -5- gains. The Assessing Officer after considerijrfg-.:"L:'-the objections of the assessee heid that the transatitiea:§:'a'te.r:iu* "
31.01.1998 was attracted eapitai Q-aihs-~:5hd~'er 513 of} the Act and treated capitai gain.s.Va:eA.'shertwterrr:
gains and passed an erder etf-.,a"s.sessh'te.ht~ah'-.2§..;C}'2;i§93. " ' Being aggrieved by the QArrie:rj._ef-..,_assessment dated 25.02.1993, an appea$'"":r:a?'as -assessee before the C0mmissi0h_erV_.of Bangalore contending saéVe'el--eaF¥Y d€Cid€S that it was a__s_h;m.g;f"sa«%_e_ the capitai gains is net attracted as'he'i<_j byiti1e'3gipreme'"Court and wherefore, the Assessing Ciffirger Eh impesing tax on short termV_c_apita'i~. g'ain_s}. L§s1_de~r": Section 50 of the Act. The "V'~..v_App'e§'f~at_ét: Atuthe'ri't'y'v------by an erder dated 23.12.1996 heid th.at-~the._sa}'eiiheuestien dated 31.011990 was a slump sa3.e"a1hd censtitute capitat gains and set aside the erder ;;a"ssedx by the Assessing Autherity regarding demand V' "..f*f::ir'tt"e;g< en Capitaf gains and interest imposed thereeh and * as'?e»§n;'ee the apeeef. Being aggrieazee by the erder ef the V. A_ attr_a'ete§j_jA.' -6- Appeuate Authority dated 23.12.1996, revenue an appeai ITA N0.15S/Bang/199? to the Trib;;«:%Va.£"'aee:'--
assessee had fitee a cross ebje_:t§e_r} Ne'f49;'.§§e.eg;'2'QO3v4 being aggrieved by the findings-,aglaiestéflze homing that the transactien d'a t'e<;i 31:L1=..1':i99G'V:9%:aje_3H HsvI:,1im p sale and did not attract Se<:tioe t:"'i?.V{:ZI' awed it"attracteid under Section 50~B of the an ertier dated 30.08.2004 heEdV that --'i'e 'nk:rjt._'--V"attracted and upheid the cQ.r.'tej::j:tEoniiraigsetd E«nfi"t1h_'~e.v_.ef%jss--objection and provision at applicable and accordiirigfygt;E:i::;rt1.E;s:eVe:1 jtee'-apt§ea'i"f'i§ied by the revenue and ttetdéng that the transactien was sium;:V§*----.saieV e__nd._ 'wb~erefere capitai gains was not H A aggrievee by the order of the Tribuna§ '.eismuis3§Feg; the eppeat and aimwéng the cross objectéen ' '..jciai:e--<in 3308,2804; this appeat is flied by the revenue
-- ceateeeieg that Seetien 5&8, wteeh was came inte effect was '2 'M. :52 xi 3%» <.
M' -7- from 01.04.2000; was riot appiicabie to the which took piace err 31.01.1998 and the not censtitute stamp sale and_...m_ere _--'retii"tai.'V'i's=~i"'.theV_ agreement weuid not make it sIu'me;'sa.i-e aad'i.i£ihe"re'€ere.i_' an order passed by the =Tri_E;uaa'i'-._a'iir5V tti'ei..éj{i.i;i;pHe_i3Iate Authority are iiabie to be set ttie'aVrti:er passed by the Assessing Officer it it 12'. A sigaiiia r.:_4V£'§t>vi::'V.ri'se'i"'iappeari ng for the appeiiant riiiaing of the Appeiiate transaction in question is a sii.i'm!p' gains is net attracted is baseless as ria_rea.s'ans. have been assigned and wherefore, .---...i.tiie'-':tifi"rid.i'ng is capjVr«ie'ie"Lis and arbitrary and therefore, iiabie ta and further submitted that the order p'as's'ed 'Assessing Officer is justified and may be resteredvearhie aiso farther submitted that the erovisiees at "..jjSAe£:ti«.aa 5&8 of the Act is not appiieabie and the order at' i ti':;ei'Tribeaai ta that extent is aise iiaaie te be set aside.
8. The teamed Counsei appearing fo:ir'»the respondent submitted that the agreement at materiai on record shows that the impugnee_'ti'::VhSa_t:tiVee K V' a slump sale and not a eaeitai gaihis"as~._&efi-rgect.;;Ve'der"'« Section 2 (42)A of the Act _andv4'i.eh'c_e it .:ES;Ah*eE*d'V impugned transaction is a sit3"e%:j'.saie, "a_t}i'~;=»'tgaeitaiiiiigiains whether long term or,Sh_ert te'rm.njEe'e'tt_raCt«ed';"hevrice, the finding of the Appeiiate Tribunal is justified. He:.ft5rtti-er assuming that the order and the Appeilate Authori.ty*"'visit:'a"rh'i:téf:ary"~jtahvd it p'eirvejVrse, it has net been oppose} big that it is not a slump safe. TheV°cr_r:ier 'paSs_ed__"t;y the Assessing Officer cannot aiscwigfe e'usteiriabE.6,.__i.i}r»se far as it reiates te imposition sf itax.;;h:jer_:11e'etien 50 of the Act imposed as a short term t't.ra;5itai "'ge'_:'_ns'V~i:e'rid wherefore; the order passed by the Asseesirfiflttieer is also iiabie te be set aside. 2 V7'-~« g\':?;~§ag;?',./ § _g,..
9. The aepeei has been admitted for abo\{"e----._said censideretieh ef substantiai question of modified by as as referred to above.
10. We have givenTVcarefe1__ eQhsidefet§t)vn'~ contentions urged by the §ee--r:5ee Ceuhseé-ezpeeetttithe fort' the parties and scrutinized th~e"m'e:tetE"eA£._en re'C€>'rd';V
11. ivcieariy Show that the ':5jea.:ed 31.014990 and whereVf0'r'é' of the Act, which has came Vii'-age is not applécabée ants! wherefere'tf«¥.hdinVgj -t>f'~?:he...'~5Tribunaf to that effect cannot be sus:gt§3.ir§eti. __Hem}e§ver.,.en peruse: ef the erder passed by the 'A§jpe§£et4e'tAut'herity and the Tribunat. it is clear that they pretieededtv-V'teré..e:'the basis that the impugned transaction is a siuree. sejevand there is rte finding supperted by any reason A C_*e:s'h"t.:f; him: the impugned transaction weuid censtitute gem? eaie. Mere recite? Eh the egreemeet ef sate by itseif
-10..
is not conciusive to find out as te whether the.«.i_r%5V.;j'u§:j's1.esi transaction is a slump safe and wherefere M pointed eat by the ieamed Ceivmsei-4ap;§ee,iiifie'4_fe:*.'jthe-.A appeiiant it is dear that the finding confirming the order of the'>i,§p+;,3Ve£¥a{e the " L' impugned transaction is a sEem:§".s_a'i'eLAwfiicimis based upon reasoning, basei:i""en..ti'é:e' case en pure question of factwis pe:'ve::-se Vcairj»n_<>if",5eA".:'.sListained. The same cannet. fee e;':iV§ie'é!. It is aiso clear from Officer that the Assessii;Vf1g--t,_:,,;f;:;.':;§eed§2d on the basis presuming that t:re'nVsé:Ci:ien...éV gains and treated transgactiien as teiirmvcapitai gains under Section 50 of .ii"i:he"'i;3astE'e:ndTi"e:i}.ere finding as to whether the impugned siump saie, which attract eapitai gains ca i3»:}_ot;be~ si;f.s':ained.
V' Lincier these circumstances, in View ef the sgébmissiens meée by the Seemed Ceuesei appearing fer
-11..
the parties, we hem that the order passed by the Tribuna¥, Appellate Authority and the Assessing Qffécer is Iiab.}e»._te;_§3e set aside and requires to be remitted back to _ Gfficer ta find em: as to whether the impug;her:}_j'::re'hseet:o§§ is e stump saie and if so, whether §i:.syx%ve{;,£'d.' .ettrez:'ts__ the.' prevision of Section 50 er of Act ilmvision of Section 508 of Act is alfifilicabfe. Accordéngty, we answeflthe -sut;ste':1t;i.eE"«qgtestieh of law in favour of the respehdenAt_:afTssessVee a'h"d.'p;éé;ss'V"the feliowihg:
QRbege?»Wf
1. by th§eV'Income Tax Appelfate """ 'Tr.§ev:>_un'z3;;" S'a~hflgaIore'V"ih ITA N0.155/Bang/1997 " "and: __'Objecti0n No.49/Bang/2003 "a'daf:ed'- 3C'.{O8,"2§)O4 confirming the order of the Appeikate Aufhorityi Commissicmer 0f Appeais . (1:1) ""epp«ea: No.1TA.15/Mme/cma) dated
-2__3".v1%2¢199s is set: aside.
erder of assessment passed by the "Assessing Officer dated 25.021993 is also set asifie.
5*, Prs*.' ' ..12_.
The matter is remétted back to the Assessing Qfficer to pass fresh orders after affofding opportunity to the assessee in acc0rc§a't1'%:ef wftff; faw in the fight of the 0bservati0ns._-r§éde~V--'i§1fz~- . body of the order.
The Assessing Office}, st;'aeE§.:'d«iss.g§o~s:e é;ff'a.,,.:he:
preceedings witbméua period of sfzhsree: I;'I"i():if':tH:3 from the date ef"s«s.VVV%e.ceipt"»:}f"-tfiés".;>rdVer or productionof cert-ifiheci'"~e*:0py, w-hicfiever is eariier.
fee;
gfigs ass geese ; See %%\ EUEGE