Karnataka High Court
The Commissioner Of Income Tax vs Smt.Shaila S Hegde on 1 September, 2010
Bench: N.Kumar, H.S.Kempanna
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 157 DAY OF SEPTEMBER,'
: PRESENT :
THE HON'BLE ma. JUSTICE "
THE HON'BLE MR. JVes1fIcE"H_.'s.
I.T.A.NO.1€3§z£.._q'OF 2005. -
Between:
1. The Commissioner of" " VT
Income-'1'ax,_'" " V
C.R. Buildiflgf' '
Queens. "
Bangalore; ' O
2. The Ineofiie;.».ta,X3VO1fieer,v
coinpanyVc1rc:'e.¢v1,
C.R.*BU;ilding, ' "
Queen"s.._Road,'. '
Bangalore...'
(B3; If Seshaehala, Advocate)
V
Srfit. sha11a""'.s.Hegde,
L/R. of Late B.T.Shankar Hegcie,
Shreeshyla'
Kafiakapura Road,
Bangalore.
" {By Sr: S.Parthasarathi, Advocate]
Appellants
... Respondent
R/, ,****** This ITA is filed U/ S. 260-A of 1.1". Act, 19ES..1d'&_gainst the Order dated 08.03.2004 passed in ITA.No.,Hl268*,/.BN'G/ 2003, for the Assessment year 1977~78, praying to' fo'rm__'ui~atei_ the substantial questions of law stated therein.'and-allowthe ' appeal and set aside the Order passed--».--by'.. the«pI'i'A'I'; Bangalore in ITA N0.1268/BNG,i'-2003, dated 1 08.032004, confirm the Order of the appellate Cosninissioner and confinmng the Order passed by"¢th'e_ Income "Ol"ficer, Company Circle-Vl, Bangalore, ' it "
This ITA coming this day, N.Kumar J., delivered the foiloxxringz J1} mg ..
..:_.................. _......... This isgi challenging the order 3 hvollding, for all practical purpdses, 'transfer of liability to the extent of Rs.2o;i51;9so.5o;p his only from 30th April 1992 and not._%lf)efore and»--..th_ere:fore, the addition of Rs.20,51,980- .0 in _Vthevasse'ssment year 1977-78 is illegal and thus it the assessee as prayed for by her. .V"Late Sri. B.T. Shankar Hegde was the Managing Director of M/s. Hegde and Golay Limited. 'On his death, his wife, Smt. Shaila S. Hegde filed return K/t 'income from other sources' . On re--assessment, a total income of Rs.2,09,'71,380/-- was brought to tvai<'~..tinder an assessment order dated 145*" February§V.:'l'9:8Q;~- assessee took up the rnatte_r~~»in4 appea]':'.';be'I'oreV Commissioner of Income allowed on 26*" November-..:Vl'9_90.'Adllhe it the amount in respect shares was remanded. The fglaim was also remanded to Rs.2,03,810/..
was due to difference in the value """ '1\/l,l'sV§""Vl§*legde and Golay and the Assessing Officer was confirmed. 'Aggrieved by the said order, assessee 'preferred 'appeal to the Income T ax Appellate Vfiarigalore. The Tribunal disposed of the Aappetd order dated 30th May 2000, rernanding the .. rnatter to the Assessing Officer to consider the valuation 'afresh. Even the claim in respect of amounts paid by 'A the Ancillary Companies for designs, drawings X'/, and manufacture of new caliber watch was also remanded. After remand, the Assessing virtually confirmed the earlier order except to the extent of Rs. 2,031.,-8110-/,-- t by the first Appellate Authorit3tQ__ by order, again, the assessee'-vpreferred--.In the appeal, in respect of "Rs.l1V,25,OO0/_ in respect of purchase was deleted. In so far as - in Swiss francs of and Golay Ltd. for clajmpsuof brought to tax under Section of concerned, the same was confirmed." .pSiinilariy,w.the addition of Rs.30,27,000/-- tioggptaxfvunder the head 'income from other I sources'iw._\5vafs.,also confirmed. The Revenue did not ch'a.1leng'e.the Appellate Commissioners order regarding Valuation of the shares. Thus, the order of the Appellate "iCo*rn-irzissioner became final. However, the assessee
-"challenged that portion of the order of the Appellate Commissioner, which was against her. The Tribunal found that the Assessing Officer has not carried .,on_t~V.the directions issued in the order of remand'.:---- held, even if the liability to the ,extent 50 owned by the Company to to Sri. B.T. Shankar Hegdeis-v..accep:¢dv, "eoiivld"be only'? from 30th April 1992- and and"thei:efore, the addition of Rs.2O,5l4',Q'S'OL5vQi:'»Vfblfltvhle.vxassessrnent year 1977-78 is deleted. It also held, C'-technical know--how to Ancillary' to tax on merchantile basisizasl maintaining the Mercantile Accounting _SysteIn}*. But the assessee is maintaining a_S.ystem of""Accounting. Admittedly, no cash is "F'1i1;i;her, it held, the said amount cannot be treated»aspiscapital gains as cost of acquisition cannot be workedwout in View of the settled legal position and therefore, it allowed the appeal and set aside the order assessment as Well as the order of the Appellate Commissioner. Aggrieved by the said order, Revenue is in appeal.
3. The learned counsel for the Revenue.,.' the impugned orders, contended, it is case,» of the assessee that he j; is actionable claims valued' at which on conversion, Indian». is at Rs.l,72,87,773/~. V;:.'l_.'l*_e' pleaded by the assessee is not proye-dd the material on record4_,sho'§{7s,._ it4"islaifraudulentVl device adopted by the to of tax and therefore, in the 'absence acceptable explanation, the consideration for the acquisition of the said actionable V. pelairnia'*is"l'treated""as undisclosed income and brought to 69 of the Act. Therefore, the finding re'eordved.,lfiy the Tribunal is erroneous and requires to be set aside. Similarly, admittedly, the assessee has it 'gtransferred designs, drawings etc. to 18 Ancillary " "Companies which is Valued at Rs.30,27,000/- which is iv an income derived by such transfer. Merely because the said 18 Ancillary Companies did not utilize the designs and drawings and did not make any make no difference in law. That is 1 the assessee and it is the assessee for which he is 1ia§:>.1_e , A
4. Per contra, learnedl"'~e_O'u.nsei' for the assessee subrnitted,:._._."i"t_' Sahel' case of the assessee that the 'vvas gifted to the assessee . Feinand jjPerreten, without any consivderation, éllthjecase is not believed, then, there "a='right and the asset does not belong to theylassvessee and therefore, the assessee is not
- v liable to tip; at Even other Wise, he contended, as thefinatevriaidiscloses, if at all the transfer is to be treated' faltransfer it is only from 3031 April 1992, the date . 021 which the clearance is given by the RBI. ._'i'herefore, it was not an asset owned by the assessee in " ~-the year of assessment 1977-78 and therefore, there is \i/ no liability to pay tax. In so far as transfer of designs and drawings is concerned, the terms of the make it very clear, it is only after the Companies use the said drawingsand designs, 'and._stai'.t ' earning, they should pay the not in dispute that the Cornpanies urieyerxlusedll the designs and drawings, ,they.fcaVi'r-ied no"im:'ome, they made no that the assessee was of Accounting.
As the amount at all, the anllllincome and bringing it to tax the the assessee does not arise. There.fore,auth_e Tribunalvswas justified in negativing these therefore, he submits no case for A i1i.terfcrencef'.With the order is made out.
-From the material on record, it is clear, the assesses claimed gift of the actionable claims. He l produced a gift deed. The authorities after investigation V' "have demonstrated that the alleged gift deed is a V, l0 fabricated document for the purpose of avoidingtax. If that is so, the assessee did not acquire the claim at all and he cannot be construed the said actionable claim. Merely beca.us'ei claimed to be the owner of thei'*acti_on:able V basis of a gift, he cannot beivpjtiteateld .«i¢7he1-'ll , the gift is not provved, in.e"tl'le_:'co'u.rse' of "investigation, Revenue could not on any other documents the title to the said actiona_b'le""'clai,Insf;--'However, material on record eshows,'h'theu thelcllelarance to treat the said actionable on 30th April 1992 to the extent of Therefore, in the year 1977- .' 7E3lo;.{th.eA asseesseevlnras not the owner of the actionable 'therefore, in the year of assessment 1977378, he-«.._could.V'not have been assessed and no tax liability .could'=have been charged on the assessee. That is it "i,pr--ecisely What the Tribunal has held on appreciation of " ~-the material on record. In fact, the Tribunal, on an \/ ll earlier occasion, remanded the matter to the Ass_e_ssing Officer with a specific direction to look into aspects. It is not in dispute that the did not obey in letter and spirit by if the Tribunal. Under those material available on record';v:.r:'tl'ie the said finding whic-"l1__is loase'.dioris~.legallevidence and cannot be found faultof the matter.
we do not of law, which do arise that aspect of the matter' V ' A V pertaining to transfer of designs and drawings etc. is concerned, it is true that l V. "the is transferred to 18 Ancillary Companies for a of Rs.30,27,000/--. The material on reccrd none of the 18 Ancillary Companies :_"'didp_.n1a'ke use of the said designs and drawings, did a.'_'mla1:'ufacture any spare parts, did earn any money out it "of such manufacturing activity, nor paid the aforesaid \/ 12 amount to the assessee. The assessee is ad0pting__Cash System of Accounting. The assessee did not pie from the 18 Anciliary Companies. circumstances, when the assessee~d_id --'_not.'receive.i'an5( income. question of charging taxA"on'inon»e5(istin,g«. would not arise. That is precisely the has' held. Therefore, even" on that'AWetdo"not see any justification to interfereh the Tribunal as it is purely In that View of the 'Jmstification to interfere with substantial questions Of 13\%\}" .@c"01a'sideration in this appeal. Accordingiif, dismissed. Parties to bear " their oiifn costs.
I Sd/g_-In 5ii'dg'"é Sd/ti Judge?