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1 - 10 of 12 (0.24 seconds)Section 115A in The Income Tax Act, 1961 [Entire Act]
The Income Tax Act, 1961
State Bank Of Travancore vs Commissioner Of Income Tax, Kerala on 8 January, 1986
The decision of the Supreme Court is reported in (1993) 201 ITR 391 (supra). It is on this decision that the main reliance of the Department has been placed before us. A study of this decision shows that the Supreme Court did not find it necessary to express any opinion on the question whether, as held by the Madras High Court, "(i) there was conflict or inconsistency between s. 5(2) and s. 145; and, (ii) in the case of a non-resident like the appellant, cl. (a) of s. 5(2) had no application whatsoever and cl. (b) of the section governed it irrespective of the fact whether it maintained its accounts on cash basis or mercantile basis". In view of the facts before us, we also do not consider it necessary to go deeper into these questions on which the Supreme Court has not found it necessary to express its opinion. Suffice it to say that in view of the discussion made by us in the foregoing paras, it can safely be held that there was no accrual of income to the assessee, i.e., appellant company, and, therefore, no tax liability was invited. In this connection, it was submitted by the learned Departmental Representative that the rescission of the agreement by the letter dt. 7th May, 1985 was a subsequent event, which could not have been taken into consideration in relation to the asst. yr. 1984-85, which is the year under appeal. According to the learned Departmental Representative, since the credit entry in the books of account of the Indian company was passed in the accounting period relevant to the asst. yr. 1984-85, and, since the agreement dt. 30th Dec., 1982 had not been rescinded till the end of that accounting period, the amount of Rs. 12,50,000 represented by that book entry was liable to be included on accrual basis in the total income of the foreign company. We have given our careful thought to this argument of the learned Departmental Representative, but do not feel persuaded to accept it. As has already been discussed above, the word "accrual" is capable of a definite meaning. As has already been indicated above, according to the Law Lexicon tax accrues when all events have occurred which fix the amount of tax and determine the taxpayers liability to pay the tax. Would we, in the face of the facts available on the record, be justified in holding that all events had occurred which determined the tax payers, liability to pay tax in the present case? Since the project had not taken off and there was no transfer and supply of technical know-how and since the parties found the project economically non-feasible and were contemplating to rescind the agreement ab initio, the foreign company had not acquired any right to receive, nor the Indian company was legally or contractually obliged to pay any instalment of royalty. There was thus no earning of income so as to invite tax even on accrual basis.
Commissioner Of Income-Tax, Bombay ... vs Babulal Narottamdas, Legal Heirs Of ... on 9 July, 1975
10. Viewed in the above context of the doctrine of real income, there cannot be any manner of doubt that in the present case no income had accrued to the foreign company. The same ratio can be deduced from the decision of the Bombay High Court in the case of CIT vs. Babulal Narottamdas Legal Heirs of Narottamdas Jethalal (supra) which decision has been confirmed by the Supreme Court in its decision in the same case Babulal Narottamdas vs. CIT (supra). It has been held in that case that there was no dispute between the company and its employee to whom payment of remuneration was to be paid and hence, the income to the assessee had accrued in the respective year. The dispute in the form of Court case was raised only by third parties. In the case before us, there was no dispute between the two companies. The agreement was rescinded with mutual consent. No mutual rights and obligations had arisen in as much as no part of the promissory contract was performed by any party. There was no pre-existing right or pre-existing liability prior to the making of entry in the books of account of the Indian company. Therefore, that entry by itself could not lead to the accrual of rights or liability on the parties.
Babulal Narotfamdas And Ors vs Commissioner Of Income-Tax, Bombay on 14 December, 1990
10. Viewed in the above context of the doctrine of real income, there cannot be any manner of doubt that in the present case no income had accrued to the foreign company. The same ratio can be deduced from the decision of the Bombay High Court in the case of CIT vs. Babulal Narottamdas Legal Heirs of Narottamdas Jethalal (supra) which decision has been confirmed by the Supreme Court in its decision in the same case Babulal Narottamdas vs. CIT (supra). It has been held in that case that there was no dispute between the company and its employee to whom payment of remuneration was to be paid and hence, the income to the assessee had accrued in the respective year. The dispute in the form of Court case was raised only by third parties. In the case before us, there was no dispute between the two companies. The agreement was rescinded with mutual consent. No mutual rights and obligations had arisen in as much as no part of the promissory contract was performed by any party. There was no pre-existing right or pre-existing liability prior to the making of entry in the books of account of the Indian company. Therefore, that entry by itself could not lead to the accrual of rights or liability on the parties.
Commissioner Of Income-Tax vs Shivsagar Estates (Aop) on 1 March, 1993
9. The contention at serial No. (ii) made by the leaned counsel was that in view of the rescission of the agreement ab initio with the mutual consent of both the parties there was total frustration of the contract. No consideration, therefore, passed from one party to another. It was a promissory agreement and since the foreign company had neither performed not was it required to perform its part of the contract, the Indian company was also not obliged to perform its part and pay any cash consideration to the foreign company. There was, thus, no accrual of income to the foreign company. Since there was no real income, there could be no taxability. Reliance for this purpose was placed by the learned counsel on the decision of the Bombay High Court in the case of CIT vs. Shivsagar Estates (AOP) (1993) 204 ITR 1 (Bom). We have studied this decision of the jurisdictional High Court with great care and find that it offers not only an important but also nearly decisive support to the assessees case. It would be profitable to extract the relevant part of that judgment of the High Court reading as under :
Commissioner Of Income-Tax, Andhra ... vs Toshoku Ltd., Guntur Etc on 29 August, 1980
In support of his contention, he relied upon the decision of the Special Bench of the Tribunal in the case of IAC vs. Reinz Dichtunga GmbH and the decision of the Supreme Court in the case of CIT vs. Toshoku Ltd. (1980) 125 ITR 525(SC).
Standard Triumph Motor Co. Ltd vs Commissioner Of Income Tax, Madras on 25 February, 1993
(1) Standard Triumph Motor Co. Ltd. vs. CIT (1973) 201 ITR 391 (SC)]
(2) State Bank of Travancore vs. CIT (1986) 158 ITR 102 (SC).
Commissioner Of Income-Tax vs Standard Triumph Motor Co. Ltd. on 14 March, 1978
8. Now, on the basis of the facts available on the record, it cannot be said that merely on account of passing of entry in its books of account by the Indian company, the foreign company had acquired a right to receive the payment. Since the agreement dt. 30th Dec., 1982 had been rescinded ab initio, and technical know-how was not to be supplied, consideration in the form of supply of technical know-how had totally failed. The Indian company was not liable to make any payment on account of royalty; and the foreign company was also not entitled to receive any payment on that account. Would we say in such circumstances that the Indian company, even after passing of an entry (since reversed) in its books of account would have agreed to pay the amount of royalty by such credit entry to the foreign company? The answer to this question can only be emphatic no. The agreement was rescinded with the mutual consent of both the parties and there was no dispute about it. The rescission was not an unilateral one. As such, the foreign company, i.e. the assessee, was not entitled to receive any royalty, nor had it earned any income, and, therefore, the question of such liability could not arise. So far as the Court decisions relied upon by the learned Departmental Representative are concerned, it would be seen that the decision of the Madras High Court in the case of Standard Triumph Motor Co. Ltd. (supra) which had been the basis of the passing of the impugned revisional order by the CIT has been the subject matter of appeal before the Honble Supreme Court.