* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA No.88/2007
# CIT, CENTRAL-II, NEW DELHI ..... Appellant through
! Ms. P.L. Bansal with
Mr. M.P. Gupta, Advs.
versus
$ M/S. K.J. BUSINESS CENTRE ....Respondent through
^ Mr. Ajay Vohra with
Ms. Kavita Jha, Advs.
WITH
ITA No.90/2007
CIT, CENTRAL-II, NEW DELHI ..... Appellant through
Ms. P.L. Bansal with
Mr. M.P. Gupta, Advs.
versus
M/S. K.J. BUSINESS CENTRE ....Respondent through
Mr. Ajay Vohra with
Ms. Kavita Jha, Advs.
% Date of Hearing : January 20, 2009
Date of Decision : April 02, 2009
CORAM:
* HON'BLE MR. JUSTICE VIKRAMAJIT SEN
HON'BLE MR. JUSTICE RAJIV SHAKDHER
1. Whether reporters of local papers may be
allowed to see the Judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the Judgment should be reported
in the Digest? Yes
ITA No.88/2007 Page 1 of 12
VIKRAMAJIT SEN, J.
1. Heard.
2. Admit.
3. On behalf of the Revenue the following questions of law,
stated in the Appeal to be of substantial nature, have been
proposed for the Assessment Year 1994-1995(ITA 90/2007):-
(a) Whether ITAT was correct in law in confirming the
order passed by CIT(A) and thereby deleting the
addition of Rs.19,84,000/- made by the Assessing
Officer on account of commission paid by M/s G E
International to M/s Arora & Associates?
(b) Whether ITAT was correct in law in confirming the
order passed by CIT(A) and thereby deleting the
addition of Rs.1,07,50,000/- made by the
Assessing Officer on account of commission paid
by M/s AIFACS to M/s Manik Enterprises?
(c) Whether ITAT was correct in law in allowing the
assessee to spread the entire commission of
Rs.62,05,375/- over the period of 06 years and
thus charging only 1/6th of the commission in the
present year?
(d) Whether order passed by ITAT is perverse in law
i) when it ignored the relevant material found by
the Assessing Officer and held that the concerns
M/s Arora & Associates and M/s Manik
Enterprises are not the benami of the assessee
and ii) when it allowed the assessee to spread the
income over 06 years ignoring the relevantITA No.88/2007 Page 2 of 12
provisions of law and the standard accounting
practice of the trade?
For Assessment Year 1995-1996 (ITA No.88/2007)
(1) Whether ITAT was correct in law in
confirming the order passed by CIT(A) and
thereby deleting the addition of
Rs.58,50,000/- made by the Assessing
Officer on account of commission paid by
M/s AIFACS to M/s Competent Holding
Limited treating the same as income of the
assessee?
(2) Whether ITAT was correct in law in
confirming the order passed by CIT(A) and
thereby deleting the addition of
Rs.3,84,,000/- made by the Assessing
Officer on account of commission paid by
M/s AIFACS to M/s Achha & Associates and
M/s. Creative Investment & Marketing
treating the same as income of the
assessee?
(3) Whether order passed by ITAT is perverse
in law when it ignored the relevant material
found by the Assessing Officer and held
that the concerns M/s Arora & Associates
and M/s Manik Enterprises are not the
benami of the assessee?
(4) Whether ITAT was correct in law in
confirming the order passed by CIT(A) and
thereby deleting the addition of
Rs.51,75,000/- made by the Assessing
ITA No.88/2007 Page 3 of 12
Officer on account of commission paid by
M/s AIFACS to M/s Manik Enterprises
treating the same as income of the
assessee?
4. At the outset, we need to underscore that so far as
findings of fact are concerned interference of the High Court
would be justified only if it appears to it that the conclusions
arrived at by the ITAT are palpably perverse.
5. The entitlement of sundry parties to the receipt of
commission essentially entails a determination of facts and the
High Court must be loathe to enter into that arena except in the
case of perversity. In both the Appeals this question has been
dealt with threadbare at all the three stages of the assessment
adjudication. In these proceedings we are concerned with the
receipt of commission for the letting-out of property belonging
to the All India Fine Arts and Crafts Society(AIFACS) to M/s.
G.E. International. For the Assessment Year 1994-1995 the
Assessee had received Rupees 64,75,000/- as commission from
AIFACS. While framing the assessment for Assessment Year
1995-1996 the Assessing Officer noticed that AIFACS had paid a
sum of Rupees 15,92,500/- to Manik Enterprises (P) Ltd.,
Rupees 30,00,000/- to SMC Food Ltd. and Rupees 28,50,000/-
to Competent Holding (P) Ltd. The Tenant, namely, M/s. G.E.
International also paid commission amounting to Rupees
ITA No.88/2007 Page 4 of 12
19,84,000/- to M/s. Arora & Associates, Rupees 2,00,000/- to
M/s. Achha & Associates and Rupees 1,84,000/- to M/s. Chetan
Investments and Marketing Services. So far as the Appellant is
concerned the commission paid by AIFACS was in two
instalments, viz. Rupees 40,00,000/- on 31.12.2003 and Rupees
24,70,000/- on 15.2.1994.
6. The CIT(A) did not agree with the finding of the Assessing
Officer that the Assessee was, in fact, solely and exclusively
entitled to the receipt of the entire commission; that the
Assessee had distributed commission to its various benami or
family concerns with the intention of spreading its income and
thereby evading tax. The CIT(A) also did not agree with the
Assessing Officer that the Assessee was not entitled to stagger
or spread out the receipt of the commission of Rupees
64,75,000/- over a period of six years. In Assessment Year 1994-
1995 the Assessee had shown its income as 1/6 th of the said sum
of Rupees 64,75,000/-, that is, Rupees 10,78,500/-. Out of this
sum the Assessee had claimed that it had to pay commission to
M/s. Trehan Estate Agency to the extent of Rupees 8,08,875/-,
thus showing only a sum of Rupees 2,69,625/- as taxable. The
additions of Rupees 28,50,000/- and Rupees 30,00,000/- paid by
AIFACS to Competent Holding (P) Ltd. and SMC Food Ltd.
aggregating Rupees 58,50,000/- were deleted by the CIT(A).
ITA No.88/2007 Page 5 of 12
After duly noting the constitution of ownership of Manik
Enterprises (P) Ltd., and the aspect of lifting of corporate veil,
the CIT(A) deleted the addition of Rupees 51,75,000/- made by
the Assessing Officer. It was also highlighted by the CIT(A) that
a company has to bear a higher incidence of tax and, therefore,
it would be of no advantage to the Assessee to share the
commission and thereby eventually subject itself to a higher
taxation. The addition of commission of Rupees 2,00,000/- and
Rupees 1,84,000/- to M/s. Achha & Associates and M/s. Chetan
Investment & Marketing Services respectively were also
deleted. However, the addition of commission of Rupees
8,09,375/- paid by the Assessee to M/s. Trehan Estate Agency
was sustained since the CIT(A) considered this to be without
consideration and justification. The Tribunal has upset this
finding primarily for the reason that payment had not been
returned by M/s. Trehan Estate Agency to the Assessee and the
fact that there was a distant relationship between them was
insufficient reason to disallow the said amount. It is clear that
the factual matrix was carefully considered by the CIT(A) as well
as the ITAT, calling for no further consideration on our part. The
ITAT has observed that the conclusion of the Assessing Officer
to the effect that the commission had been distributed to
different parties by the Assessee was not based on any material
ITA No.88/2007 Page 6 of 12
on record. The ITAT has also opined that it was erroneous for
the Assessing Officer to conclude that Manik Enterprises (P)
Ltd., M/s.Achha & Associates, M/s.Chetan Investment and
Marketing Services and M/s. Arora & Associates were not
independently entitled to the receipt of commission as they had
no role to play in the subject letting out of property belonging to
M/s. All India Fine Arts and Crafts Society(AIFACS) to M/s. G.E.
International.
7. In CIT -vs- Walchand and Co. (Pvt.) Ltd., Bombay, AIR
1967 SC 1435 their Lordships have opined that because of “the
hierarchy of authorities the Appellate Tribunal is the final fact
finding body : its decision on questions of fact are not liable to
be questioned before the High Court.” To the same effect are
the observations in CIT, Calcutta -vs- Karam Chand Thapar and
Brothers (P) Ltd., AIR 1989 SC 1045, as will be clear from a
reading of the following passage:-
7. ….Where the Tribunal has come to the conclusion
that the loss incurred by the assessee in the sale of
shares held by it was a trading loss and its is not the
case of the Department that in arriving at its decision
the Tribunal had taken into consideration any
irrelevant material or failed to take into consideration
any relevant material, there is no room for interference
by the Court. It is well settled that the Tribunal is the
final fact finding body. The questions whether aITA No.88/2007 Page 7 of 12
particular loss is a trading loss or a capital loss and
whether the loss is genuine or bogus are primarily
questions which have to be determined on the
appreciation of facts. The findings of the Tribunal on
these questions are not liable to be interfered with
unless the Tribunal has taken into consideration any
irrelevant material or has failed to take into
consideration any relevant material or the conclusion
arrived at by the Tribunal is perverse in the sense that
no reasonable persons on the basis of facts before the
Tribunal could have come to the conclusion to which
the Tribunal has come. It is equally settled that the
decision of the Tribunal has not to be scrutinised
sentence by sentence merely to find out whether all
facts have been set out in detail by the Tribunal or
whether some incidental fact which appears on record
has not been noticed by the Tribunal in its judgment. If
the court, on a fair reading of the judgment of the
Tribunal, finds that it has taken into account all
relevant material and has not taken into account any
irrelevant material in basing its conclusions, the
decision of the Tribunal is not liable to be interfered
with, unless, of course, the conclusions arrived at by
the Tribunal are perverse.
8. In K. Ravindranathan Nair -vs- CIT, (2001) 247 ITR
178(SC):2001(1) SCC 135 it has been prescribed that the
Tribunal is the final fact finding forum and its decision can be
questioned only if it partakes of a perverse nature, that is, it is
indicative of an action, opinion or conclusion which could not
ITA No.88/2007 Page 8 of 12
reasonably be arrived at; that an incorrect conclusion is not
invariably perverse unless it is palpably deliberate or mala fide.
9. None of the arguments addressed on behalf of the
Revenue can persuade us to conclude that these findings of fact
partake of the nature of perversity. So far as the sharing of the
commission between the Assessee and the aforementioned
business concerns is concerned, no substantial question of law
arises for our consideration.
10. The second question which we are called upon to inquire
into is whether it was legally permissible for the Assessee to
stagger its income over a period of six years by showing the
commission received as advance payments in the Assessee’s
Books of Accounts. There is some controversy as to whether the
Assessee could be entitled to spread the income over a period of
nine years for the reason that the Lease was eventually
negotiated for this period instead of six years. The concurrent
finding at all the three tiers of adjudication is that the Appellant
had shown 1/6th of the entire commission, which undisputedly
had been paid in one instalment in its Books of Accounts, and
hence there was no justifiable ground to claim that instead of
1/6th it was entitled to 1/9th of the commission annually. The
Assessee has not filed any Appeal on this point. The Tribunal
has noted that in the Books of Accounts the Assesee had spread
ITA No.88/2007 Page 9 of 12
the commission receipts over a period of six years initially.
Following the conclusion arrived at by another Bench of the
Tribunal the ITAT had also opined that this spreading over of
commission was a practice followed in the trade. We are unable
to subscribe to the opinion that the extant practice in the trade
is to spread commission over the period of a Lease. However,
since this practice has been given approval to by the Tribunal in
the case of Manik Enterprises(P) Ltd. as well as M/s. Arora &
Associates, applying the principle of consistency we decline to
interfere in the facts and circumstances of the present case. In
Union of India -vs- Kaumudini Narayan Dalal, [2001] 249 ITR
219 and Union of India -vs- Satish Panalal Shah, [2001] 249 ITR
221 their Lordships have opined that it is not permissible for the
Revenue to accept a legal proposition in the case of one
assessee and assail in the case of another. We think there is
sufficient reason for our attention to be drawn to Commissioner
of Income-Tax -vs- Varghese Mani, [2001] 252 ITR 735. In that
case a total of Rupees 2,11,500/- was received by way of interest
but the Assessee had admitted only Rupees 32,965/- as interest,
attributable to the previous year ending on March 31, 1990 on
the ground that the discounted value of interest also included
interest which would accrue over the future period of three
years. It was held that the entire interest accrued and received
ITA No.88/2007 Page 10 of 12
was assessable in the Assessment Year 1990-1991. In
Commissioner of Income-Tax -vs- A.R. Santhanakrishnan, [2002]
256 ITR 187 certain amounts were deposited in three years
Government Bonds but the discounted interest was received in
lump sum. It was held that interest in its entirety had to be
taxed in the year of receipt. In P.L. Ganapathi Rao -vs-
Commissioner of Income-Tax, [2006] 285 ITR 501 the
Agreement spelt out that a total sum of Rupees 4,00,000/- was
to be paid towards rentals for a period of five years, to be
adjusted in the following manner:- Rupees 1,00,000/- in the first
year, Rupees 90,000/- in the second year, Rs.80,000/- in the
third year, Rupees 70,000/- in the fourth year and Rupees
60,000/- in the fifth year. The Court noted that the Agreement
mentioned the consideration of Rupees 4,00,000/-; right to claim
a return of the money from the Assessee was conspicuous by its
absence. Hence, the sum of Rupees 4,00,000/- would be taxed in
the year when it was received. To the same effect is E.D.
Sassoon & Company Ltd. -vs- Commission of Income-Tax,
Bombay City, [1954] 26 ITR 27. We decline to answer this
question whether it is permissible to spread the income over six
years primarily because of the observations of the Supreme
Court pertaining to the rule of consistency. This is especially so
ITA No.88/2007 Page 11 of 12
since no specific question pertaining to this aspect of the law
has been proposed on behalf of the Respondent.
11. We also find it difficult to accept the reasoning of the
Tribunal that an oral statement to the effect that it was
understood between the parties concerned that commission
would be refundable if the Lease was terminated before
stipulated tenure, must be accepted even in the absence of a
written covenant to this effect. Such terms are of such far-
reaching import that its absence in the relevant document
could only be indicative of the falsity of the claim.
12. The Appeals are dismissed with no order as to costs.
( VIKRAMAJIT SEN )
JUDGE
( RAJIV SHAKDHER )
JUDGE
April 02, 2009
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ITA No.88/2007 Page 12 of 12