2006 (12) TMI 96 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of receipts under a non-competition agreement.
2. Application of the "Kar Vivad Samadhan Scheme, 1998".
3. Compliance of the Revenue's circular with the Delhi High Court's judgment.
4. Refund of tax paid under the scheme.
5. Conclusiveness of settlement under the scheme.

Detailed Analysis:

1. Taxability of Receipts under a Non-Competition Agreement:
The appellant argued that the substantial sums received during the assessment years 1991-92 to 1994-95 under a non-competition agreement were capital receipts and thus not taxable. The Assessing Officer treated these as revenue receipts and taxable. The Commissioner of Income-tax (Appeals) reversed this decision, granting full exemption. The Revenue appealed to the Tribunal.

2. Application of the "Kar Vivad Samadhan Scheme, 1998":
While the appeal was pending, the "Kar Vivad Samadhan Scheme, 1998" was introduced. This scheme allowed assessees with pending disputes to settle upon payment of tax at a prescribed rate. The scheme was challenged but upheld by the Delhi High Court with certain modifications to remove discrimination between different classes of assessees.

3. Compliance of the Revenue's Circular with the Delhi High Court's Judgment:
The appellant contended that the circular issued by the Revenue on December 17, 1998, was not in conformity with the Delhi High Court's judgment and violated the principles of natural justice. The circular allowed for the settlement of disputes even where no tax arrear existed, which the appellant argued was against the spirit of the scheme.

4. Refund of Tax Paid under the Scheme:
The appellant paid the disputed tax as calculated by the Revenue under the scheme, without protest, and a settlement certificate was issued. Later, the appellant claimed that the tax was calculated erroneously and sought a refund. The learned single judge dismissed the writ petition for refund, emphasizing that the scheme was voluntary and the appellant had paid the tax without protest.

5. Conclusiveness of Settlement under the Scheme:
The learned single judge relied on the Supreme Court's decision in Smt. Sushila Rani v. CIT, which held that once a settlement under the scheme was accepted, it could not be questioned unless there was a false declaration. The appellant's appeal against this judgment was dismissed, with the court reiterating that the scheme was voluntary and the appellant had the option to withdraw before payment. The stringent provision of section 93 barred any refund once the settlement was conclusive.

Conclusion:
The appeal was dismissed, upholding the learned single judge's decision that the settlement under the "Kar Vivad Samadhan Scheme, 1998" was conclusive and binding. The court emphasized that the scheme was voluntary, and the appellant had paid the tax without protest, thus barring any refund under section 93. The court found no violation of principles of natural justice or any exceptional circumstances that would warrant reopening the settlement.