2006 (1) TMI 547 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of the "settlement" dated March 3, 1987, for computation of income beyond March 31, 1987.
2. Consistency in the application of the "settlement" by the Revenue.
3. Validity of the subsequent clarifications issued by the Central Board of Direct Taxes (CBDT) regarding the "settlement."
4. The role of judicial precedents and the principle of consistency in tax assessments.

Issue-wise Detailed Analysis:

1. Applicability of the "Settlement" Dated March 3, 1987, for Computation of Income Beyond March 31, 1987:
The primary issue is whether the "settlement" dated March 3, 1987, continues to govern the computation of income for the assessment years subsequent to 1987-88. The "settlement" provided that the taxable income of the member companies of the Motion Picture Association of America (MPA) would be determined on a presumptive rate of 25% of the gross film receipts earned in India. The Tribunal noted that the CBDT had issued clarifications on January 6, 1992, and February 19, 1998, stating that the "settlement" was only applicable up to March 31, 1987. However, the Tribunal found that the principles of the "settlement" continued to be followed by the Revenue even after March 31, 1987, indicating a consistent method of assessment.

2. Consistency in the Application of the "Settlement" by the Revenue:
The Tribunal observed that the Revenue had consistently followed the "settlement" for many years, including assessments beyond March 31, 1987. This consistent application established a rule of practice that could not be easily disregarded. The Tribunal emphasized the importance of consistency and judicial discipline, citing Supreme Court decisions in Union of India v. Kaumudini Narayan Dalal and Union of India v. Satish Panalal Shah, which held that the Revenue is estopped from changing its stance without sufficient reason.

3. Validity of the Subsequent Clarifications Issued by the CBDT:
The Tribunal examined the subsequent clarifications issued by the CBDT, which stated that the "settlement" was not applicable beyond March 31, 1987. However, the Tribunal found that these clarifications were not sufficient to override the established practice of following the "settlement" for subsequent years. The Tribunal noted that the CBDT had not provided a better alternative method for assessing the income of the member companies of MPA, and the "settlement" remained the most practical approach.

4. The Role of Judicial Precedents and the Principle of Consistency in Tax Assessments:
The Tribunal highlighted the importance of judicial precedents and the principle of consistency in tax assessments. It noted that various Benches of the Tribunal had consistently upheld the applicability of the "settlement" for assessments beyond March 31, 1987, even after considering the subsequent clarifications issued by the CBDT. The Tribunal found that the Revenue's reliance on a single decision in the case of Columbia Pictures Industries Inc. (dated October 23, 2003) was not sufficient to overturn the established practice.

Conclusion:
The Tribunal concluded that the "settlement" dated March 3, 1987, continued to govern the computation of income for the assessment years subsequent to 1987-88. The appeals filed by the Revenue for the assessment years 1995-96, 1996-97, and 1997-98 were dismissed. The cross-objection filed by the assessee for the assessment year 1995-96 was rejected as infructuous, and the appeal filed by the assessee for the assessment year 1998-99 was withdrawn and thus rejected.