1987 (1) TMI 67 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was justified in holding that the assessee had sold import licences for Rs. 3,50,000.
2. Whether Rs. 3,29,870 could be considered as income of the assessee for the assessment year 1974-75.

Summary:

Issue 1: Sale of Import Licences
The Tribunal found that the assessee had sold import licences for Rs. 3,50,000, which was received from the second party on January 19, 1973. The assessee argued that this amount was received as security under an agreement and was not income. The agreement stipulated that the amount was to be adjusted against the profit margin upon receipt of goods by the buyer. However, the Tribunal concluded that the transaction was essentially an outright sale of the licences, making the amount received the assessee's income. The court agreed with the Tribunal, stating that the amount received was irretrievably the assessee's own money, regardless of the subsequent performance of the contract. The court emphasized that the true nature of the transaction, rather than its form, should be considered, and found that the so-called security was in essence income.

Issue 2: Income for Assessment Year 1974-75
Given the affirmative answer to the first question, the court addressed whether Rs. 3,29,870 could be considered as income for the assessment year 1974-75. The court recast the question to align with the first issue and answered it in the affirmative, confirming that the amount was indeed income for the relevant assessment year. The court noted that the agreement was an attempt to defer tax payment, which it could not support.

Conclusion:
The court upheld the Tribunal's decision, confirming that the amount received by the assessee was income for the assessment year 1974-75. The judgment emphasized the importance of considering the substance of transactions over their form, particularly in cases involving potential tax avoidance. The parties were directed to bear their respective costs.