1986 (10) TMI 71 - AT - Income Tax

Summary

Issues:
1. Dispute over the inclusion of income in the assessment for the years 1977-78 and 1978-79.
2. Interpretation of the tripartite agreement between the Government of India, Caltex Petroleum Corpn., Caltex (India) Ltd., and Caltex Oil Refining (India) Ltd.
3. Analysis of the Acquisition Act and its provisions regarding the transfer of assets and liabilities of CIL to the Government of India.
4. Examination of the notification issued under section 9(1) of the Acquisition Act transferring the rights, title, and interest of CIL to CORIL.
5. Determination of the tax liability on the profits earned by CIL in its marketing operations up to 29-12-1976.

Analysis:

The judgment concerns appeals by the revenue related to assessments for the years 1977-78 and 1978-79, originating from separate orders of the first appellate authority but involving common issues. The primary dispute revolves around the inclusion of a specific amount in the income for the assessment year 1977-78. The case involves a tripartite agreement between the Government of India, Caltex Petroleum Corpn., Caltex (India) Ltd., and Caltex Oil Refining (India) Ltd., leading to the acquisition of the equity shareholdings of CORIL and CIL by the GOI. The Acquisition Act, which replaced the earlier Ordinance, detailed the transfer of shares, profits, and liabilities to the Central Government.

The judgment delves into the provisions of the Acquisition Act, particularly sections 3, 5, 6, and 9, which stipulate the transfer of assets and liabilities from CIL to the Government of India and later to CORIL. The notification issued under section 9(1) directed the transfer of rights and liabilities of CIL to CORIL, a Government company, effectively changing the tax liability on the profits earned by CIL. The court analyzed the legal implications of the transfer and the subsequent tax obligations on the assessee, CORIL, based on the provisions of the Acquisition Act and the notification issued.

The crux of the judgment lies in the interpretation of the provisions of the Acquisition Act, especially section 9(3), which deems the Government company as equivalent to the Central Government for certain purposes. The court held that the profits earned by CIL in its marketing operations up to 29-12-1976 were taxable and the liability for the tax obligation passed to CORIL, the Government company. The judgment concludes by upholding the inclusion of the disputed amount in the computation, overturning the decision of the Commissioner (Appeals) to delete it.