9911796707
|
Home
Issues Involved:
1. Deletion of addition on account of commission. 2. Deletion of addition on account of capital gains. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Commission: The first issue pertains to the deletion of an addition of Rs. 11,40,699 on account of commission. The Assessing Officer (AO) argued that the commission is part of the salary and taxable on an accrual basis as per Section 15(a) of the Income-tax Act, 1961. The AO included this amount in the taxable salary for the assessment year 1997-98, rejecting the assessee's contention that the commission accrued only after the accounts were audited and approved in the Annual General Meeting (AGM) held on 30th September 1997, making it taxable in the financial year 1997-98 relevant to the assessment year 1998-99. The Commissioner of Income-tax (Appeals) [CIT(A)] deleted the addition, holding that the department had accepted the method of taxation of commission income on the basis that it became due only after the company's accounts were approved by the shareholders in the AGM. The CIT(A) relied on the method of accounting adopted by the assessee in past years and various judgments to support this conclusion. The Tribunal examined the rival submissions and found that the commission payable to the assessee could not be quantified without computing the net profits of the company, which required the accounts to be audited and approved by the AGM. The Tribunal agreed with the CIT(A) that the commission income accrued only after the finalization of the accounts and its adoption by the AGM. The Tribunal emphasized the rule of consistency, noting that the method of accounting had been accepted by the Revenue in previous years and should not be disrupted unless contrary evidence is presented. Thus, the Tribunal confirmed the CIT(A)'s order, finding no justification in taxing the commission in the impugned assessment year. 2. Deletion of Addition on Account of Capital Gains: The second issue concerns the deletion of an addition of Rs. 4,77,14,279 on account of capital gains. The AO contended that the assessee had transferred shares of M/s. Rajendra Lal Shadi Lal & Co. (P.) Ltd. to M/s. SRF Ltd. in the previous year relevant to the assessment year 1997-98 as per an agreement dated 19-8-1996. The AO argued that the transfer of shares was completed upon the receipt of the first installment, and any deferment in the receipt of sale consideration did not alter the chargeability of capital gains under Section 45(1). The CIT(A) deleted the addition, observing that the shares continued to remain with the assessee till the end of the previous year (31-3-1997) and were not transferred to M/s. SRF Ltd. during the assessment year under appeal. The Tribunal reviewed the agreement and found that the sale of shares was linked to the transfer of immovable properties (two flats) owned by the company. The Tribunal noted that the agreement included a schedule of payments and stipulated that the shares would be transferred upon receipt of the first installment. The Tribunal referred to the provisions of the Sale of Goods Act and various judgments, concluding that the property in shares passed to the buyer upon receipt of the first installment, despite the delay in subsequent payments. The Tribunal also considered whether the transaction involved the transfer of immovable property, invoking Section 2(47) of the Income-tax Act, which includes any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance of a contract. The Tribunal found that the possession of the flats was retained by the buyer and the transaction was not merely a sale of shares but also a transfer of immovable property. The Tribunal concluded that the transfer of shares took place in the financial year relevant to the impugned assessment year and set aside the CIT(A)'s order, restoring the AO's addition on account of capital gains. Conclusion: The Tribunal partly allowed the Revenue's appeal, confirming the CIT(A)'s deletion of the addition on account of commission but setting aside the CIT(A)'s deletion of the addition on account of capital gains.
|
