9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2005 (10) TMI 48 - HC - Income TaxAgainst the order of Tribunal holding in favour of the assessee that the first year's subscription was a capital receipt, a reference under section 256(2) was sought by the Revenue before this High Court - (a) Whether the judgment of the Supreme Court in Peerless General Finance and Investment Co. Ltd. v. Reserve Bank of India 1992 75 Comp Cas 12 (SC); 1992 2 SCC 343 lays down as an absolute proposition of law that all receipts of subscriptions in the hands of the assessee for the previous years relevant to the assessment years 1985-86 and 1986-87 must necessarily be treated as capital receipts? - Tribunal was wrong in appreciating the impact or effect of the second Peerless case so far as the assessee is concerned who is bound by the same in respect of the first year's subscription/deposits received by it prior to May 15, 1987
Issues Involved:
1. Whether the Supreme Court's judgment in Peerless General Finance and Investment Co. Ltd. v. Reserve Bank of India lays down an absolute proposition that all receipts of subscriptions for the assessment years 1985-86 and 1986-87 must be treated as capital receipts. 2. Whether the Tribunal was justified in accepting the assessee's contention that the first year's subscriptions were capital receipts and hence not taxable. 3. Whether the Tribunal was justified in holding that the Reserve Bank of India's directions dated May 15, 1987, were retrospective and must be applied in all pending proceedings. Issue-wise Detailed Analysis: Issue 1: Absolute Proposition of Law The court examined whether the Supreme Court's decision in the second Peerless case laid down an absolute proposition that all receipts of subscriptions must be treated as capital receipts. The court concluded that the decision did not lay down any absolute proposition of law applicable to all cases irrespective of the facts and circumstances. The Supreme Court's decision was context-specific, dealing with the Reserve Bank of India's directions effective from May 15, 1987, and did not imply that all such receipts should be treated as capital receipts for the assessment years 1985-86 and 1986-87. Issue 2: Tribunal's Justification on Capital Receipts The court analyzed the Tribunal's decision to treat the first year's subscriptions as capital receipts. The Tribunal's basis was that the Revenue could not prove that the amount was not refunded. However, the court found this approach flawed because the burden of proof regarding the refund rested with the assessee, not the Revenue. The court noted that the assessee had appropriated 97% of the first year's subscription and only set aside 3% as liability, indicating that the amount was treated as income rather than a capital receipt. The court held that the Tribunal was wrong in treating the first year's subscriptions for the assessment years 1985-86 and 1986-87 as capital receipts and hence not taxable. Issue 3: Retrospective Application of RBI Directions The court examined whether the Tribunal was justified in holding that the Reserve Bank of India's directions dated May 15, 1987, were retrospective. The Supreme Court in the second Peerless case had held that these directions were prospective and would apply only to deposits made after May 15, 1987. Therefore, the Tribunal's decision to apply these directions retrospectively was incorrect. The court clarified that the 1987 directions were applicable to all pending proceedings only in relation to deposits made after May 15, 1987. Conclusion: The court concluded that the Tribunal's decision could not be sustained and answered the questions as follows: 1. The Supreme Court's decision did not lay down an absolute proposition of law that all receipts of subscriptions for the relevant assessment years must be treated as capital receipts. 2. The Tribunal was wrong in treating the first year's subscriptions for the assessment years 1985-86 and 1986-87 as capital receipts and hence not taxable. 3. The Reserve Bank of India's directions dated May 15, 1987, are applicable to all pending proceedings only in relation to deposits made after that date. The reference succeeded, and the Tribunal was directed to dispose of the appeal according to the answers provided. No order as to costs was made.
|
