9911796707
TMI Blog1995 (8) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi Administration and other Government Economic Services by holding that it was a case of diversion of income and not application of income." Ground of appeal in assessment year 1991-92 : " On the facts and in the circumstances of the case, the ld. CIT (Appeals) has erred in considering the expenditure of Rs. 28.86 crores to Delhi Administration---Other General Economic Services' as a diversion of income rather than an application of income." 2.2 The facts in this respect are that the assessee, namely, Delhi Tourism and Transportation Development Corporation Ltd. (hereinafter will be referred to as " the DTTDC ") is a wholly owned Government company of Delhi Administration, which was Union Territory at the relevant time. It was engaged in the business of tourism, transportation, catering and Indian made foreign liquor till the assessment year 1989-90. The country liquor business was being carried on by the Excise Department of Delhi Administration till14-5-1989. The country liquor business was transferred to the assessee from15-5-1989. A note dated24-4-1989was put up by the Secretary (Transport), Delhi Administration before the Executive Council for special arrangements to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was created by debit to profit and loss account and the quantum of amount was Rs. 2,39,07,659 and Rs. 6,65,05,785 for assessment years 1990-91 and 1991-92 respectively. Out of this fund the assessee appropriated 5 paise for assessment year 1990-91 and 10 paise for assessment year 1991-92 per bottle of country liquor sold against administrative expenses of its corporate office. This was adjusted by debit to Transport Utilisation Fund Account and by credit to corporate office expenses account. 2.3 The assessee has debited the amount of Rs. 24,17,65,160 and Rs. 28,86,02,020 for assessment years 1990-91 and 1991-92 respectively to the profit and loss account being the amount payable to Delhi Administration. Before the Assessing Officer it was pleaded that the amount was not the income of the assessee, so it cannot be taxed in the hands of the assessee. The argument of the assessee was not accepted by the Assessing Officer and he treated this amount as income of the assessee for both the years. 2.4 On appeal, the CIT (Appeals) accepted the assessee's plea and directed the Assessing Officer to delete the above additions in those years. The revenue, aggrieved by such a direction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that in that case MMTC had deposited the surplus every month with the Consolidated Fund of India. Therefore, they did not have any control over the money. While in the case of the assessee the money remained under the control of the assessee during the relevant previous year. This money was invested for earning interest and such interest income was shown as income of the assessee. This interest was not paid to Government of India alongwith the money deposited in Consolidated Fund of India subsequently. This clearly prove that the assessee was owner of money at the relevant time. The money was deposited with the Consolidated Fund of India only after the letter of the Delhi Administration issued in February, 1992. The deposit of money subsequently will not affect the income accrued to the assessee during relevant previous years. 2.6 The learned Counsel for the assessee has argued at length. His arguments may be summarised as below : ---- The country liquor business was transferred to the assessee with effect from15-5-1989but the margin of the assessee was not fixed. It was fixed only in February, 1992 with retrospective effect from15-5-1989. This fixation of the profit ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t up by Secretary (Transport), except the name of the assessee which was changed from Delhi Tourism & Transportation Corporation Delhi Tourism and Transportation Development Corporation. The relevant portion of the paragraph. 3 of the Note dated24-4-1989reads as under :---- "3. The main constraint in taking up a major programme for construction of grade separators, footover bridges and subways is of funds .... The matter has been discussed extensively at the official level and the following approach is submitted to the Executive Council for its approval : (a) ** ** ** (b) The retail trade in Country Liquor and 50 degree U.P. Rum which has so far been undertaken departmentally by the Excise Department, be transferred to DTTC w.e.f.15-5-1989. That will give DTTC a surplus of over Rs. 100 crores in the three financial years, 1989 to 1992 which will enable it to construct about 20 road flyovers and a fairly substantial number of pedestrian facilities. The Corporation will also derive pay back from the road owning authorities (as explained hereunder) whereby it will be possible to expand the programme further. The shift of retail trade from the department to the Corporation (as it al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date of transfer of trade. You are therefore, requested to make arrangement to deposit the balance amount at the earliest." 2.9 The assessee on the basis of above two letters dated5-2-1992and27-2-1992worked out the amount payable to the Government and debited the same to the profit and loss account in both the years under appeal. The amount of Rs. 24.21 crores was paid to Consolidated Fund of India in support of this letter of Deputy Secretary (Finance), Govt. of National Capital Territory of Delhi was filed. It is also claimed that assessee never disputed or challenged fixation of profit retrospectively. This factual position is not disputed by the Revenue. The main argument of the learned Special Standing Counsel for the revenue was that the letter dated27-2-1992cannot have the retrospective operation and the income which already accrued to the assessee in the relevant previous years could not be diverted at source by virtue of that letter. Thus he submitted that the income already accrued to the assessee was liable to be taxed in its hands. Both the parties have relied. upon the number of decisions in support of their contentions. The issue was considered by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atuitous. The assessee was required to pay the money as per the direction of Delhi Administration. The direction was issued with the approval of the Lt. Governor ofDelhi. Thus, it cannot by any stretch of imagination be held to be self imposed or gratuitous. In fact the claim of the Revenue is mainly limited to the retrospective operation of the direction. 2.10 At the time of hearing before us it was admitted by the Special Standing Counsel that the direction of the Delhi Administration may be applicable prospectively but it will have no effect so far as the assessment years under appeal are concerned ; the income in the relevant previous years had already accrued to the assessee. Before we examine the merit of the contention of the learned Special Standing Counsel, we may mention that the assessee, ie., DTTDC has not disputed the fixation of margin of profit retrospectively. On the other hand, as per direction of Lt. Governor it has paid Rs. 24.17 crores to the Consolidated Fund of Government of India. It is not disputing the liability of payment of remaining sum of Rs. 28.86 crores. Therefore, if these letters of Lt. Governor were effective prospectively, as canvassed by the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry Liquor is still pending in the Administration. The matter needs detailed examination keeping in view the financial interest of both the Administration as well as the DTTDC. However, necessary steps for sorting out the issue are being taken and the decision is likely be arrived at shortly." In the letter dated5-2-1992of Delhi Administration also it is mentioned that " This has reference to the Executive Council's decision dated25-4-1989as amended from time to time." (Underlined by us to supply emphasis). The genuineness of the contents of these letters are not in doubt and, therefore, the assessee's contention that there was protracted discussion for the fixation of the margin of profit in the retail trade Country Liquor business of the assessee, has to be accepted. 2.12 Now reverting back to the decision of the Hon'ble Supreme Court in the case of Motilal Chhadami Lal Jain. The relevant portion is already reproduced by us earlier. Their Lordships by giving example of diversion by over-riding title, has mentioned that if it is a right under a statutory provision or an obligation by third party, it effectively slices away a part of the corpus of the right of the latter to receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire income and so it would be a case of diversion. In view of above, we have no hesitation to hold that the amount paid/payable by the assessee as per the direction of the Lt. Governor ofDelhivide letter dated27-2-1992was not the income of the assessee. Therefore, we uphold the order of the CIT (Appeals) and dismiss the appeal of the revenue. ITA No. 6060 (Delhi)/ 1993 Assessment year 1990-91--- Assesseee's appeal---- 3. The first two grounds of appeal read as under :---- " That on the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals)-XV, New Delhi has erred in holding that the Assessing Officer was right in briging the income from retail sale of liquor at Re. 1 per bottle sold to tax as income of the assessee. That the learned Commissioner of Income-tax (Appeals) did no appropriate that out of the margin of Re. 1 per bottle of liquor sold, income to the extent of 95 paise per bottle was diverted by overriding title and only the balance income to the extent of 5 paise per bottle belonged to the appellant, which was duly disclosed." 3.1 We have already stated the facts relating to the transfer of liquor business to the assessee with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the year was not its income as the same was to be utilised for construction of fly-overs and pedestrian facilities. The claim of the assessee was not accepted by either the Assessing Officer or by the CIT (Appeals). Hence this appeal before us. 3.2 At the time of hearing before us the learned counsel for the assessee has submitted that the assessee was to utilise the profit of Re. I per bottle earned by it for the construction of fly-overs or pedestrian facilities as may be directed by the Delhi Administration. Thus, the amount was never the income of the assessee but the assessee has held the money only for the purpose of utilisation as per-the direction of Delhi Administration. The learned Departmental Representative (Special Standing Counsel) supported the orders of the authorities below. He submitted that the amount spent on the construction of fly-overs or pedestrian facilities was only an application of income and not in the nature of expenditure. He alternatively submitted that the amount was spent for acquiring the liquor business and, therefore, it amounted to the consideration paid for acquisition of business, it would be capital expenditure. 3.3 We have carefully c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended to Delhi), no liquor can be sold except under the authority and subject to the terms and conditions of licence granted in this behalf. We have also held as per Delhi Liquor Rules, the Lt. Governor is the authority to grant licence for retail vend of country liquor. The Delhi Administration is headed by the Lt. Governor. From this direction (letter dated5-2-1992) of Delhi Administration, it is evident that construction of flyovers and pedestrian facilities was the consideration for carrying on of the retail trade business within theterritoryofDelhi. Thus, it was in the nature of licence fee paid by any trader for sale of liquor. Therefore, it is in the nature of revenue expenditure. We also do not agree with the submission of the assessee's Counsel that the fly-overs and the pedestrian facilities are capital assets and therefore, the expenditure on their construction is capital expenditure. Because the assets were never owned by the assessee but the assessee was to construct them as a consideration for carrying on of the liquor business within theterritoryofDelhi. Accordingly, we direct the Assessing Officer to allow the expenditure, an and when incurred on construction of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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