9911796707
TMI Blog2000 (7) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... 000, Rs. 56,96,250, Rs. 83,21,250 and Rs. 1,10,60,000 respectively to various parties. Detailed enquiries were made in respect of the genuineness of the claim as well as the purported payments, The assessee had claimed that the payments were made to 217 Association of Persons for sales promotion services rendered to the assessee for promoting sales of liquor products of M/s. Shaw Wallace Ltd. Investigation and enquiries revealed that no such sales promotion work was done by any of the AOPs and none was in a position to render the services either. The AOPs were constituted with the members of the family of Sri A.C. Muthiah or the concerns belonging to and controlled by his group. The entire commission payments claimed as expenditure were disallowed in the income-tax assessments and were confirmed by the Appellate Commissioner. For the assessment years 1987-88 and 1988-89 the Tribunal by its order dated 16-4-1993 set aside the entire matter to the Assessing Officer on assessee's plea that it intended to file settlement petitions before the Settlement Commission. The Assessing Officer noticed that the assessee had itself stated before the Settlement Commission that it apprehended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to represent the case. Even though the case was posted on 22-8-1995 it was by oversight that the date was failed to be noted by the authorised representative. When written submissions were furnished and appeal was heard in the presence of the authorised representative on two occasions, the appellate Commissioner should have been judicious enough to grant atleast another opportunity to represent the matter. The Appellate Commissioner has reiterated what the assessee's representative has submitted but has not countered them in a judicious way. A reading of the order of the Appellate Commissioner would reveal that he has already made up his mind to uphold the proceedings of gift-tax since in all paragraphs of his order he has stated that he had already held that disallowance of expenditure under the I.T. Act was the one initiated by him and this will automatically attract gift-tax. Disallowance of expenditure in the income-tax proceedings would not automatically attract gift-tax since for attracting gift-tax for any transaction there should be a willing donor and a donee accepting the gift. When any gift is given, no person will pay income-tax on the amount of gift receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay kindly be upheld. 6.1 Rival submissions heard and relevant orders read including the case laws relied upon by the parties as well as the relevant paper books filed before us. After a careful analysis of the facts and circumstances of the instant case over the issue in question for a long time with due deliberations between us, we are of the considered opinion that the stand of the assessee has substantial force, in spite of the strenuous and appreciable efforts put forth by the learned Representative for the Revenue, for the reasons following. 6.2 The Assessing Officer on the basis of investigations done disallowed the entire commission payment claimed as expenditure in the income-tax assessment orders. After the Appellate Commissioner confirmed such assessments in this regard, the assessee appealed before the Tribunal but got the assessments set aside by the Tribunal to the Assessing Officer himself and preferred application before the Settlement Commission. The Settlement Commission has observed that the company appointed sub-agents for carrying out the activities and paid commission payments by cheque to these agents for carrying out sales promotion activities. The applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that it has approached the Settlement Commission praying also for a direction not to levy gift-tax on the assessee. 6.4 The Assessing Officer has observed that payments made for non-business purposes attract liability to gift-tax. It is not known as to how it would attract gift-tax. If the payments would have been made for non-business purposes, then naturally it has to be disallowed under the Income-tax Act which has been rightly done. But that cannot form the basis of arriving at a finding that it would attract liability to gift-tax. It is not known how it has been arrived at by the Assessing Officer that the payments were made for no consideration at all stating that no services were rendered by any of the AOPs warranting payments to them as remuneration. Just because the payments are big, it cannot be treated as gift rendering the assessee liable for gift-tax. It is also further not known as to how the payments which were subjected to tax in the hands of recipients can be the reason to attract the provisions of Gift-tax Act. 6.5 It is seen that the assessee has filed its written submissions before the Appellate Commissioner and it was sent to the Assessing Officer by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act it should also be treated as such for the purpose of Gift-tax Act. If the transaction comes within the mischief of definition of 'gift' under section 2(xii) it would be subject to tax irrespective of the fact that it might be subject to tax under any other provisions of the direct tax laws treating the transaction as something other than gift. Our view is supported by the decision in the case of ICI (India) (P.) Ltd v. GTO [1977] 110 ITR 88(Cal.). 6.8 The Appellate Commissioner while on the one hand stated in his order that the assessee itself had sought to withdraw the appeals against the appellate orders, but on the other hand simultaneously stated that the assessee has specifically pleaded before the Tribunal that the proceedings be set aside to the file of the Assessing Officer to enable itself to move the Settlement Commission clearly to avoid the stringent ramifications of penalty and prosecution. In our view of the matter, the sentence would be self-explanatory to reflect that it is contradicting. The reason is that the assessee did not give up its claim before the Tribunal, but only has submitted that the matter at best be set aside to the file of the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g it as a gift to attract tax under the provisions of the Gift-tax Act is the question that ponders over in our mind, and when seen judiciously the answer is in the negative. 6.12 The Appellate Commissioner further goes on to state that the fact thus remains that the transactions with AOPs having been found established, proved and admitted as sham, there was no reason as to why the Assessing Officer should be held to be precluded from concluding that gift-tax proceedings were required to be initiated under section 16. It is not known how the conclusion has been arrived at that the transaction with the AOPs found, established, proved and admitted as sham. Nowhere the Settlement Commission too says so that the transactions are sham. Even assuming it to be sham, how that could be deemed to cause it as gift to attract gift-tax under the relevant Act? If at all, disallowance could be made under the Income-tax Act which has been already done and thereafter the Settlement Commission has also settled the matter when the assessee desired to purchase peace, so that the matter is put to an end to at some point or stage which has happened. 6.13 The Assessing Officer viewed in his assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as sham and therefore the difference was sought to be assessed to gift-tax unlike in the instant case where the Settlement Commission has not given its finding that the transactions are sham. In the instant case, since the assessee was not able to produce clinching evidence, a portion of the payment of commission was sought to be disallowed. Therefore, the rendering of service being for the purpose of business, the question of gift-tax cannot arise. 6.15 In the case of CITV. Krishan Bans Bahadur [1974] 96 ITR 714 (Delhi) it was held that though it is the donor's intention and not the donee's which determines the nature of the gift, the donee's attitude may shed some light which may help in understanding the donor's intention and the precise character of the gift. In the instant case, the alleged donor has given commission only for business purposes and the alleged donee has not accepted it as gift but as a contracting party and after meeting certain expenditure has filed a return of income treating the commission as income of the said years. Return of income has also been filed and the assessment has also been completed in the hands of the so called donees. Therefore, the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al consideration, then the payment that has been made for extra commercial consideration has to be considered as gift unless the assessee proves that such payment was paid for some other consideration. We are unable to understand as to what is the basis of this stand taken by the Department. Who has to decide commercial consideration or extra commercial consideration, whether it is for the assessee or for Revenue to decide such case, and in our considered opinion it is not the Department but only the' assessee who only knows where his shoe pinches to determine such niceties involved in the business. It is highlighted by the Revenue that the onus is always on the assessee to prove why excess consideration was paid and for what purpose, and further that the amount paid in excess of the commercial necessity is only a gift as the onus has not been discharged. We may state here that gift must be a transfer without consideration in money or money's worth and that the onus is on the Revenue to establish lack of consideration. Under section 3 of the Gift-tax Act, gift-tax can be levied only if there is a gift as defined under the Act. Under section 2(xii) of the Act one of the essential co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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