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TMI Blog2016 (2) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains, there is only a single rate of tax i.e. 33.6%. In such event, the adoption of a ‘marginal rate’ is not apposite for determining the disputed income. In other words, the impugned instructions of the Ministry of Finance regarding applicability of a marginal rate to the unpaid tax for determining the disputed income cannot apply where the taxable income arises only from capital gains and to which a uniform rate of 33.6% applies. For the reasons already explained, the Court is of the view that the instructions issued are not consistent with the provisions of the Finance Act 1998 which does not talk of a marginal rate, particularly when it comes to computing the disputed income arising out of the capital gains. All that the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner No. 1 filed its return of income for Assessment Year (AY) 1994-95 on 30th November, 1994 disclosing nil income. The Assessing Officer (AO) completed the assessment of the Petitioner No.1 on 18th March, 1997. The dissolution of Petitioner No. 1 took place during the AY. On dissolution, the assets of Petitioner No. 1 in the form of land was transferred to one of the partners at the book value of ₹ 59,84,802/-. The AO noticed that the market value of the said land was ₹ 5,68,00,000. Accordingly, the taxable income of Petitioner No. 1 was computed by the AO at ₹ 5,08,15,200/- being the difference in the market value and that at which the land was transferred. An order was passed on 18th March, 1997 raising a demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions to the authorities for the proper administration of the KVSS. Under Section 96 (2) the Central Government was empowered to issue general special orders or instructions as to the principles or procedures to be followed by authorities in the work relating to the KVSS. 5. It is stated that pursuant thereto the Ministry of Finance, Government of India, issued circulars by way of clarifying the KVSS 1998 in the form of questions and answers. Question No. 18 of the instructions dated 7th October, 1998 provided the basis of calculating disputed income. Question No. 18 and the answer thereto read as under: Question No.18: Section 90(1) of the Scheme refers to the sum payable that may be determined by the designated authority. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... + 12% surcharges) 33.6% Tax payable 1,54,12,652 Less: Tax Paid- Upto 31.3.98- After 31.3.98 30,04,26142,50,000________72,54,261 Tax Unpaid 81,58,391 Disputed Tax in terms of sec. 87 (f) of the Finance Act 81,58,392 Disputed Income in terms of section 87 (e) of the Finance Act determined by applying the marginal rate applicable to Petitioner No.1 of 44.8 per cent 1,82,10,694 Amount payable under the scheme as per section 88 of the Finance Act @ 35 per cent 63,73,743 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority to even amend the provision of law enacted by Parliament. 9. As regards the instructions issued, there are two aspects - one regarding the calculation of the disputed income with reference to the unpaid tax. The other is in relation to the application of the marginal rate. At the outset it requires to be noticed that the Finance Act, 1998 does not talk of any marginal rate to be applied. Also, it appears to the Court that the marginal rate was premised on an Assessee having to pay tax at different slab rates depending on the level of income. However, where the tax is on capital gains, there is only a single rate of tax i.e. 33.6%. In such event, the adoption of a marginal rate is not apposite for determining the disputed inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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