9911796707
TMI Blog1998 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuance of that scheme, the Punjab State Civil Supplies Corporation (hereinafter called PUNSUP) and the Delhi State Civil Supply Corporation (hereinafter referred to as DSCSC) were allowed to import cement from Romania and Korea respectively, by six shipments in all (five for gray and one for white portland cement). Four of the ships, i.e., 1. Niketar (15400 MTs), 2. Promina (14241 MTs), 3. Wanda (23000 MTs), 4. Kherea (24200 MTs), brought the cement from Romania and two of the ships, i.e., 1. Krishnaraja (18250 MTs) and 2. Shyam Venture (2000 MTs), brought the cement from Korea. PUNSUP and DSCSC then appointed the assessee as what has been described as handling agent and passed over the entire burden of handling the said imported cement to the assessee. The assessee in its turn claims to have associated itself with Rajasthan Construction Co. Ltd., and Fort William Co. Ltd. (hereinafter referred to as FWCL), in the import and sale of cement and several other parties were also said to have been appointed as agents, etc., to whom the commission is claimed to have been paid for services rendered. To handle the import of the cement at Madras port the assessee had established tempor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's managing director, Shri S. K. Navlakha, some papers recording certain transactions, admittedly, in the handwriting of the said Shri S. K. Navlakha were recovered. Those documents related to the import of cement from the ships which were unloaded at Bombay port, and on the basis of the entries recorded therein the Assessing Officer took a view that on that consignment also "on money", i.e., money over and above the price accounted for in the books of account, was charged by the assessee and the extent of "on money" was determined at Rs. 66,42,000. This amount was also added to the assessee's income. As already stated the assessee had claimed that it appointed Fortwilliam Company Limited, hereinafter referred to as FWCL, for locating buyers for the imported cement and to act as agents of the prospective buyers for the sale of cement by the assessee on a high seas sale basis. The cement was to be sold on high seas sale basis so as to avoid payment of sales tax and since so many buyers could not appoint separate agents for clearing the goods from the ship and the port, each of the buyers had to appoint FWCL as their clearing agent and they had to pay to the assessee the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that freight amounting to Rs. 19,28,327 and demurrage amounting to Rs. 40,83,445 was payable by it to the ship owners and claimed the same as a deduction in computing its income. The Assessing Officer took the view that these amounts were not payable during the accounting period under consideration and he, therefore, did not allow a deduction therefor. With the aforesaid additions the assessee's income was, vide order dated March 31, 1986, assessed at Rs. 2,58,04,330 as against a returned income of Rs. 4,51,587. The assessee appealed to the Commissioner of Income-tax (Appeals), who by a brief order dated September 26, 1986, set aside the assessment directing the Assessing Officer to reframe the assessment after making fresh enquiries regarding the various additions, particularly on account of "on money" and disallowance of commission paid to FWCL. The learned Commissioner of Income-tax (Appeals) observed that Shri R. Jayaraman and Shri M. Dalip, the two persons who were present in Room No. 439, Hotel Taj Coramandal, Madras, at the time of the search on August 29, 1983, and had spoken about "on money", should be summoned, and the assessee be allowed an opportunity of cross-exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MT as reasonable for the services rendered in that connection, as against Rs. 100 per MT claimed to have been paid by the assessee. He, thus, directed an allowance of Rs. 11,80,000 as against the claim of the assessee of Rs. 47,20,000. The learned Commissioner of Income-tax (Appeals) upheld the disallowances in respect of payments said to have been made to Ashirwad and its associates (Rs. 2,20,000), Moradabad Syntex Ltd. (Rs. 6,84,000) and some other parties (Rs. 3,21,780). Regarding the disallowance of the assessee's claim of Rs. 60,11,772 payable as freight and demurrage, the Commissioner of Income-tax (Appeals) agreed with the view taken by the Assessing Officer and confirmed the disallowance. Regarding the addition of Rs. 30 lakhs, which represented the additional amount of income disclosed by the assessee in the revised return, the Commissioner of Income-tax (Appeals) took the view that in the face of the additions and disallowances made, which exceeded the amount of the additional income disclosed by the assessee, a separate addition of Rs. 30 lakhs could not be made. He, therefore, deleted the said addition. The aforesaid order of the Commissioner of Income-tax (Appeals), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee informed us that it had only two employees, namely, G. K. Maheshwari as its secretary and Bhanu Pratap Singh as accountant. It was earlier trading in paper and took up the aforesaid transactions in relation to cement for the first time. The Bangur group owns a cement factory under the ownership of Digvijay Cement Company Ltd., Shri S. K. Navlakha is the managing director of the assessee-company and is a resident manager at Delhi of the said Digvijay Cement Co. Ltd., Rajasthan Construction Co. is also a company of this group. So is Fort William Co. Ltd. (FWCL) a company based at Calcutta, which owns a steel wire factory and jute mill situated near Calcutta. Like the assessee, Rajasthan Construction Co. and FWCL too had no earlier dealing in cement." The questions were reframed and eventually the revised questions are as follows : "1. Whether, on the facts and in the circumstances of the case and in law, the rejection by the Department of the offer made by the assessee under the amnesty scheme was valid and correct and if the answer to the said question is in the affirmative then was it open to the Tribunal to continue the proceedings for assessment on the basis of the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with the import and sale of cement. It was all done by the assessee with the assistance of staff deputed by the Rajasthan Construction Co. and Digvijay Cement Co. Although FWCL is a subsidiary of Digvijay Cement Co. Ltd. but it cannot be said that the employees of Digvijay Cement Co. who were working with the assessee, had been deputed at the request of FWCL to Digvijay Cement Co., deputed those persons for performance of the duties of its subsidiary, the FWCL. For the above reason we are of the opinion that FWCL was not entitled to any money in respect of the transactions in question and, therefore, the Commissioner of Income-tax (Appeals) was not correct in deleting the addition of Rs. 16,52,629. We hereby reverse his finding and restore the said addition." In so far as the issue relating to payment to FWCL for Rs. 47,20,000, as a remuneration for arranging the sale of cement brought by ships, "Wanda" and "Kherea", to KSWC is concerned, the Tribunal recorded the following finding : "We have already mentioned how the assessee's explanation and evidence on several other counts have been found to be untrue. Some of such transactions are yet to come up for discussion hereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khs over and above what was disclosed and this was never retracted by filing a fresh revised return omitting the sum of Rs. 30 lakhs, nor has the assessee otherwise attempted to show that this admission was incorrect. Therefore, the assessee's income could not be assessed as an amount lower than what was returned in the revised return. However, the income to be determined was one compact whole derived from the assessee's business and since the income determined by the Assessing Officer by making various disallowances and additions was much more than the income returned, the sum of Rs. 30 lakhs declared as additional income in the revised return could not be separately added. The Commissioner of Income-tax (Appeals), therefore, rightly deleted this addition and there is no need for any change in what he has stated as reasons for the deletion. The Revenue's plea is thoroughly untenable because this additional income was not offered by the assessee from a different source. It represented only the assessee's income from business and it is only to the assessee's business income that the Assessing Officer made this addition. The Revenue's plea, therefore, is rejected." In so far as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , direct the Assessing Officer to verify this contention and in case the demurrage in respect of "Nikatar" has been paid in February, 1984, the amount thereof be allowed as a deduction in computing the income of the year under consideration. Regarding "Wanda" and "Kherea", as already stated, these two ship loads had been sold to the Kerala State Warehousing Corporation. The agreement between the assessee and the KSWC has been placed at pages 282 to 285 of the paper book and clause 10 of the agreement reads as under : "10. Demurrage guarantee : All demurrages incurred by the ship till it reaches the agreed port and notice of readiness served on the Kerala State Warehousing Corporation or its agents shall be at the Rajasthan Mercantile Co. Ltd. account. Subsequent demurrage incurred on account of delay in clearance as per C/P terms will have to be borne by the Kerala State Warehousing Corporation and will be paid on receipt of bills from the Rajasthan Mercantile Co. Ltd., on the basis of lay time calculated after discharge by the master of the ship." Thus a part of the liability for demurrage was transferred to the KSWC and the assessee was entitled to receive the same from t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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