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TMI Blog2019 (7) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... epending upon the scheme in question, these subscribed amounts at the end of the scheme are ultimately repaid with interest. The scheme at hand also contains forfeiture clauses as a result of which if, mid-way, a certain amount is forfeited, then the said amount would immediately become income in the hands of the assessee. This is an admitted position before us. 3) In the present case, the assessee was asked to bring to tax such amounts as income for the two years in question, inasmuch as, according to the Assessing Officer, it had treated the whole amount as income, 3% of which is not disputed to be income before us for the years in question. The Assessing Officer treated these amounts as income inasmuch as under the accounting system followed by the assessee, these amounts were credited to the profit and loss account for the years in question as income. The Commissioner of Income Tax (Appeals) dismissed the appeal from the original assessment orders and confirmed the same. The Income Tax Appellate Tribunal, on the other hand, allowed the appeals by relying upon the judgment of this Court in Peerless General Finance and Investment Co. Limited and Another vs. Reserve Bank of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt for taxation by the assessee in the returns of income filed in respect of assessment years 1985-86 and 1986-87, whether the Tribunal was justified in accepting the assessee's contention that the first years' subscription was capital receipts and hence not taxable? (c) Whether on the facts and in the circumstances of the case and having regard to the observations of Hon'ble Supreme Court to the effect that the directions of Reserve Bank of India dated 15th May, 1987 had been made applicable from 15th May, 1987 and would only apply to the deposits made on or after 15th May, 1987, the tribunal was justified in law as well as on the facts in holding that the said directions of the Reserve Bank of India were retrospective and must be applied in all pending proceedings?" 4) When remanded to the High Court, by the impugned judgment dated 06.10.2005, the High Court of Calcutta allowed the appeal against the Appellate Tribunal holding that a perusal of the subscription scheme of the appellant company would show that since forfeiture of the amounts deposited is possible, this amount should be treated as income and not as a capital receipt. Further, it relied heavily upon the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be incorrect to raise any question of estoppel against the appellant-Company and cited judgments of this Court to buttress this proposition. 6) On the other hand, Mr. Arijit Prasad, learned Senior Counsel, appearing for the Revenue has countered Mr. Ganesh's submissions. He read copiously from the Commissioner of Income Tax (Appeals) orders in order to buttress his submission that the ground reality of the situation in the facts of this case is that in point of fact the appellant-Company itself treated these amounts as income. Had it not done so, it would not have been able to face its subscribers for payments in future. He also argued based on Ram Janki Devi and Another vs. M/s Juggilal Kamlapat, (1971) 1 SCC 477 that the true form of the transaction must be looked at. He also cited Poona Electric Supply Co. Ltd., Bombay vs. Commissioner of Income-tax, Bombay AIR 1966 SC 30 to the effect that the ground reality must govern and not mere theoretical considerations. Also, according to the learned Senior Advocate, the issue at hand did not arise directly before this Court in the Peerless General Finance and Investment Co. Limited (supra) and, therefore, any observations made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in which the RBI had, pursuant to this Court's earlier judgment in Reserve Bank of India vs. Peerless General Finance and Investment Co. Ltd. And Others (1987) 1 SCC 424, taken steps to remedy the concerns raised by this Court in that judgment. The steps taken were under powers conferred by Section 45 J & 45 K of the Reserve Bank of India Act, as a result of which directions were issued by the RBI dated 15.05.1987. These directions, in turn, were the subject matter of challenge by the Peerless General Finance and Investment Co. Limited (supra) i.e. the second Peerless case. The aforesaid directions are set out in full in para 9 of the said judgment. We are concerned with para 12 which states as follows:- "12. Every residuary non-banking company shall disclose as liabilities in its books of accounts and balance sheets the total amount of deposits received together with interest, bonus, premium or other advantage, accrued or payable to the depositors." It is true that the focus of this Court was a challenge, on various grounds, to the aforesaid directions. However, this Court did state, Kasliwal, J., in particular, holding: "The amount contributed by the depositors being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey were treated to be income, this would violate the Companies Act. It is, therefore, incorrect to state, as has been stated by the High Court, that the decision in Peerless General Finance and Investment Co. Limited (supra) must be read as not having laid down any absolute proposition of law that all receipts of subscription at the hands of the assessee for these years must be treated as capital receipts. We reiterate that though the Court's focus was not directly on this, yet, a pronouncement by this Court, even if it cannot be strictly called the ratio decidendi of the judgment, would certainly be binding on the High Court. Even otherwise, as we have stated, it is clear that on general principles also such subscription cannot possibly be treated as income. Mr. Ganesh is right in stating that in cases of this nature it would not be possible to go only by the treatment of such subscriptions in the hands of accounts of the assessee itself. In this behalf, he cited a decision of the Division Bench of the Allahabad High Court in Commissioner of Income Tax vs. Sahara Investment India Ltd., reported as Volume 266 ITR page 641 in which the Division Bench followed Peerless General Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal receipt to a revenue receipt. Hence, that decision is clearly distinguishable." This Court, on 21.07.2015, in appeal against the said judgment held as under: "After reading of the decision of the High Court, we find that the High Court has rightly relied upon the judgment of this Court in "Peerless General Finance & Investment Co. Ltd. & Anr. v. Reserve Bank of India" (1992) 2 SCC 343. Since the case is squarely covered by the judgment, we do not find any merit in these appeals and petitions which are accordingly, dismissed." It is also correct to state that there can be no estoppel against a settled position in law [See Commissioner of Income-Tax, Bombay vs. C. Parakh & Co. (India) Ltd. 29 ITR 661 at 665 and Commissioner of Income-Tax, Madras vs. V.MR.P. Firm, Muar (1965) 56 ITR 67. 11) Shri Arijit Prasad, learned senior counsel, appearing on behalf of the Revenue, however, strongly relied upon the observations in Ram Janki Devi and another v. M/s. Juggilal Kamlapat, (1971) 1 SCC 477. In particular, he relied upon paragraph 12 of the judgment which reads as follows:- "The case of a deposit is something more than a mere loan of money. It will depend on the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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