9911796707
TMI Blog1981 (4) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... 62] 45 ITR 512 (Bom), which decision arose out of a dispute with regard to certain amounts received by the assessee during the assessment years 1952-53 and 1953-54 in terms of the said lease of 1947. Under the lease, the Shivrajpur Syndicate Ltd. (hereinafter referred to as" the Syndicate was to pay annually a sum of Rs. 2,6298-8 as rent and royalty at the rate of 8% of the sale value of manganese ore. Clause (i) of Part VII of the lease of 1947 read as follows: "The lessee shall pay the rents and royalty reserved by this lease at the time and in the manner provided in Parts V and VI and shall also pay and discharge all taxes, rates, meats and impositions whatsoever being in the nature of public demands which shall from time to time be charged, assessed or imposed upon or irrespect of the mines or works of the lessee or any part thereof by authority of the Government of India or the Government of Bombay or otherwise except demands for land revenue ........" Besides rents and royalty, the assessee received from the Syndicate several amounts during the assessment years 1954-55 to 1959-60 as local fund cess, the liability for which was, at all material times, said to be that of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court and the decision of the Supreme Court, a detailed reference to which will be made later, is Chhatrasinhji Kesarisinhji Thakore v. CIT [1966] 59 ITR 562 (SC). For the present it will suffice to say that the view taken by the High Court, was confirmed and the appeals filed by the assesses came to be dismissed. Resuming the course of assessment proceedings for the assessment years in question, the ITO, relying upon the decision of the Income-tax Appellate Tribunal in respect of the earlier years, held that the rents and royalties as well as the local fund cess received by the assessee constituted his income. The AAC confirmed the order of the ITO. The matter was taken in appeal by the assesses to the Appellate Tribunal. At this stage, it is necessary to refer to the fact that in view of the decision of the High Court in the reference for the assessment years 1952-53 and 1953-54 that the assessee had recovered more than what he was entitled, the Syndicate filed a Special Civil Suit No. 9 of 1961 in the Court of the Civil judge, Senior Division, Godhra, on 20th September, 1961, for a declaration that the assessee was not entitled to collect and recover from it any amount b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in Special Civil Suit No. 9 of 1961. Before the Gujarat High Court it was contended on behalf of the present assessee that as the ex-Talukdar he was entitled to recover local fund cess on the rent and royalty and, therefore, it was a public demand and the requirement of cl. (i) of Pt. VII of the lease was satisfied. The Gujarat High Court referred extensively to the decision of this court in Chhatrasinhji Kesarisinhji Thakore v CIT [1962] 45 ITR 512 and held that from the finding recorded by the, High Court, it was clear that the liability of the lessee was only to pay the public demands which were imposed upon or in respect of the lands or works of the lessee and it was not shown that the local fund cess was such a public demand. The High Court found that the assessee had no right to recover by way of local fund cess an yearly sum in excess of Rs. 204-7-3 and it was observed that the local fund cess paid on the surplus rent and royalty at the rate of 3 annas per every rupee of rents and royalties paid would be recoverable, if at all, under s. 93 of the Bombay Local Boards Act, 1923, but it was not the case of the defendant that the Local Boards Act was applied or adopted in, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. The Tribunal referred to the decision of the Supreme Court in CIT v. Shoorji Vallabhdas and Co. [1962] 46 ITR 144, in which the Supreme Court had pointed out that when the income had in fact been received and subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. It was also pointed out in that case that where the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. On the facts of the present case, the Tribunal took the view that the temporary receipts of the disputed amounts by the assessee under a mistaken belief did not constitute his real income and it was immaterial that the parties were temporarily under the illusion that the amount was contractually payable. Holding that the amounts received by the assesses did not have the quality of income, the Tribunal came to the conclusion that the disputed amounts had to be excluded from the assessments of the respective years. Out of this order the question reproduced above has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to the payment of rent and royalty would, in our judgment, also be; taxable as income. The amounts paid have the quality which is, if not identical closely similar to rents and royalty. It is immaterial that if the true position were appreciated, the syndicate way not have paid the amounts. The amounts have in fact been paid by the Syndicate, and have been received and appropriated by the appellant as if he was entitled to receive them. The difference between the amounts which the appellant received and the amounts for which he could under the terms of the lease claim reimbursement, must, therefore, be regarded as income within the meaning of the Indian Income-tax Act, and unless specially exempted, liable to tax. The appellant did not purport to collect local fund cess on behalf of the State Government no did the syndicate pay the amount to him as an agent of the Government. The syndicate merely sought to discharge what it believed was its contractual obligation under the indenture of lease, and in doing so, it made payments which exceeded the local fund cess payable by the appellant." The crucial finding recorded by the Supreme Court, therefore, was that the amounts paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect of such decision on the nature of the receipt considered by the Supreme Court. It is no doubt true that since for the assessment years 1952-53 and 1953-54, excess amounts recovered by the assessee had been held to have a quality closely similar to rents and royalties, even for the subsequent years the receipts would have to be considered in the same manner. But that would be so only if no new circumstance entered into this determination. The fact that the rights and liabilities under the contract as between the Syndicate and the assessee have now been expressly determined by a competent civil court, cannot be overlooked or ignored while determining the legal nature of the receipt of the excess amounts in question. The findings of the trial court and of the Gujarat High Court, to which we have referred, clearly indicate that the assessee Was not in law entitled to receive the amounts in question under the agreement. Consequently, the payments received by the assessee from: the Syndicate cannot be said to have been received under the agreement, though payments have been made under mistaken belief that the Syndicate was liable to make these payments. Now, so far as the Syndica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship. The firm was assessed to income-tax in respect of the unclaimed balances transferred to the current account of the partnership in a particular year. The firm contended that the unclaimed balances did not at any time become profits or trading receipts, but were always to be considered as liabilities, for, the statute of limitations did not apply to the case. It was held that the quality and nature of the receipt for income-tax purposes were fixed once and for all when the subject of the receipt was received; and, consequently, as the unclaimed balances, when first received, were obviously liabilities, no subsequent operation could turn them into trading receipts, and they were, therefore, not assessable to income-tax. It is difficult for us to see how this decision is of any assistance today. The decision in Tattersall's case [1939] 7 ITR 316 turned on the question as to whether what was never an income of the assessee at the time when those amounts were received could be treated as an income. The argument on behalf of the revenue in Tattersall's case [1939] 7 ITR 316 was that although the amounts received were not trading receipts at the moment of receipt, they had the poten ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
