9911796707
TMI Blog1986 (11) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... mean and include the said company and its successor or successors and assigns) of the first part, and the Gujarat Electricity Board, a statutory corporate body constituted under section 5 of the Electricity (Supply) Act, 1948, having its head office at Baroda in the State of Gujarat hereinafter called 'the purchaser' (which expression shall unless repugnant to the context or meaning thereof mean and include the said Gujarat Electricity Board and its successor or successors) of the second part. Whereas the initial period of the licence granted to the vendor expired on 14-10-1974 and whereas the purchaser served a notice to the vendor in exercise of the powers vested in it under section 6 of the Indian Electricity Act, 1910 requiring the vendor to sell its undertaking to it on the expiry of its initial period of licence, and whereas the vendor agreed to hand over on the midnight of 14-10-1974 the possession of its undertaking's assets as shown in the attached schedule. Now this agreement witnesseth and it is hereby agreed by and between the parties as under : 1. The vendor shall sell, and the Board shall purchase the assets of the vendor on the terms and conditions and at or fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corresponding to consumers' contribution and statutory reserves as per last Government audit report which is for the financial year 1972-73 and after taking into account the amounts of Rs. 3,40,000 and Rs. 75,000 already paid as on account on taking over of the possession of all the assets as per the joint inventory on the day of vesting, viz., 14-10-1974. (b) 10 per cent of the sale price plus interest as admissible under the Indian Electricity (Gujarat) Amendment Act, 1974 after the final Government audit report as on the date of vesting, i.e., up to 14-10-1974 is received and the sale receipt for the assets purchased is passed : Provided that out of the first instalment of the aforesaid payments, the liability in respect of any charge, mortgage or similar obligation on the vendor shall be first deducted and paid by the purchaser direct to the persons holding such charge, mortgage or similar obligation and such payments shall be deemed to be the payments having been made to the vendor as sale price of the works taken over by the purchaser : Provided further that out of any of the aforesaid payment, capital contribution of consumers shall be deducted : Provided also that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be incorporated in the licence of every licensee. Now Para III of the Sixth Schedule provides for the creation of a reserve to be called 'Contingencies Reserve'. Para V(1) of the Schedule provides that the Contingencies Reserve shall be not drawn upon during the currency of the licence except to meet certain charges as the State Government may approve. What is more important is that Para V(2) provides that on the purchase of the undertaking, the Contingencies Reserve shall be handed over to the purchaser and maintained as such Contingencies Reserve. Para VI(a) of the Sixth Schedule provides for the creation of a reserve to be called 'Development Reserve'. It is further provided that the Development Reserve shall be available only for the investment in the business of the electricity supply of the undertaking and that on the purchase of the undertaking, the Development Reserve shall be handed over to the purchaser and maintained as such Development Reserve. It is clear from the provisions of the Sixth Schedule that the balance in the Contingencies Reserve and Development Reserve accounts were paid by the assessee to the purchaser in discharge of statutory obligation cast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant portion of the order of the IAC reads as under : " On going through the balance sheet the assessee was asked to explain what is the mode of transfer of entries from profit and loss account to balance sheet. He was asked to explain whether any of the reserves have been claimed in the previous assessment years as expenses debited to profit and loss account and then transferred to balance sheet. On such verification it is found that the following reserves have already been claimed by the assessee in the profit and loss account. The details are as under : Rs. Claimed in profit and loss account in assessment year 1970-71 19,843 Claimed in profit and loss account in assessment year 1971-72 11,381 Claimed in profit and loss account in assessment year 1976-77 17,627 ------------------ 48,851 ------------------ I am satisfied that the agreement is clear regarding the consideration and, therefore, the actual amount that should be considered would be Rs. 9,44,816 as added by Rs. 48,851 mentioned above. The ITO is directed to verify whether any other amount has already been claimed in profit and loss account as per the income-tax records. Therefore on recalculati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order under section 263 passed on 11-12-1980 was partially set aside and these 3 items had not to be considered again in the fresh assessment. As regards 'consumers contribution', the assessee is not in a position to establish that the same was the reserve and not the liability. Thus, this also being a liability would not be deductible from the sale consideration. I have already held that the order of the ITO was erroneous and prejudicial to the interests of the revenue as he had not taken the correct sale price of Rs. 13 lakhs for the purposes of finding out the profit under section 41(2) of the income-tax Act. The ITO is, therefore, directed to take the sale consideration at Rs. 13 lakhs as against Rs. 9,93,667 taken by him. " 10. Being aggrieved by the order of the Commissioner, the assessee has come up in appeal before the Tribunal. At the outset, the learned counsel for the assessee submitted that since the ITO had framed the assessment en 9-7-1982 as per the directions of the IAC issued under section 144A, the Commissioner has no power to revise the said order of the ITO. The Commissioner could have taken action under section 263, if he had initiated the proceedings an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in its orders relied on behalf of the assessee. In any event, he submitted that if there is a conflict between the earlier order of the Commissioner made under section 263 and that of the directions of the IAC issued under section 144A, the Commissioner being a superior authority, his order should prevail. According to him, the IAC being a subordinate authority could not have interfered with the earlier order of the Commissioner made under section 263, as in the said order, the Commissioner had directed the ITO to examine the balance in the consumers contribution account only. As regards other three items, viz., the contingency reserve, the development reserve and the regular payment deposits, the Commissioner had clearly held that the same were not deductible in determining the sale price of the assets. Against the said order of the Commissioner, the assessee had not preferred any appeal before the Tribunal. Relying on the decision in the case of Gaurishanker Kedia v. CIT [1963] 49 ITR 655 (Bom.), he submitted that the assessee should not be allowed to dispute the earlier order of the Commissioner on these three items. According to him, the decision in the case of Artex Mfg. Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 144A and section 144B. It is pertinent to note that the directions contemplated under section 144A, are those prior to the framing of the assessment draft or otherwise under section 143(3). However, under section 144B, the IAC could issue directions only when the ITO has framed the draft assessment under section 143(3). It is pertinent to note that under section 144B, the IAC cannot issue directions to the ITO to include or not to include certain income which the ITO has not considered while framing a draft assessment under section 143(3). However, under section 144A, the IAC has got wide powers to issue directions to the ITO before the latter frames the assessment under section 143(3). In this view of the matter, we do not find any infirmity in the order of the Commissioner under appeal. In our opinion, the decision in the case of Artex Mfg. Co. is hardly of any use to the assessee in view of glaring distinguishing features on the facts and circumstances obtaining in the instant case. From the plain reading of the agreement of sale (reproduced above), it cannot be disputed that Rs. 13 lakhs were paid to the assessee in respect of capital assets which wer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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