THE ACIT CIR 2(2), MUMBAI v. M/S. HIND LEVER CHEMICALS LTD, MUMBAI

ITA 2281/MUM/2006 | 1997-1998
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 228119914 RSA 2006
Bench Mumbai
Appeal Number ITA 2281/MUM/2006
Duration Of Justice 5 year(s) 5 month(s) 16 day(s)
Appellant THE ACIT CIR 2(2), MUMBAI
Respondent M/S. HIND LEVER CHEMICALS LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 30-09-2011
Date Of Final Hearing 08-06-2011
Next Hearing Date 08-06-2011
Assessment Year 1997-1998
Appeal Filed On 13-04-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) ITA NO. 2281/MUM/2006 ASSESSMENT YEAR 1997-98 THE ACIT CIRCLE 2(2) AAYAKAR BHAVAN MUMBAI-400 020 VS. M/S. HIND LEVER CHEMICALS LTD. BOMBAY HOUSE 24 HOMY MODY STREET FORT MUMBAI-400 001 PAN- N.A. (APPELLANT) (RESPONDENT) APPELLANT BY: MRS. KUSUM INGLE RESPONDENT BY: SHRI ANIL KHANNA DATE OF HEARING : 11.8.2011 DATE OF PRONOUNCEMENT: O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER DATED 31.1.2006 PASSED BY THE LD. CIT(A) PATIALA F OR THE ASSESSMENT YEAR 1997-98. 2. THE LD. CIT(A) HELD AS FOLLOWS: THE SUBMISSIONS MADE BY THE LD. COUNSEL OF THE APPELLANT THE COMMENTS OF THE LD. ASSESSING OFFICE R THE DECISIONS RENDERED BY LD. PREDECESSOR ON IDENTICAL ISSUE IN ASSESSMENT YEAR 1996-1997 AND THE DECISION RENDERED BY THE CIT(A)-I MUMBAI IN THE CASE OF M/S. HINDUSTAN LEVE R LIMITED FOR ASSESSMENT YEAR 1997-98 WHEREIN IDENTICAL/SAME ISS UE INVOLVED HAVE BEEN PERUSED. IT IS NOTED THAT IN THE CASE OF DALMIA ITA NO. 2281/M/06 2 CEMENT LIMITED THE ASSSESSEE WAS THE OWNER OF TWO CEMENT FACTORIES SITUATED IN PAKISTAN. BY AN AGREEMENT IN JULY 1962 IT AGREED TO SELL AND TRANSFER TO ONE SH. MANECK JI IT S PROPERTY AND ASSETS REPRESENTED IN THE TWO CEMENT FACTORIES. THE RELEVANT CLAUSES OF THE SAID AGREEMENT HAVE BEEN REPRODUCED BY THE HON'BLE SUPREME COURT. ONE OF THE CLAUSES WAS THAT THE PROFITS AND LOSSES ARISING FROM THE OPERATION OF THE COMPAN Y DURING THE PERIOD SUBSEQUENT TO 30.9.1962 SHALL IN THE EVENT OF THE COMPLETION OF SALE TRANSACTIONS IN ACCORDANCE WITH IN THE SAID AGREEMENT WILL BE ON ACCOUNT OF SH. MANECK JI. THE ACTUAL TRANSFER OF THE CEMENT FACTORIES WAS EFFECT ON 30.0 9.1964. THE HON'BLE SUPREME COURT HAS NOTED THAT THE SALE TRANS ACTIONS HAS TAKEN PLACE IN JULY 1962 AND THE PARTIES HAD AGREE D TO RELEVANT DATE OF TRANSFER TO BE 30.09.1962. THERE WAS NO QUE STION OF ENABLING THE ASSESSEE TO RETAIN THE PROFITS IN ITS OWN HAND AFTER THE SALE AGREEMENT. THE PROFITS WOULD DIVERT TO THE PURCHASER IN TERMS AND IN ACCORDANCE WITH THE AGREEMENT DATED JU LY 1962 AND THE DATE OF ACTUAL TRANSFER OF THE FACTORY IN Q UESTION WHICH IN-FACT HAD TAKEN PLACE ON 30.09.1964 DID NOT ALTER THE SITUATION. THE INCOME STOOD DIVERTED BY AN OVERRIDING TITLE AS A MATTER OF FACT EVEN BEFORE THE ACCRUAL. THE HON'BLE COURT REL IED FOR THIS PROPOSITION ON THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF JHANZIE TEA ASSOCIATION (SUPRA). IN THE APPELLATE O RDER FOR ASSESSMENT YEAR 1996-97 MY LD. PREDECESSOR HELD THA T THE RESOLUTIONS PASSED BY THE BOARD OF DIRECTORS / SHAR EHOLDERS AMOUNTED TO ARRANGEMENTS OR CONTRACTS WHICH TANTAMO UNT TO AN AGREEMENT. IN VIEW OF THE ABOVE HE PROCEEDED TO RE LY ON THE DECISIONS CITED ABOVE AND HELD THAT THE APPELLANT C OMPANY HAD VALIDLY TRANSFERRED THE RIGHT TO THE PROFITS OF THE DETERGENT BUSINESS CARRIED ON IN TRUST BY THE APPELLANT COMPA NY FOR MJ/S. HLL W.E.F. 1.1.96 TO 31.3.1996 AND HAD CORRESPONDIN GLY VALIDLY ACQUIRED THE RIGHTS OF PROFITS OF BULK CHEMICALS & FERTILIZER BUSINESS FOR THE SAME PERIOD FROM M/S. HLL EVEN THO UGH THE ACTUAL TRANSFER OF ASSETS AND LIABILITIES WAS MADE ON SUBSEQUENT DATES. SIMILARLY THE CIT(A)-I MUMBAI IN THE CASE OF M/S. HLL FOR ASSESSMENT YEAR 1997-98 RELIED UPON THE AFORESAID D ECISION TO HOLD THAT THE PROFITS OF THE DETERGENT BUSINESS ALO NGWITH THE EXPENSES FOR THE PERIOD 1.4.1996 TO 31.12.1996 WAS ASSESSABLE IN THE HANDS OF M/S. HLL. IT IS NOTED THAT UNLIKE T HE FACTS IN THE CASE OF DALMIA CEMENT LIMITED WHEREIN AN AGREEMENT HAD BEEN ENTERED INTO PRIOR TO THE EFFECTIVE DATE OF TRANSFE R IN THE CASE UNDER CONSIDERATION THE AGREEMENT FIXING THE EFFEC TIVE DATE OF TRANSFER AS 1.1.1996 WAS ENTERED IN NOVEMBER 1996. NEVERTHELESS THE HON'BLE SUPREME COURT IN THE CASE OF DALMIA CEMENT LIMITED HAS OBSERVED THAT IN ANY EVENT PROF ITS OF BUSINESS DO NOT ACCRUE FROM DAY TO DAY BUT AT THE E ND OF THE ACCOUNTING YEAR I.E. IF PRIOR TO THE CLOSE OF THE ACCOUNTING YEAR AN INCOME HAS BEEN DIVERTED BY VIRTUE OF AN OVERRID ING TITLE EFFECT WILL HAVE TO BE GIVEN TO THE SAME WHILE DETERMINING THE ENTITY IN ITA NO. 2281/M/06 3 WHOSE HANDS SUCH INCOME WAS ASSESSABLE IN THE ACCOU NTING YEAR. THE MERE FACT THAT THE EFFECTIVE DATE FOR TRA NSFER IS ANTERIOR TO THE DATE OF THE AGREEMENT WILL NO MAKE IT IRRELE VANT AS LONG AS THE AGREEMENT HAS BEEN ENTERED INTO PRIOR TO THE EN D OF THE ACCOUNTING YEAR IN WHICH THE EFFECTIVE DATE OF TRAN SFER FALLS. IN THE CASE OF JHANZIE TEA ASSOCIATION LIMITED THE ASSESS EE OWNED NUMBER OF TEA ESTATES. UNDER DIFFERENT AGREEMENTS W ITH VARIOUS PARTIES IT WANTED TO SELL SOME OF ITS TEA ESTATES. ONE SUCH AGREEMENT WAS DATED 15.09.1969 WHEREIN THE EFFECTIV E DATE OF TRANSFER WAS FIXED AT AS 01.01.1969. THE CONVEYANCE DEED IN RESPECT OF THIS TRANSFER WAS EXECUTED ON 02.04.1974 . THE HON'BLE COURT HELD THAT THE INCOME ACCRUING FROM THE TRANSF ER ALSO STOOD TRANSFERRED TO THE PURCHASER W.E.F. 01.01.1969. IT IS NOTED THAT IN THIS CASE THE EFFECTIVE DATE FIXED FOR TRANSFER WA S 01.01.1969 WHEREAS THE AGREEMENT WAS ENTERED INTO ON 15.09.196 9 AND CONVEYANCE WAS EXECUTED ON 02.04.1974. FOR THE REAS ONS CITED ABOVE AND RESPECTFULLY FOLLOWING THE DECISION RENDE RED BY MY LD. PREDECESSOR IN THE APPELLANTS CASE FOR ASSESSMENT YEAR 1996-97 AND THE DECISION RENDERED BY THE LD. CIT(A)-I MUMB AI IN THE CASE OF M/S. HLL FOR ASSESSMENT YEAR 1997-98 I HOLD THA T THE APPELLANT COMPANY IS ASSESSABLE FROM THE PERIOD 01. 04.1996 TO 31.12.1996 IN RESPECT OF PROFITS AND GAINS OF BULK CHEMICALS & FERTILIZER BUSINESS (AS HAS BEEN ADOPTED BY THE APP ELLANT) AND NOT IN RESPECT OF THE DETERGENT UNIT (AS HAS BEEN H ELD BY THE LD. ASSESSING OFFICER). 3. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US AN D HAS RAISED THE FOLLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESS EE COMPANY IS ASSESSABLE FROM THE PERIOD 1.4.1996 TO 31.12.1996 IN RESPECT OF PROFITS & GAINS OF BULK CH EMICAL AND FERTILIZER BUSINESS (AS ADOPTED BY THE ASSESSEE ) AND NOT IN RESPECT OF DETERGENT UNIT (AS HELD BY THE AO ). 4. WE FIND THAT THE ISSUE IS COVERED BY THE DECISI ON FOR THE A.Y. 1996-97 BY CHANDIGARH H BENCH IN ITA NO. 305/CHAN D/2003 WHEREIN IT HAS BEEN HELD AS FOLLOWS: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON THIS I SSUE AND FIND OURSELVES IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE FIRST APPELLATE AUTHORITY. THE FACT SITUATION N OTED BY US IN THE EARLIER PARAGRAPHS IS NOT BEING REPEATED FOR THE SA KE OF BREVITY. ADMITTEDLY THE RESOLUTION AUTHORIZING THE SALE OF UNDERTAKING OF DETERGENT BUSINESS WAS PASSED BY ASSESSEES SHARE H OLDERS ITA NO. 2281/M/06 4 BEFORE 31.3.96. THE ACTUAL TRANSFER OF ASSETS OF TH E BUSINESS HAS INDEED TAKEN PLACE SUBSEQUENTLY BY WAY OF AGREEMEN T DATED 25.11.1996. THE RESOLUTION OF THE SHARE HOLDERS OF THE RESPECTIVE COMPANIES AS ALSO THE AGREEMENT FOR TRANSFER ENVISA GED THE EFFECTIVE DATE OF TRANSFER AS 01.01.1996. IT IS THI S DATE WHICH IS RELEVANT TO DECIDE AS TO FROM WHAT TIME THE BUSINES S BELONGS TO THE OTHER CONCERN. CLEARLY THE PROFITS OF DETERGEN T BUSINESS W.E.F. 1.1.96 STOOD VESTED IN THE HANDS OF THE HINDUSTAN L EVER LIMITED AND THEREFORE IT CANNOT BE CONSIDERED FOR TAXATION IN THE HANDS OF THE ASSESSEE COMPANY. THE STAND OF THE REVENUE ON THE BASIS OF THE DATE OF THE FORMAL AGREEMENT IS MISCONSTRUCTED IN AS MUCH AS THE SAID AGREEMENT IS ONLY AN INSTRUMENT TO EFFECTU ATE THE TRANSFER AS CONTEMPLATED AND APPROVED IN THE MEETIN G OF THE SHARE HOLDERS OF THE RESPECTIVE COMPANIES WHICH WA S PRIOR TO 31.3.96. THEREFORE THE CIT(A) HAS CORRECTLY UPHELD THE STAND OF THE ASSESSEE ON THIS COUNT. WE HEREBY AFFIRM THE SA ME. THE REVENUE FALLS ON THIS GROUND. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE EARLIER YEAR ORDER IN ASSESSEES OWN CASE WE DISMISS THE REVENUES APPEAL. 5. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF SEPTEMBER 2011 SD/- SD/- (R.S. SYAL) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 30 TH SEPTEMBER 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR E BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T MUMBAI