ACIT, New Delhi V. Sh. Kanwaljit Singh, New Delhi

ITA 4348/DEL/2011

• Counselvise Citation: 434820114 RSA 2011
• Duration Of Justice: 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Business income; Salary income; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 4348/DEL/2011 ASSESSMENT YEAR: 2007- 2008 ACIT VS. KANWALJIT SINGH, CIRCLE-37(1), ROOM NO. 401, 75, FRIENDS COLONY N. BLOCK, VIKAS BHAWAN, N EW DELHI-110 002. I.P. ESTATE, NEW DELHI. A AXPS6495A (APPELLANT) (RES PONDENT) APPELLANT BY : SHRI R.S. NEGI , SR. DR RESPONDENT BY : SHRI VINOD KR. BI NDAL, MS. SWEETY KOTHARI, CAS ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE REVENUE HAS IMPUGNED THE FIRST APPELL ATE ORDER ON THE FOLLOWING GROUND :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CI T(A)- XXVIII, NEW DELHI ERRED IN DELETING THE ADDITION OF ` 1,54,90,828/- AS A QUESTION OF LAW IN INVOLVED IN T HIS CASE I.E., WHETHER NON-COMPETE FEE/COMMISSION IS TO BE A SSESSED AS BUSINESS INCOME OR SALARY INCOME IN VIEW OF SPE CIFIC PROVISIONS OF SECTION 17 WHICH STATES THAT ANY FEE, WAGES, COMMISSION, BONUS AND PERQUISITE IN LIEU OF SALARY IS INCLUDED IN THE DEFINITION OF SALARY. ITA NO. 4348/DEL/2011 2 2. AT THE OUTSET OF HEARING LD. AR POINTED OUT THAT AN IDENTICAL ISSUE UNDER SIMILAR FACTS HAS BEEN DECIDED BY THE TRIBUNA L IN FAVOUR OF THE ASSESSEE IN THE ASSESSMENT YEARS 2003-04 TO 2005-06 IN ITA NO. 2311 TO 2313/D/2007 VIDE ORDER DATED 16 TH JANUARY, 2009 AND IN ASSTT. YEAR 2006- 07 IN ITA NO. 2022/D/2009 VIDE ORDER DATED 8.1.2010 . THUS THE ISSUE RAISED IN THE GROUND DURING THE YEAR IS FULLY COVERED IN F AVOUR OF THE ASSESSEE. 3. LD. DR DID NOT DISPUTE THE ABOVE FACTS. HE HOWEVER PLACED RELIANCE ON THE ASSESSMENT ORDER. 4. HAVING GONE THROUGH THE ABOVE CITED ORDE RS OF THE TRIBUNAL WE FIND THAT THE ISSUE RAISED IN THE GROUND UNDER SIMILAR F ACTS HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE IN THE ASSES SMENT YEAR 2003-04 TO 2006-07. THE RELEVANT FACTS ARE THAT DURING THE YEA R THE AO MADE AN ADDITION OF ` 1,54,90,828/- BEING THE NON-COMPETE FEES RECEIVABL E BY THE ASSESSEE FROM M/S. UZIND CORPORATION AND OFFERED FO R TAXATION AS BUSINESS INCOME FOLLOWING CASH SYSTEM OF ACCOUNTING . THE AO ALLEGED THE CLAIMED BUSINESS INCOME AS SALARY. THE ASSESSEE CONTENDED T HAT THE SAID AMOUNT WAS NOT RECEIVABLE BECAUSE OF EMPLOYER-EMPLOYEE REL ATIONSHIP BUT AS NON- COMPETE FEES IN LIEU OF NOT TAKING AWAY THE BUSINES S OF THE SAID FIRM IN TERMS OF THE AGREEMENT DATED 15.3.2002. IT WAS CONT ENDED THAT THE NON COMPETE FEE HAS TO BE TAXED UNDER THE HEAD BUSINES S INCOME AND THAT THE ASSESSEE WAS HAVING AN OPTION TO ADOPT CASH OR MERCANTILE SYSTEM OF ACCOUNTING FOR ITS BUSINESS INCOME. WITHOUT PREJUDI CE TO THESE SUBMISSIONS ITA NO. 4348/DEL/2011 3 IT WAS ALSO CONTENDED THAT EVEN IF AMOUNT RECEIVABL E FROM UZIND CORPORATION IS TAXABLE AS SALARY ON DUE BASIS, THEN THE AMOUNT OF ` 2,12,42,850/- DECLARED AS BUSINESS INCOME BY THE AS SESSEE ON RECEIPT BASIS FOLLOWING CASH METHOD OF ACCOUNTING SHOULD BE REDUC ED FROM THE TOTAL INCOME AS THE SAID INCOME PERTAINED TO THE PRECEDIN G ASSESSMENT YEAR BECAUSE AN AMOUNT CANNOT BE TAXED IN THE TWO DIFFER ENT YEARS UNDER DIFFERENT HEADS OF INCOME FOLLOWING DIFFERENT METHO DS OF ACCOUNTING. THE LD. CIT(A) REFERRING ORDER OF THE TRIBUNAL IN THE C ASE OF ASSESSEE ON AN IDENTICAL ISSUE FOR THE ASSESSMENT YEARS 2003-04 TO 2005-06 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITH THIS FINDI NG THAT THE NON-COMPETE FEES RECEIVABLE IN PURSUANT TO THE AGREEMENT DATED 15.3.2002 IS ASSESSABLE AS BUSINESS INCOME AND THE ASSESSEE IS FREE TO AD OPT CASH METHOD OF ACCOUNTING FOR HIS BUSINESS INCOME AND THE ADDITION MADE BY THE AO OF THE SAID AMOUNT AS SALARY WAS DELETED. THE LD. CIT(A) H AS ALSO GIVEN REFERENCE OF THE ORDER OF THE TRIBUNAL ON THE ISSUE IN THE CA SE OF ASSESSEE FOR THE ASSESSMENT YEAR 2006-07. FOR A READY REFERENCE THE RELEVANT PARA NO. 17 OF THE ORDER DATED 16.1.2009 OF THE TRIBUNAL IN THE CA SE OF THE ASSESSEE IN THE ASSESSMENT YEARS 2003-04 TO 2005-06 IS BEING REPROD UCED HEREUNDER :- 17. NOW COMING TO THE ISSUE IN QUESTION ABOUT THE HEAD OF TAXABILITY, THE PROVISIONS OF SECTION 28(VA) HAVE B EEN NARRATED ABOVE. EXCEPT FROM RAISING GENERAL ARGUMENT ABOUT CO LOURABLE DEVICE, LOWER AUTHORITIES HAVE NOT DISPUTED THE ARG UMENTS OF THE ASSESSEE ABOUT APPLICABILITY OF SECTION 28(VA), CIT(A) HAS CONSIDERED THE ARGUMENT OF THE ASSESSEE AND AT THE END HELD THAT THIS IS A COLOURBLE DEVICE AND THE INCOME IS A SSESSABLE ITA NO. 4348/DEL/2011 4 UNDER THE HEAD AS SALARY INCOME WITHOUT COMMENTING ON INHERENT MERITS AND SCOPE OF SECTION 28(VA). IN OUR VIEW, PROVISIONS OF SECTION 28(VA) ARE APPLICABLE TO ASSE SEES CASE AS A SPECIAL PROVISION DERIVE LIGHT FROM THE FOLLOWING OBSERVATIONS OF HONBLE SUPREME COURT IN THE CASE OF N.L. MEHTA CINEMA ENTERPRISES, 208 ITR 975. 5. UNDER THE ABOVE CIRCUMSTANCES WE DO NOT F IND REASON TO INTERFERE WITH THE FIRST APPELLATE ORDER ON THE ISSUE AS THE SAME IS FULLY COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASS ESSEE ITSELF FOR THE EARLIER ASSESSMENT YEARS. THE FIRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. 6. THE GROUND IS ACCORDINGLY REJECTED. 7. CONSEQUENTLY THE APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COUR T ON 24 TH AUGUST, 2012. SD/- SD/- (G.D. AGRAWAL) ( I.C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATED 24.8.2012 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT