TMI Blog2002 (1) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... ss: Expenses 92,44,686 ------------ Loss: 59,55,660 ------------ ----------------------------------------------- 3. Return was processed under section 143(1)(a). Capital gain was said to be received on the repurchase of CANSTAR which was matured in August, 1990. During the proceedings under section 143(1)(a), the claim as to the expenditure, was disallowed on the ground, that the expenditure laid out was not within the meaning of section 48 of the Act. Resultantly, tax was found to be payable on the long term capital gains. 4. Being aggrieved, assessee filed appeal before the CIT(A). In the said appeal CIT(A) held that the adjustment so made by the Assessing Officer was not within the ambit of section 143(1)(a) of the Act. Assessing Officer thereafter issued notice under section 143(2) of the Act and the case was completed under section 143(3) of the Act. Exemption claimed by the assessee under section 13A of the Act was accorded to it by the Assessing Officer, in respect of income from voluntary contributions and income from other sources. However, the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 8. Shri Arun Sathe, Sr. Advocate appeared along with Mrs. Veni Thapar, CA on behalf of the assessee. Revenue was represented by Shri B.B. Ahuja, standing counsel for the Department. Necessary documents and papers were filed. 9. At the outset Shri Sathe submitted that the loss in the publication be allowed as a business loss and it should be set off against the other heads of income. To buttress this argument Shri Sathe laid emphasis on the following facts:- (i) The assessee is having a separate publication department. (ii) BJP Today and Bhajpa Samachar are registered newspapers. (iii) Activity of publication is a continuous, systematic and organised activity. (iv) All newspapers, books, magazines and journals are sold for a fixed price. (v) The newspapers are registered with the Postal Department for Concessional rates for despatch like any other newspaper. These registrations are renewed annually. (vi) The newspapers are registered with the Police Department, specifically stating a selling price. (vii) A separate bank account exists which was opened with an intent to keep the activity independent of the other receipts and payments of the party. (viii) The pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 48 (SC)-In this case assessee after his retirement from Government service, was spending his time in studying and teaching Vedanta philosophy. One of his disciples used to come fromEnglandat regular intervals toTrivandrumwhere the assessee was residing. His disciple stayed with the assessee for few months at a time and attended his discourses. He also received instructions in Vedanta and had the benefit of his teachings. He transferred the entire balance standing to his credit in his account atBombayamounting to more than Rs. 2 lakhs to the account of the assessee in assessee's name in the same bank atBombay. Further amounts were also deposited to the assessee's account inBombay. The question was whether the receipts from the disciple constituted the assessee's income. Hon'ble Supreme Court has held that the teaching was a vocation. The teaching of Vedanta was just as much teaching as any other teaching. In order that an activity might be called a vocation it was not necessary to show that it was an organised activity and that it was indulged in with a motive of making profit. It was well established that it was not the motive of a person doing an act which decided whether the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orandum of the assessee party did not forbid the carrying on of business activity. There is no such restriction under the Representation of People Act or under the Income-tax Act on carrying on a business activity by a political party. Funds can be raised through various means. Carrying on business is one of the means for raising the fund. 13. Coming to the next ground that whether the surplus on the maturity value of CANSTAR could be construed as capital gains, Shri Sathe submitted that the assessee invested the money in Canstar in 1990. The offer letter and the rules and regulations of Canstar assured a minimum annual income of not less than 12.5% every year. It was to be ploughed back for investment purpose. Assessee received Rs. 17.40 paise per unit as a repurchase value. This was an assured repurchase value as per the offer document. The amount received was less than the NAV of CANSTAR for the year. Assessee received surplus amount of Rs. 7.40 on the purchase value of the CANSTAR. Shri Sathe contended that this should be considered as income from other sources. It was argued that the assessee received his own money, being the accumulated annual dividend invested every year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be a transfer of it. The extinguishment of right or rights should, in any case, be on account of its or their transfer in order to attract the provisions of section 45. If it was not, and was on account of the destruction or loss of the asset, it was not a transfer and did not attract the provisions of section 45 which related to transfer and not to mere extinguishment of a right. Hence, an extinguishment of right not brought about by transfer was outside the purview of section 45. (2) Bharat Forge Co. Ltd. v. CIT [1994] 205 ITR 339(3)(Bom.)-In this case it was held that the phrase "extinguishment of rights" takes colour from the associated words and expressions and will have to be restricted to the sense analogous to them. Hence expression "extinguishment of any rights therein" will have to be confined to the extinguishment of rights on account of transfer and cannot be extended to mean any extinguishment of right independent of our otherwise than on account of transfer. The cost of machinery purchased from abroad met by loan from Exim Bank which was repayable in instalments. There was a contract for purchase of dollars by assessee through its bank in anticipation of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not permitted to carry the business. 19. It was further stated that assessee failed to establish the profit motive, which is a necessary ingredient for carrying on the business. It was stated that from, ab initio, assessee suffered losses on the sales of publication. No iota of evidence was adduced to demonstrate that the motive was to earn profit. Once it is established that motive of the assessee was to earn profit, thereafter it is not relevant that whether assessee earns profit or incurs loss in carrying the business. In the present case there is absolutely nothing to indicate that the activity of publication was undertaken with a view to earn profit. To regard an activity as "business", there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive. The two essential requirements for an activity to be considered as business are: (i) it must be continuous course of activity; and (ii) it must be carried on with a profit motive. Reliance was placed on the following precedents:- (1) Bharat Development (P.) Ltd. v. CIT [1982] 133 ITR 470(4)(Delhi); (2) B. Malick v. CIT [1968] 67 ITR 616(All.); (3) CIT v. K.S. Venkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officers under your region. Yours faithfully, Sd/- (Kamlesh C. Varshney) Under Secretary to the Govt. ofIndia" 22. Shri Ahuja vehemently contended that profit making must be the end to which the activity concerned was directed. The predominant object of the activity must be the making of profit. Where an activity is not pervaded by profit motive but is carried on primarily for serving the political parties, it would not be correct to describe it as an activity for profit. It was stated that the Memorandum of the assessee party was silent on this aspect. There was no express provision that the party shall do the publication for earning the profit. The surrounding circumstances clearly indicates that the activity was not propelled by a profit motive. 23. In the case of Sole Trustee, Loka Shikshana Trust at page 244, the Hon'ble Supreme Court has held that whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. 24. In the case of Indian Chamber of Commerce at page 805, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further placed on the decision of B. Malik. In this case the assessee, Chief Justice of the Allahabad High Court, was requested to act as an arbitrator in a certain matter. A fee of Rs. 20,000 was paid to the assessee. Whether such fee was revenue income liable to tax was the question before the Hon'ble High Court. It was decided as under:- "An activity of the assessee, before the assessee has actually acquired a profession, vocation, or occupation, either by a habitual pursuit of the activity or by engaging in it as a result of a design to pursue an occupation, cannot be considered the exercise of a profession or occupation. The activity of the assessee, however disorganised or irregular or desultory, must assume or acquire the form of or flow from an "occupation" before the resulting income becomes taxable under the provisions of section 4(3)(vii) of the Act. Whether it has assumed that character or not will be a question of fact, which could only be determined by taking the intention with which, the number of times on which, and the whole set of attendant circumstances in which an activity, which may produce some monetary gain, is carried on. In every case, however, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the unit were stipulated in the instrument of offer. The amount was given over to the assessee on the extinguishment of its right in relation to the CANSTAR unit. The extinguishment of right was on account of the transfer of units from assessee to the CANSTAR. 30. Shri Ahuja further stated that the provisions of sub-section(6) of section 45 are in relation to the section 80CCB. It is apparent from the perusal of records that assessee earned capital gains. It was reflected as such. Later on when it was realised that capital gain was not exempted under section 13A and expenditure cannot be set off against the surplus value of the CANSTAR unit, the stand was changed. 31. Reference was made to the decision of the Apex Court rendered in the case of Anarkali Sarabhai v. CIT [1997] 224 ITR 422(6) wherein it was held that when preference shares are redeemed by the company, the shareholder has to obtain or surrender the shares; in order to get the amount of money in lieu thereof. There is, therefore, also a relinquishment which brings the transaction within the meaning of section 2(47) of the Act. 32. We have heard the rival submissions in the light of material placed before us and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes out that Aagami magazine will be published in Hindi. This is the party organ. It is nowhere mentioned that such activity will be undertaken for the purpose of making profit. 35. Assessee maintains a separate publication department. 'BJP Today' and 'Bhajapa Samachar' are registered newspapers. These are registered with the Postal Department and Police Department and separate bank account was maintained for publication business, are some of the facts which indicate that the activity of publication was a continuous, systematic and organised activity. But the fact that such an activity was undertaken with profit motive cannot be ascertained with these facts. Because registration of the newspaper with the required authorities is sine qua non-whether that activity be undertaken for profit or otherwise. Similarly maintenance of separate accounts only is not sufficient to demonstrate the intent that the activity was for profit. 36. Coming now to the Circular relied upon by Shri Ahuja, we find that the CBDT appreciated this fact that the idea of profession arises from a profit motive. In a political party, as in any charitable institutions there is no private profit motive nor a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources of income. It is, therefore, proposed to provide for exemption from income-tax in respect of specified categories of income derived by political parties, namely, income from investments both in movable and immovable properties and income by way of voluntary contributions. The proposed exemption will be available only in the case of political parties which are registered or deemed to be registered with the Election Commission of India under the Election Symbols (Reservation and Allotment) Order, 1968. The exemption will not be allowed unless the political party maintains proper books of account; records the name and address of every person who has made a voluntary contribution of more than ten thousand rupees at a time; and the accounts of the political party are audited by a chartered accountant or other qualified accountant. 2. Payments made for advertisements in souvenirs, brochures and the like published by political parties are not made on considerations of commercial expediency, but are in the nature of donations made with the twin objective of circumventing the ban on company donations and for securing their deduction in the computation of taxable profits. It is, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a well known dictum of law that CAUSA PROXIMA NON REMOTA SPECTATUR (The proximate cause and not the remote one must be regarded). In the present case making profit out of the publication activity was not CAUSA CAUSANS. 'Causa causans' denotes anything operating to produce an effect. Thus it is said CAUSA CAUSANTIS CAUSA EST CAUSATI (the cause of the thing causing is the cause of the thing caused). "Causa Causans" is supposed to mean a cause which causes, while "causa sine qua non" means a cause which does not in the sense material to the particular case, cause, but is merely an incident which precedes in the history or narrative of events. As such the ratio laid down in the aforesaid cases cannot be applied in the facts of the present case. 43. In the case of Mazagaon Dock Ltd., the question before the apex court was that whether tax can be charged on the profits which assessee company would ordinarily have made out of the ship repair activity. Hon'ble Supreme Court found it to be a trading activity. The facts of this case are not matching with the facts of the present case. Hence it is not relevant for deciding the issue. In the case of Distributors (Baroda) (P.) Ltd., apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s required to reflect the earning from CANSTAR UNIT on year to year basis. This was not done by the assessee. For that purpose he abided the norms laid for the capital gains unit. Rightly done so, as assessee was holding only capital gains unit. But when the question of taxability came, assessee realised that capital gains scheme is not advantageous. Benefit of section 13A is not available in respect of capital gains. Assessee, therefore, changed the stand before CIT(A). 47. "APPROBATE AND REPROBATE" is a phrase borrowed from the Scots law, where it is used to express the principle embodied in the English doctrine of ELECTION-namely, that no party can blow hot and cold in the same stream. The equitable doctrine of ELECTION evolved from the rule of common law: Election is the obligation imposed upon a party to choose between two inconsistent, or alternative, rights or claims, in cases where there is a clear intention of the person from whom he derives one that he should not enjoy both. No one is allowed to say one thing at one time and the opposite of it at another time. 48. Assessee resiled from the earlier stand because tax advantage was not available under the capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own by the apex court in the case of Anarkali Sarabhai. In our opinion, the act of repurchase tantamounts to transfer which brings transaction within the sweep of section 2(47) of the Act. As such, we uphold the impugned order on this count. 52. In the result, appeal of the assessee stands dismissed. Per V. Dongzathang, President -I have carefully purused the order of my learned Brother. The assessee in this case is a political party registered as a National Party with the Election Commission of India. The application of the provisions of section 13A of the Income-tax Act, 1961 is not disputed. The main issues before the Tribunal are in regard to the question whether the publication of journals/ magazines etc. by the assessee constitute a business and whether the loss can be treated a business loss. The second question is in regard to capital gains assessed by the Assessing Officer in regard to investment in Canstar. The basic facts and the arguments of the parties have been fully recorded and discussed by my learned Brother. I am, however, not persuaded to agree with the conclusion arrived at by him. The assessee, as stated above, is a recognised National Party. The objective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objective of which was not for making profit. Its memorandum does not enable it to carry on the business. Admittedly it suffered huge losses on account of publication work from its inception. The mere fact that publications were not distributed free would not be sufficient to establish that there is a profit motive. Mere charging of subscription fee would not change the character of the publication for which reliance was placed in the case of Webster, Pearson. My learned Brother also examined the Resolution passed by the management and also examined the set up of the publication department and the nature of the publication which was registered as newspaper. However, it was his view that these facts by themselves could not establish the fact that the activity was undertaken with profit motive. It was further noted that the assessee was not making any attempt to comply with the provisions of Section 44AB of the Act. It is also pointed out that by not including business income for exemption under section 13A the legislature in its wisdom did not sanction the carrying on of business by political parties. It was further pointed out by him that the assessee did not reflect the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular activity is run on a business line, the same cannot be rejected as non-business merely because the ultimate objective is not for earning profit. Earning of profit need not be an end in itself. The ultimate objective can be achieved by doing certain ancillary activities generating own source of income to meet the financial requirements. The ultimate objective is too remote and therefore, cannot be used to judge the nature of the business. In this case also, one should not confuse the ultimate objective and the immediate objective. Since the immediate objective is to have more subscribers and at the same time derive income from the sale of publications, the assessee fixed a reduced price for the publications. Such practice is prevalent not only in trading but in other Newspapers also where invitation price is fixed at much below the market price so as to attract more subscribers and customers. In such a case, it cannot be said that the activity of publication is not a business activity.Lotof emphasis has been laid on profit motive and the loss incurred by the assessee right from the beginning. In this regard, there are number of authorities to support the view that actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on department is in the nature of business and the loss incurred by it is to be treated as business loss. Coming now to the next issue regarding taxability of the maturity value of Canstar as capital gains, it is seen that the issue has not been examined in the right perspective. The decision has been based mainly on the scheme and the claim made by the assessee at the initial stages. It is, therefore, necessary to examine the nature of the Canstar Scheme, 1990 floated by Canara Bank through Canbank Mutual Fund. The Scheme offers two types of units namely CG. Canstar and 80L Canstar. Under both the schemes, interest not less than 12.5% accrued each year on both the Canstars. The income so declared, however, was not disbursed but ploughed back for investment purpose. In the case of 80L Canstar holder, a Certificate was given to claim tax deduction at the time of filing of the income tax return. However, in the case of CG. Canstar holders, such Certificate was not granted as the payment was to be made at the termination or at the time of repurchase of the Canstar. The only difference between the two Schemes is that in the case of 80L Canstar, the interest income is declared every yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f cannot override the provisions of Income-tax Act and therefore, the assessment has to be made in the light of the provisions of the IT Act and not on the basis of the Scheme put forward by the Canbank Mutual Fund. It is for the Assessing Officer to decide and assess the income in accordance with law. Since the above accretion is in the nature of revenue receipt, it cannot be assessed as capital gains and has to be assessed as income from other sources as the assessee is not doing this investment as its business. Lots of emphasis has been laid on the options exercised by the assessee at the time of investment and even in the original return filed by it. This aspect in my view is irrelevant as the assessment is to be made by the Assessing Officer in accordance with law. The assessee cannot be punished and assessed for its ignorance. It is the duty of the Assessing Officer, to apply the correct law and assess the tax which is due. Just because the assessee claims the exemption, it cannot be allowed unless it is permissible in law. Similarly, if the assessee makes a wrong claim then it will not be binding if that is not in accordance with law. Therefore, the options exercised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (2) of section 80CCB and the capital value of such units shall be deemed to be the capital gains arising to the assessee in the previous year in which such repurchase takes place or the plan referred to in that section is terminated and shall be taxed accordingly. Explanation-For the purposes of this sub-section, "capital value of such units" means any amount invested by the assessee in the units referred to in sub-section(2) of Section 80CCB." From the above difference between the repurchase price of the units referred in sub-section (2) of Section 80CCB and the capital value of such units is deemed to be the capital gains arising to the assessee in the previous year in which such repurchase takes place etc. The deeming provisions of Section 80CCB are applicable to only assessees being an individual or a Hindu undivided family. Therefore, the provisions of Section 80CCB are not applicable to the case of the assessee. In such a case, the interest received by the assessee cannot be assessed under any other head than "income from other sources" as the said section deals with the residuary head of income and sweeps in all such taxable income, profits and gains as fall out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, but the stand taken in respect of the capital gains as also the claim on account of business loss was not accepted as these were found to be beyond the ken of section 13A. The Assessing Officer brought to tax the capital gains of Rs. 31,69,231 and also rejected the business loss claimed completing assessment on an income of Rs. 31,69,231. 4. Coming to the first point of difference the assessee claimed before the Assessing Officer that it was engaged in a business activity inasmuch as it was publishing certain journals, which were sold to subscribers directly or through party outlets. The submission in fact was that this represented a concerted business activity and direct and indirect expenditure relating thereto was allowable as deduction from the sale proceeds of such journals etc. It was noted by the Assessing Officer that the assessee had claimed direct expenditure as also indirect expenditure as deductions being attributable to the purported business activity of publication and sale. It was noticed by the Assessing Officer that the expenditure claimed by the assessee was much more than the sale proceeds and, therefore, the resultant claim on account of loss. 5. In respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 531, Deonarayan Prasad Bhadani v. Bank of Baroda Ltd. [1957] 27 Comp. Cas. 223 (Bom.) and Delhi Stock Exchange Association Ltd. v. CIT [1997] 225 ITR 235(7)(SC). 8. In the light of the aforesaid facts, the Assessing Officer held that the party's constitution did not allow it to do any activity other than what was necessary to achieve the goals prescribed in the said constitution. According to him "business" was not a part of the activity prescribed in the constitution of the party and nor did any case law support the assessee's stand. According to the Assessing Officer the party carried on an activity which was beyond the powers given to it by its document of incorporation and which was consequentially void ab initio. In the final analysis, the Assessing Officer rejected the claim of the appellant on account of publication and sale of its journals and literature as a business proposition. He, however, held that the expenses were incurred for carrying on political activities and the receipts from the sale of publications could be considered as voluntary contributions. The Assessing Officer in fact observed that the publications sold comprised political literature of the party and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the overall strategy of a Party to come to power by publication and distribution of its Journals and publication and other such efforts approved by R.P. Act, Model Code of Conduct under the overall spirit of the Constitution of India that political party spreads its message to the electorate. Thus, the political parties have to undertake a number of exercises to achieve their objective by coming to power and then to implement its ideology. Publication of literature as already stated is a means to an end and not a separate and independent end in itself resulting in earning of income for incurring loss by carrying on business activity. In the case of Bharat Development (P.) Ltd., it has been held that to regard an activity as business, there must be cause of dealings continue or contemplated to be continued with a profit motive and not for support or pleasure. Obviously, activities of political party are not motivated by desire to earn profit. In the case of IRC v. Marine Steam Turbine Co. Ltd. [1920] IKB 192, it has been held that business was an active occupation continuously carried on. It means, some real substantive and systematic course of activity or conduct with a set p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was that section 13A did not place any bar on carrying on of a business by a political party and although exemption under the said section was not available it was nowhere laid down that a political party could not carry on business. According to the learned counsel for the appellant earning of profit was not a sine qua non and all that had to be seen was that the activity must be continuous, systematic and organised. An unintended activity, according to the learned counsel, could also turn out to be a business activity, which may be without any profit motive. To support the aforesaid arguments, reliance was placed on the following judgments: (i) Narain Swadeshi Weaving Mills' case; (ii) Mazagaon Dock Ltd's case; (iii) P. Krishna Menon's case; (iv) Distributors (Baroda)(P.) Ltd's case; and (v) Ram Kripal Tripathi's case. 12. In concluding it was urged by the learned counsel for the appellant that the loss at best be described as negative income and further there was a separate and independent publication department in which an organized and continuous activity was being carried on and the publications were sold at a price. It was also sought to be emphasized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asmuch as in order to be business there must be a semblance of trade. A reference was made to the judgment of the Hon'ble Supreme Court in the case of Indian Chamber of Commerce. The learned standing counsel also relied on a Departmental Circular dated19-10-2000, according to which provisions of section 44AB read with section 271B were held not to be applicable. 16. It was further submitted on behalf of the Revenue that profit making must be the end to which the activity concerned was directed and that the predominant object of the activity must be the making of profit. The plea, in other words, was that where an activity was not pervaded by profit making but was carried on primarily for serving a political party it would not be correct to describe it as an activity for profit. It was pointed out that the memorandum of the party was silent on this aspect and further there was no express provision that the party will undertake publication for earning profit. It was submitted that the surrounding circumstances clearly indicated that the publishing activity of the assessee was not propelled by a profit motive. 17. The learned Vice President, who passed the initial order confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a political party there was neither profit motive nor possibility of distribution of income; (xi) Section 13A contained a special provision relating to the income of a political party and as per the mandate of this section it was sine qua non to avail the requisite benefit that the eligible political party must fulfil the requisite conditions contained in the section; (xii) That under the said section any income of a political party chargeable under the heads "Income from house property", "Income from other sources" or "any income by way of voluntary contributions" was exempt from the rigour of Income-tax and it implied that the legislature in its wisdom did not confer benefit of section 13A in relation to business income the reason probably being that political parties were supposed to carry on political activities and not business activities. 18. By a further detailed discussion with reference to facts of each of the cases cited before the bench the learned Vice President took the view that those pressed forth on behalf of the assessee were not applicable whereas certain others supported the Revenue's view-point. It was held that a "profit motive" was an essential requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price for the publication and such practice was prevalent not only in trading, but in other newspapers as well where the invitation price was fixed at a figure below the market price so as to attract more subscribers and customers. Under these circumstances it could not be said that the activity of publication was not a business activity; (viii) Much emphasis had been laid by the Revenue on profit motive and the loss incurred by the assessee right from the beginning whereas there were number of authorities to support the view that actual profit was not necessary for the activity to be in the nature of business; (ix) The publication division carried on business in publishing magazines and journals on a regular basis and it was in fact a continuous, systematic and organized activity and although there was no immediate profit the publications were capable of producing such profit and, therefore, the current loss incurred by the assessee during the assessment year under consideration should not stand in the way in treating the activity as in the nature of business; (x) That section 13A itself contemplated the total income of a political party from various sources and it could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad to the conclusion that a political party could not engage itself in business. Taking us to section 13A the learned counsel submitted that there was no specific prohibition for carrying on business in the said section and if that would have been the intention of the legislature then the wording of the section itself would have been quite different. The learned counsel referred to a situation where there were continued losses for years together in an activity which was in the nature of business or akin thereto and a view could not be taken that till the losses were converted into gains it would be treated as a non-business activity. 22. The further submissions of the learned counsel were that separate accounts had been maintained for the publication department and the various publications were not only registered with the Registrar of Newspapers, but with all other Government authorities as was required in the case of newspapers. It was also submitted that the National Executive was the highest authority within the party and the various activities pertaining to the publication department had been set out by the document by means of which the party was constituted/came into exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business was being carried on or not. It was submitted by the learned standing counsel that there was no resolution by the National Council of the party to support "business of printing" and every political party was to adhere to its constitution in a strict manner. According to him it was inconceivable that a political party would venture into business although there was no provision in any law debarring a political party from carrying on business. Referring to section 13A it was pointed out that only three sources of income had been contemplated for exemption and referring to the CBDT Circular set out at pages 17 18 of the order of the learned Vice President, it was the submission that provisions of section 44AB had not been made applicable to a political party and this by itself was an indicator that a political party could not engage in business. 25. By referring to the assessee's own facts the learned standing counsel further submitted that over a period of 12 years expenditure to the tune of Rs. 4 to 5 crores had been incurred in the publication department and compared to this the income was negligible. According to him intention to make profit was a necessary requisite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be held that a business was being carried on and in the assessee's case being that of a political party the dominant purpose was politics and nothing else. According to him even a collection of Rs. 100 per person would not make it a business. 29. Coming to the decisions relied upon by the assessee's counsel the learned standing counsel referred at length to each of these and during the numerous hearings before the Tribunal he referred to relevant portions thereof contending that none of these advanced the assessee's case for having the publication department being treated as a business activity. It was also sought to be emphasized that business, profession and vocation were not the same and these were not inter-changeable. The further plea of the learned standing counsel was that before arriving at a decision whether a business was being carried on in any case one had to see the facts and surrounding circumstances. With reference to the aforesaid arguments the learned standing counsel referred to the case of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) at 545 and the case of Tuticorin Alkali Chemicals Fertilizers Ltd. v. CIT [1997] 227 ITR 172(8)(SC). A reference was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, would not be applicable. This may appear to be a plausible argument, but one would like to further deliberate on the matter before saying anything one way or the other. Let us first go to the definition of the term "business" in section 2(13) of the Income-tax Act, 1961, as follows:- "'business' includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;" 34. Although not specifically brought to our notice by either party as to what is the definition of "business" in Sales-tax laws, we while perusing the decision of the Madras High Court in Sri Thirumagal Mills Ltd.'s case notice that the definition reads as follows: "Any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, adventure or concern is carried on which a motive to make gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern;" [underlined by us] The words beginning with whether and ending with concern are not part of the Income-tax definition of business, but the rest is identical. 35. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, did not amount to "transfer of property" within the meaning of section 2(xxiv) and, therefore, did not amount to "gift" as determined in section 2(xii). However, the High Court held in favour of the Revenue. On appeal to the Supreme Court: Held , reversing the decision of the High Court, that the Tribunal was right in holding that the release by the assessee who was one of the partners in the firm, of his rights in the assets of the firm for a consideration of Rs. 3,00,000 when the market value of the assets of the firm in proportion to his share was in excess thereof, did not amount to a gift within the meaning of the Gift-tax Act." 37. The observations of Their Lordships, which are a guide to us in the present appeal, are as follows: "The words and expressions defined in one statute as judicially interpreted do not afford a guide to the construction of the same words or expressions in another statute unless both the statutes are pari materia legislations or it is specifically provided in one statute to give the same meaning to the words as defined in another statute. The aim and object of the two legislations, namely, the Gift Tax Act and the Estate duty Act, are not si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "business" connotes some real, substantial and systematic or organized course of activity or conduct with a set purpose and a profit motive but which in fact may not arise or be earned. After all business cannot include activities, which are gratis to one party i.e., to the buyer and the seller should continue to show losses for years altogether. An activity to be treated as "business" should have a semblance of trade, an attribute of commercial activity and an expectation to earn income over a reasonable period. 44. In the present case, a chart has been filed before us by the assessee pertaining to the assessment years 1986-87 to 1998-99 [Annexure "A"] which shows that for a good period of 13 years the assessee has been carrying on the activity of publication and although it may be a systematic and organized activity the profit motive is absent. The total sales are to the tune of Rs. 37,22,568 for these years and the cost of publications is shown at Rs. 4,37,08,043. Which prudent businessman would do such a business. In case these facts and figures are taken to an entity whose name ended with the words "(P) Ltd." or "Limited" i.e., a joint stock company, then probably such entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n bench have set out in their separate orders relevant facts of the case, but to summarise these the Canara Bank floated through Can Star Mutual Fund the Canstar Scheme, 1990 which offered two types of units, namely, CG Canstar and 80-L Canstar. Under both the schemes interest not less than 12.5 per cent accrued each year, but there was no disbursal as the income so declared was ploughed back for investment purposes. In the case of 80-L Canstar holders a certificate was given for purposes of filing the Income-tax return, but in the case of CG Canstar holders, such a certificate was not given as the payment was to be made on the termination or at the time of re-purchase of the Canstar. In other words, the only difference between the two schemes was that in the case of 80-L Canstar the interest income was declared every year whereas in the case of CG Canstar the payment was made at the time of the repurchase. 49. On the aforesaid facts the issue was whether the interest income, which accrued to the CG Canstar holders, but postponed for payment became an accretion to the capital value of the investment for purposes of capital gains or whether the same was a revenue receipt distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Bond in which interest was payable monthly @ 12.25 per cent per annum or at the option of the investor 13 per cent per annum on a yearly basis. Another category was the IDBI Deemed Discount Bond in which investment could be made for 5 to 25 years with the provision that the investor will have the option to redeem such a bond before the maturity period of March 16th of each year and in case this was done then the investor would be paid the capital amount along with the interest on maturity of the bond. It was noted as a fact by the Hon'ble President that the interest, which accrued to the investor was the yield on the capital invested and the same had not been treated as appreciation of the capital result in capital gains. 52. According to the Hon'ble President, there was no appreciation in the value of the amount invested and it was only the yield on the investment, which was given to the investor in the form of interest and the same could not be treated as capital appreciation for the purpose of capital gains. It was the further observation that capital remained the capital and the yield there from was to be treated as a revenue receipt whether drawn monthly, annually or af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed in accordance with the method of accounting regularly employed by the assessee or in the absence of any such method on accrual basis and in the final analysis, it was held that the interest earned by the assessee on the redemption/repurchase of Canstar had to be assessed as "income from other sources". 57. In order to support the aforesaid view the Hon'ble President referred to the provisions of section 45(6) read with section 80-CCB(2) as also the explanation to the earlier section. It was thereafter concluded that the difference between the repurchase price of the units referred to in sub-section(2) of section 80-CCB and the capital value of such units was deemed to be the capital gains arising to the assessee in the previous year in which such repurchase took place, but the said deeming provision was applicable to only those assessees, who were individuals or HUFs and in the case of the present assessee it was a different status altogether. In concluding the Hon'ble President directed the Assessing Officer to assess the income in question under the head "income from other sources". 58. The learned counsel for the appellant, at the outset, relied on the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of NAV; (iv) That redemption/repurchase tantamounted to extinguishment of a right attracting capital gains; (v) The assessee had opted for the capital gains scheme as opposed to the 80-L scheme and it could not now be contended that the surplus arising there from should be taxed under the head "income from other sources"; (vi) The investment in the scheme and the subsequent repurchase did not represent two assets, but only one. In other words, one could not split up the investment and the repurchase; (vii) The various heads of income under the Income-tax Act were mutually exclusive and if a particular receipt fell under section 45 then it could not be covered under any other head; and (viii) That the amount received by the assessee at Rs. 17.40p per unit as against the face value/investment amount of Rs. 10 per unit represented the "full value of consideration". The term "asset" included a right and the redemption of Canstar represented extinguishment of such right giving rise to capital gains. 61. The other detailed arguments of the learned standing counsel were primarily those tendered before the division bench and the learned standing counsel highlighted various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of discharge of a fixed deposit receipt. It was the further submission that since the assessee was getting back its own money, there was no "transfer" involved. According to him, transfer to a third party would have no doubt attracted the relevant provisions of law, but what the assessee had done was to take back its own investment, which cannot be equated with investment in shares or debentures as was the plea on behalf of the Revenue. 64. The learned counsel also referred to provisions of section 45(6) as also section 80-CCB contending that vis-a-vis the latter the amount was to be treated as income from other sources and provisions of section 45 otherwise were not attracted. 65. On the assumption that the investment in Canstar was a capital asset and the repurchase amounted to a transfer, then the value of the consideration would be Rs. 17.40p per unit as against which the assessee's cost was Rs. 10 plus what was ploughed back from year to year and the total of this also came to Rs. 17.40p. The plea, in other words, was that in case the accretion every year was treated as an improvement to the asset and which was allowed as a deduction, then Rs. 17.40p would be squared u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that the said doctrine should be applied to the facts of the assessee's case. 67. We have considered the rival submissions and have also perused the material on record to which our attention was invited by the parties. The decisions cited at the bar have also been taken into account. 68. At the outset, we may observe that the point with which we are dealing may be a virgin one having no precedent since no direct authority was cited by the parties and the decisions relied upon were with reference to capital gains on a "transfer" taking place the items being preference shares, debentures etc. Therefore, most of the decisions may not be strictly applicable and one may only seek some guidance on broader legal issues. 69. Both the parties are agreed that section 45 would apply only when three conditions are fulfilled i.e., (i) there must be a capital asset in existence; (ii) there must be a transfer; and (iii) Such transfer must result in a surplus. It is also agreed upon between the parties that the investment in Canstar is a capital asset, but that is about all since the stand of the assessee is that there is no transfer on repurchase/withdrawal and on the assumption that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration when it came out of the scheme since the accretion of Rs. 7.40 per unit was received along with Rs. 10 per unit invested in the said year. This factual findings is not challenged by the Revenue. 74. The learned Vice President relied on Vania Silk Mills (P.) Ltd.'s case to opine that on repurchase of units by Canstar from the assessee there was a "transfer", but it must be emphasized considering the features of the scheme that what the assessee held was a unit/certificate with Canstar on which interest accrued over the years till withdrawal. What it received back is the principal plus interest, which can be equated to a FDR with a bank. In our opinion, no "rights" got extinguished as held by the learned Vice President. 75. Similarly reliance on the case of Anarkali Sarabhai is not apt as that pertains to redemption of preference shares which carry with them certain rights and privileges. Although subscribing to a preference share entails a sum of money which entitles an assessee to some specified percentage of dividend which may be equated with the yearly interest on the Canstar, but the similarity ends here. As already stated it is the extinguishment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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