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TMI Blog2002 (1) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------- 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 claim of the assessee in respect of capital gains and business loss was not allowed. It was found to be beyond the ken of section 13A. The alleged capital gains of Rs. 31,69,231 was made exigible to tax. Loss on publication all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 publication activity was carried out with proper resolution of the National Executive. 10. Relying on the prescription of section 13A Shri Sathe submitted that the mandate of the section does not put any bar, on carrying on the business by a po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 act done by him was the carrying on of a business, profession or vocation. If any business, profession or vocation, in fact, produced an income, that was taxable income, and was nonetheless so because it was carried on without the motive of produci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised 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, as per the agreed terms with the CANSTAR, along with the original amount of Rs. 10 per unit which was initially invested. 14. Adverting to our attention on the prescription of section 45, Shri Sathe submitted that to attract capital gain there has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 devaluation of Indian rupee. There was breach of contract in relation to the purchase of dollars. Dispute was settled and amount was paid by bank to the assessee for the breach of contract. Hon'ble High Court held that the amount paid by the bank was not de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Venkatasubbiah Reddiar [1996] 221 ITR 18(5)(Mad.); (4) Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234(SC). 20. It was further contended that just because some amount is charged it does not make the transaction as business. In order to be business it must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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, the Hon'ble Supreme Court has held as under:- "As an antithesis, take a funeral home or an animal welfare organisation or a super bazar run for general public utility by an institution which charges large sums and makes huge profits. Indubitably they render services of general public utility. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 "the exercise of a profession, vocation or occupation" by an assessee which has to be established and not the mere use of the faculties or energies of an assessee which may result in an income." 27. Further, to buttress this proposition reliance was placed on the decision of Hon'ble Madras High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions 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 precedents relied upon. It is important to ascertain at the outset that what was the intent and motive of the assessee behind the publication activity? Whether, it was to earn profit or to propagate the policies of the party, or something else.. The intent and motive of the assessee must be translated before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stered 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 possibility of distribution of income among the members as such political parties were exonerated from the applicability of sections 44AB and 271B. It is laid down in the said Circular that the income of political parties from voluntary contributions cannot be said to be income from business so as to attract section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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, therefore, proposed to provide that expenditure incurred by a taxpayer for purposes of advertisement in any souvenir, brochure and the like published by a political party will not be allowed as a deduction in computing the taxable profits." 39. As per the mandate of this section, to avail the benefit of section 13A, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 court held that business refers to real, substantial, organised cause of activity for earning of profits. As such 'profit motive' is essential requisite for conducting business. 44. Business, without profit is not business, any more than a pickle is candy. Two essential requirements for an activity to be considered as busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 scheme. This fact came to its knowledge after the completion of assessment. The doctrine of CAVEAT EMPTOR, prescribes that let purchaser should take care. If purchaser makes a bad choice, he cannot hold others responsible for the same. To justify the claim, assessee resorted to some arguments and relied on some precedents to buttr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the assessee is enshrined in its Constitution as follows: "Article II: Objective-The party is pledged to build up India as a strong and prosperous nation, which is modern, progressive and enlighted in outlook and which proudly draws inspiration from India's ancient culture and values and thus is able to emerge as great world power pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cription 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 business income at the time of furnishing of the return. Having regard to this and also the various decisions cited before us, he came to the conclusion that the profit motive, which is a necessary requisite for carrying on the business was not present in this case and, therefore, the CIT(Appeals) took a correct view in the matter and his order ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. 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 profit is not necessary for the activity to be in the nature of business. The learned counsel himself heavily relied on the decision in the case of Bharat Development (P.) Ltd., which in turn relied on the decision in the case of Sole Trustee, Loka Shikshana Trust wherein the Hon'ble Supreme Court itself held that whether a person carries on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 year whereas in the case of CG. Canstar, the payment is made at the time of repurchase. The question to be decided by the Assessing Officer is whether by postponement of payment of the annual income, the interest income which accrued to the CG. Canstar holders automatically become appreciation of the capital value for the purpose of capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 assessee in the light of the scheme has to be ignored and the correct law has to be applied as per the provisions of the Income-tax Act. Another point raised is that the assessee has not declared the annual income which accrued to it from year to year. In this regard, it is seen that the assessee is following cash system and the income has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 outside the specific heads. The Assessing Officer is accordingly directed to assess the said income under the head "income from other sources". REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 We, the Members of the Tribunal-Delhi Bench-C New Delhi, have differed in the order to be passed in IT Appeal No. 1184/Del./99. The questions on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst 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 response to the stand of the assessee the Assessing Officer was of the view that the aforesaid activity could not be treated as earning of income from business and profession, more so, when political parties were not formed with the object of making/earning profits. The aforesaid stand of the Revenue was contested by the assessee and by means of a written communication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 it was noted as a fact that whereas the sale proceeds were to the tune of Rs. 3.37 lakhs, the expenditure claimed was to the tune of Rs. 70 lakhs. 9. On further appeal the Commissioner of Income-tax(Appeals) confirmed the view taken by the Assessing Officer, observing in the process, as under:- "Coming to the appellant's claim of loss on account of publication and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 purpose. This observation was made by Supreme Court in the case of Narain Swadeshi Weaving Mills'. In the case of Upper India Chamber of Commerce v. CIT [1947] 15 ITR 263 it had been held by Allahabad High Court that in common parlance business connotes activities in which a person is engaged with a set purpose and the frequency or the repetition of the activity, though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity 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 that the memorandum of the party did not forbid the carrying on of the business activity and further no restriction had been placed by the Representation of the Peoples Act or under the Income-tax Act on the carrying on of business activity by a political party. The plea in fact was that a political party could raise funds by various means and carrying on of business was one such mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the view taken by the Commissioner of Income-tax (Appeals) on the following main grounds:- (i) The assessee was a political party not formed with the object of making profit and its memorandum did not enable it to carry on business; (ii) Since the inception the party suffered huge losses on account of the publication work which in turn was carried on with the help of other income earned; (iii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 requisite for conducting business and, therefore, there was no merit in the contention of the assessee's counsel that profit motive was not a necessary requisite for carrying on of a business. 19. The Hon'ble President did not subscribe to the view taken by the learned Vice President and by means of a separate dissenting order he accepted the arguments advanced on behalf of the assessee to ultimately conclude th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 be held that a political party could not have a source of income over and above the exempted incomes specified in section 13A; (xi) There was no restrictive clause in section 13A as there was in section 11 of the Income-tax Act, 1961 since under the latter profits and gains of business would be exempt only if the business was incidental to the attainment of the various objectives, but there was no such special conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 existence. It was also emphasized by the learned counsel that the various publications were sold for a price and it was in the nature of a regular, organized and systematic activity. He in fact went on to state that there may be no intention for an assessee to carry on business or a motive to earn any income, but in a given situation, the income arising from an activity could still be treated as income from a vocation or a business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for carrying on a business and the facts of the present case clearly showed that there was no such intention since no proper accounts had been kept of the publication department and the expenditure had been claimed on a rough estimate. It was further submitted on behalf of the Revenue that the assessee did not seek advertisements and under these conditions there could never be a profit when the selling rates of the publications we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant 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 made to at page 21 in the case of K.S. Venkatasubbiah Reddiar ; and in the case of CIT v. K. Ramakrishnan [1993] 202 ITR 997 at page 1002 (Ker.) with reference to the question of a precedent. 30. In reply the learned counsel for the appellant at the outset stated that most of the decisions relied upon on behalf of the Revenue were in respect of the Sales-tax law and these would, therefore, not hold good/be applicable to Income-tax disputes. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. This decision in Sri Thirumagal Mills Ltd.'s case was confirmed by the Hon'ble Supreme Court in Thirumagal Mills Ltd./Simpson & Co. Ltd.'s case. Even in some of the other judgments pertaining to the Sales-tax laws of other States we found an identical definition under consideration. 36. During the course of the present hearing, we had asked both the parties to check up and let us know whether there was any judgment of a Hon'ble High Court or of theHon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 similar." 38. In the light of the aforesaid it is for the court to cull out the ratio of any decision rendered by a superior court or a court of co-ordinate jurisdiction and decide as to whether it would apply to the facts of a case considering its salient features. 39. Much was argued by the parties as to what happens when an entity or an organization or a body carries on an activity, which is not authorized by the document, which brought that entity, organizat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 entity would not have continued beyond a few years unless the intention or motive was different. 45. It is further seen for the year under reference that whereas the receipts from sale of publications are accurate the expenditure has been claimed on estimated/ad hoc basis say some percentage of the total expenditure. We cannot appreciate receipts in thousands in some of the assessment years of the chart say 1986-87 to 1990-91 and expenditure claimed in lakhs many times ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven 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 and separate from the capital invested by the assessee. The assessee in its return of income had shown long term capital gains of Rs. 31,69,231 which came to be assessed as such without any discussion and on further appeal the Commissioner of Income-tax (Appeals) upheld the view taken by the Assessing Officer observing that these were not exempt from tax under section 13-A of the Income-tax Act since the said section only provided exemption in respect of income from house p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 after a few years. 53. The Hon'ble President was further of the view that the scheme could not over ride the provisions of the Income-tax Act and assessment, therefore, had to be made in the light of the provisions of the Income-tax Act and not on the basis of the scheme framed by the Canbank Mutual Fund. Further the accretion even in the CG Canstar Scheme represented a revenue receipt and the same could not be assessed as capital gains, but it had to be assessed as income from other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection. 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 Hon'ble President, which had held that the surplus arising on the Canstar was in the nature of "income from other sources". His main submissions can be highlighted as follows:- (i) Money was handed over to the Trustees of the scheme to look after it; (ii) Both the CG Scheme and the 80-L Scheme had the same benefits attached to them; (iii) 12.5 per cent was the minimum assured income under both the schemes; (iv) The assessee received a sum of Rs. 17.40p per unit as against a face value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase; (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 observations in the order of the learned Vice President to ultimately contend that the surplus be taxed under the head capital gains and which was also the head under which the assessee had returned the same. The learned counsel further contended that the decisions relied upon by the assessee's counsel in the present hearing were distinguishable and he in turn referred to/relied on the following:- (i) Anarkali Sarabhai v. CIT [1982] 138 ITR 437(11)(Guj.); (ii) Anarkali Sarabhai v. CIT [1997] 224 ITR 422(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 up resulting in no income at all. The counsel, however, did not dispute the submission on behalf of the Revenue that it was the case of a single transaction and not two of them. 66. The learned counsel vehemently relied on the order of the Hon'ble President at this stage for the submission that any mutual fund scheme could not over ride the provisions of the Income-tax Act as any receipt or income had to be taxed under the relevant head and in case the assessee had erroneously shown something in the return due to whatever rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer" 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 there is a transfer then there is no surplus. 70. In considering the aforesaid arguments, we opine that in the present case, there was no "transfer" within the meaning of section 45 as all that happened was that the assessee withdrew from the scheme and received a sum of Rs. 17.40p per unit as against the face value of Rs. 10 per unit. It was its own money invested in Canstar, which came back with a surplus which represented the accumulated minimum annual income at 12.5 per cent per annum. It is not the case of the Revenue that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 other rights attached to preference shares, which give rise to an event which is exigible to tax. 76. The judgment of the Hon'ble Supreme Court, in our opinion, is not applicable to the present case as would also be our view in respect of the numerous other decisions cited on behalf of the Revenue. During the present hearing, no material has been brought on record by the Revenue, which would show that any right was attached to a Canstar holder like that of a preference share or a debenture holder except to receive back the principal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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