TMI Blog2011 (3) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company could have easily waited for a reasonable period of time for watching the market and could also have invested a further amount of Rs.9 to 10 crore to revive the business of M/s. SKB is not acceptable. - It is not within the province of the Assessing Officer to ignore an otherwise genuine transaction and to brand it as a colourable one on the ground that it was the duty of the company to invest further amount or it should have waited for a reasonable period. - Decided in favor of assessee. Expenditure on exploring the possibility of the hotel business - revenue expenditure or capital expenditure - Section 35D - Held that:- in the Income-tax Act itself there is specific provision dealing with the aforesaid nature of the expenditure but none of the authorities below cared to look into the said aspect. - matter remanded back. - I.T.A. No.13/2001 - - - Dated:- 17-3-2011 - Hon ble Mr. Justice Bhaskar Bhattacharya Hon ble Justice Sambuddha Chakrabarti Petitioner: Mr. Shekher B. Saraf. Respondents: Mr. R. N. Bajoria. Bhaskar Bhattacharya, J.:- This appeal is at the instance of the Revenue against an order dated 27 th July, 2000 passed by the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h at the reduced price of Rs.48.79/- per share i.e. at the agreed consolidated price of Rs.23 lac. However, it was decided that in order to meet the requirements of working capital as well as the need for payment of outstanding creditors, the assessing-company would invest further fund to the extent of Rs.8.55 crore against which M/s. SKB was to issue 45000 new equity shares of Rs.100/- each at a premium of Rs.1,800/- per equity share. Thus, the total investment in acquiring 92145 shares of SKB made by the assessee stood as below: (I) Price of 47145 existing Shares . at the rate of 48.79 per share. Rs. 23,00,000/- Cost of stamp duty Rs. 11,500/- (II) Cost of 45,00 new shares shares at the rate of Rs.100/- plus premium of Rs.1,800/- each Rs. 8,55,00,000/- - - - - - - - - - - - - - Total: Rs. 8,78,11,500/- - - - - - - - - - - - - - - (c) The payments in these regards were made through account payee cheque. The above arrangement ultimately did not suit the Assessee Company and the Assessee Company could not run the business of M/s. SKB for various reasons, for instance, during the relevant period the Pepsi having introduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of time for watching the market and could also have invested a further amount of Rs.9 to 10 crore to revive the business of M/s. SKB. Consequently, the Assessing Officer observed that the entire transaction was of the nature of colourable one and the same should be considered as having been entered into with an intention of upsetting the long term capital gain of Rs.4,03,89,154/- which the assessee did actually earn during the relevant accounting period and thus, declined to allow the claim of the assessee towards short term capital loss under consideration. (g) Being dissatisfied, the assessee preferred an appeal and the Commissioner of Income-tax (Appeal) disposed of the appeal by holding that the assessee had acquired the share under consideration long time back in 1991 and as such, the Assessee Company was a party to overall decision taken by the Group regarding investment made in the shares of M/s. SKB in the year 1991 and later on its investment in the year 1995-96, and thus, the transaction should be treated to be genuine and not a colourable one and the loss arising to the Assessee Company should be treated as long term capital loss and he directed the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tentions of Mr. Saraf and submits that the subsequent decision of the Supreme Court in the case of Union of India vs. Ajadi Bacho Andolon (supra), having explained the real scope of the earlier decision in the case of M/s. McDowell Company Ltd. (supra), we should follow the decision in the case of Ajadi Bacho Andolon (supra). As regards the other question regarding consultancy fees paid by his client for the survey of establishing a hospital, Mr. Bajoria supported the reasons assigned by the Tribunal. 6. Therefore, the first question that arises for determination in this appeal is whether we should follow the decision of the Supreme Court in the case of McDowell Company Ltd. (supra) and ignore the subsequent decision of the Supreme Court explaining the said decision on the ground that the latter ones were delivered by a Bench consisting of two Judges. There is no dispute with the proposition of law that if there are conflict of opinions between the two Benches of the Supreme Court on a question of law, the one declared by the larger Bench would prevail over the one pronounced by the other Bench. But if a Bench consisting of a smaller number of judges interprets a decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gle Judges and Benches of the High Courts refuse to follow and accept the verdict and law laid down by coordinate and even larger Benches by citing minor difference in the facts as the ground for doing so. Therefore, it has become necessary to reiterate that disrespect to the constitutional ethos and breach of discipline have grave impact on the credibility of judicial institution and encourages chance litigation. It must be remembered that predictability and certainty is an important hallmark of judicial jurisprudence developed in this country in the last six decades and increase in the frequency of conflicting judgments of the superior judiciary will do incalculable harm to the system inasmuch as the courts at the grass roots will not be able to decide as to which of the judgments lay down the correct law and which one should be followed. 91. We may add that in our constitutional set-up every citizen is under a duty to abide by the Constitution and respect its ideals and institutions. Those who have been entrusted with the task of administering the system and operating various constituents of the State and who take oath to act in accordance with the Constitution and uphold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of revenue expenditure, it appears that the CIT (Appeals) without discussing the matter has simply relied upon decision of this Court in the case of Keshoram Industries Cotton Mills Ltd vs. CIT, reported in 196 ITR 845 and CIT vs. Graphite India, reported in 221 ITR 420 without considering the facts and arriving at the conclusion whether the said decision really applies to the facts of the present case. The Tribunal has also not gone in details and has adopted the view of the CIT (Appeals). 12. After hearing the learned counsel for the parties and after going through the materials on record we find that in the Income-tax Act itself there is specific provision dealing with the aforesaid nature of the expenditure but none of the authorities below cared to look into the said aspect. In that view of the matter, we set aside the order of the Tribunal below and direct the Assessing Officer to consider the matter in the context of the provisions of the Act including Section 35D of the Act after taking into account the basic materials for arriving at a just consideration. 13. We, therefore, partly allow the appeal by answering both the questions in the negative and remanding t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
