TMI Blog2014 (8) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that:- There is no requirement that for an application to be entertained by the Commission, the applicant must declare a new source of income from that disclosed earlier to the Department. Whether case was pending - Held that:- It is very clear that the application for settlement has not been filed by STAR Ltd. for the assessment year 2000-01, as it is an issue pending before this court in an appeal from the order of the Tribunal. So far as the other parties are concerned, there is nothing in law which prohibits them from filing an application for settlement. Even respondent No. 2-STAR Ltd. can file an application for settlement in respect of the assessment year other than the assessment year for which the appeal is pending before this court. - all applications even pending before the Tribunal or in the appeal/revision before the authorities under the Act could be entertained by the Commission on the date when the respondents filed their application before the Commission on March 5, 2007. Application in respect of TDS - Held that:- At this prima facie stage before the Commission it appears that the application made by the respondents is not for the purpose of settling i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter into contract with companies for hiring of transponders. The cable operators in India for a prescribed fee charged by SIPL are allowed to download the programmes and distribute the same to the final consumers from whom subscriptions are collected. (iii) In view of the above business model, the source of revenue of the Star group are from : (a) Advertisement revenue : the advertisement revenue is collected by SIPL from the advertisers in India. SIPL, thereafter, retains a part of revenue as its commission and remits the balance to the STAR Ltd., i.e., respondent No. 2. In turn, respondent No. 2-STAR Ltd. makes payment to the channel companies for the purchase of airtime from channel companies and claim the same as expenses in its account ; and (b) Subscription revenue : the subscription revenue is collected by the cable operators from the final customers as viewers and after retaining their commission, the balance is remitted to SIPL. A part of the amount so received is retained by SIPL and the balance is remitted to respondents Nos. 3 and 4 which are companies operating outside India who retain a substantial part of the subscription revenue and rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that their income is not chargeable to tax in India. However, the Assessing Officer did not accept the contention of the channel companies and in view of the order dated January 18, 2006, of the Tribunal passed in the case of respondent No. 2 held that the income of the channel companies was chargeable to tax in India. The channel companies have carried the matter in appeal and the appeals are awaiting disposal. (ix) Respondents Nos. 3 and 4 were filing their returns of income, claiming their income to be nil. This was on the basis that that the subscription income received by them is not taxable in view of the Double Taxation Avoidance Agreement (DTAA) between India and the U. A. E. The Assessing Officer held that respondents Nos. 3 and 4 are not entitled to the benefit of the DTAA and, therefore, brought the subscription income to tax. Being aggrieved, respondents Nos. 3 and 4 have filed appeals and the appeals are still awaiting disposal. (x) Respondent No. 5 was an intermediary company engaged in acquiring contents from Indian and foreign sources to provide them to the channel companies. This was also brought to tax by the Assessing Officer for the first time du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed to be proceeded with under the amended provisions of section 245D(2A) of the Act, subject to payment of additional taxes along with interest thereon on the income disclosed in such application on or before July 31, 2007. (xiv) On August 9, 2007, in response to the query from the Commission, the petitioner indicated the position with regard to the payment of taxes and interest in respect of each of respondents Nos. 2 to 11. This was indicated on the basis of the additional income disclosed in their application for settlement to the Commission. (xv) On August 24, 2007, the petitioner submitted his report to the Commission under the amended section 245D(2B) of the Act. In his report, the petitioner submitted : (a) the Commission cannot determine the income taxable in the hands of respondent No. 2, i.e., STAR Ltd. as it cannot rule on its liability to deduct tax at source of section 245C(1) of the Act as held by the Calcutta High Court in Shaw Wallace and Co. Ltd. v. Settlement Commission [2003] 263 ITR 285 (Cal); (b) this very issue, viz., whether STAR Ltd. was required to deduct tax at source before making the payment to the channel companies is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income-tax Act in the said Star group of cases as to the validity ; or, otherwise ; of the applications filed in all those cases and shall pass appropriate orders in respect of these applications. (b) The date and place for sitting of the Special Bench will be August 29, 2007, at the Income-tax Settlement Commission, Additional Bench, Mumbai, in continuation of the hearing fixed as per the original order constituting the Special Bench or on such other date and place to which the matters may be adjourned. (xviii) On September 10, 2007, the application for settlement filed by respondents Nos. 2 to 11 was heard by the Commission. At the hearing, oral as well as written submissions were made on behalf of the petitioner as well as the respondents. At the conclusion of the hearing, the applicants made an additional offer of ₹ 150 crores in the spirit of settlement. In the above view, the Commission was of the view that the applications may not be treated as invalid. (xix) On September 10, 2007, the applicants filed a hand written application before the Commission wherein it was stated that they are offering a sum of ₹ 150 crores in addition to the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The additional income offered by respondents Nos. 2 to 11 cumulatively aggregated to ₹ 1,398,37 crores for the assessment years 2000-01 to 2006-07. Mr. Pinto, learned counsel appearing for the petitioner, in support of the petition, submits as under : (a) The impugned order dated September 11, 2007, of the Commission allowing the applications to be proceeded with after the applicants, i.e., respondents Nos. 2 to 11 had revised its income by further ₹ 150 crores before the Commission. It is on the revision of income that it was held that the applicants have made a true and full disclosure for the purposes of it being declared valid under section 245D(2C) of the Act. This it is submitted is in the face of the decision of the apex court in Ajmera Housing Corporation v. CIT [2010] 326 ITR 642 (SC) wherein it has been held that true and full disclosures of undisclosed income and the manner in which the said income has been derived are pre-requisite for a valid application before the Settlement Commission and held that the settlement proceedings under Chapter XIX-A of the Act does not contemplate revision of income as disclosed in the application. It was held that any r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no new source of income has been declared by the respondents in their applications before the Settlement Commission. The petitioners were always aware of the two streams of revenue/income available to the respondent, namely, advertisement and subscription. In view of the above, as no new source of income has been disclosed, the application for settlement before the Commission is not maintainable ; and (f) The application for settlement by respondents Nos. 2 to 11 seeking settlement was on the issue of allowing of expenditure in the absence of tax being deducted at source. This issue has been decided by the Tribunal for the assessment year 2000-01 and an appeal in respect thereof was pending for final disposal before this court. The decision of this court rendered in the above appeal would be binding upon the petitioner and respondent No. 1 even in respect of other years as held by the Supreme Court in Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC). Therefore, on the above ground also, the application for settlement filed by respondents Nos. 2 to 11 ought not to have been entertained by the Commission. On the all aforesaid grounds, it is submitted that the order dated Septe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondents, there has been no revision to the annexure to the statement of facts. Besides, in Ajmera's case, additional income of ₹ 11.41 crores was disclosed by Ajmera on its own account and not as an evidence of good faith as in this case on a suggestion by the Commission. The additional offer of ₹ 150 crores was only made to buy peace and avoid protracted litigation. Therefore, the decision of the apex court in Ajmera Housing Corporation (supra) is inapplicable to the present facts. (iv) Full and true disclosure of income would require the petitioner to only disclose all primary facts. In this case, the respondents have disclosed all primary facts particularly the remittances made and also the two sources of income, namely-advertisement revenue and subscription revenue. Even today after seven years after filing of the petition, the petitioner has not alleged or established that any primary fact has not been disclosed by respondents Nos. 2 to 11 in their application for settlement. In support of the aforesaid submissions, reliance was placed upon the decision of this court in the matter of Centurion Bank of Punjab Ltd. v. ITSC [2007] 290 ITR 555 (Bom) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was an additional amount over and above the amount which represented the true and full disclosure for the purposes of making an application under section 245C of the Act. (viii) The requirement for making an application for settlement before the Commission is not conditional upon the application declaring a new source of income. Attention was drawn to section 245C of the Act wherein the pre-condition is to a make a full and true disclosure of income not disclosed earlier before the Assessing Officer. It is, therefore, submitted that the petitioner's contention that there must be a new source of income declared in the application for settlement is not sustainable ; and (ix) The decisions to be rendered in the future by the Bombay High Court in the appeal filed by STAR Ltd. for the assessment year 2000-01 would only govern it and only for that year and would not stop the Commission from exercising jurisdiction. Moreover, the decision to be rendered by this court in respect of the assessment year 2000-01 can have no application in respect of other respondents or for years other than the assessment year 2000-01 in case of respondent No. 2. Before dealing with the rival cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been passed in accordance with the statutory provisions of the Act and is not ex facie unsustainable in law. Keeping in mind the above boundaries prescribed by the apex court, we shall now consider the objections of the petitioner to the impugned order dated September 11, 2007, of the Commission. In this case, the primary objection of the petitioner as urged before us is that the application for settlement filed by the respondents does not meet the jurisdictional requirement of full and true disclosure of their income as required under section 245C of the Act. This, according to the petitioner, is a statutory jurisdictional pre-condition that has to be satisfied before the application can be entertained by the Commission. The failure on the part of the respondent to make full and true disclosure in its application is established, according to the petitioner, by the fact that an additional income of ₹ 150 crores was declared before the Commission on September 10, 2007, i.e., over and above, the income declared in their application dated March 5, 2007. This additional disclosure of income on the part of the respondent itself, without anything more is a tacit admission that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asmuch as it manifests that an assessee cannot be permitted to resile from his stand at any stage during the proceedings. Therefore, by revising the application, the applicant would be achieving something indirectly what he cannot otherwise achieve directly and in the process rendering the provision of sub-section (3) of section 245C of the Act otiose and meaningless. In our opinion, the scheme of the said Chapter is clear and admits of no ambiguity. The above observations of the apex court may at first blush seem to cover the petitioner's case completely. However, before the above observations being relied upon by the petitioner can be applied to the present facts, the following further observations of the apex court should be taken note of which read as under (page 659) : We are convinced that, in the instant case, the disclosure of ₹ 11.41 crores as additional undisclosed income in the revised annexure, filed on September 19, 1994, alone was sufficient to establish that the application made by the assessee on September 30, 1993, under section 245C(1) of the Act could not be entertained as it did not contain a 'true and full' disclosure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on its own account and unlike in this case, where the additional income of ₹ 150 crores was made only with a view to put an end to the dispute at the instance of the Commission. (v) CBDT Circular No. 742, dated May 2, 1996 (see [1996] 219 ITR (St.) 49), had provided that where India specific accounts were not maintained by the assessee, income should be computed at the rate of 10 per cent. of the gross receipts and the respondent declared before the Commission its income at approximately 27 per cent. of the gross receipts. (vi) In fairness to the Commission, it must be stated that the Commission appears to have made suggestion to the respondents to recompute income at the higher rate on the same receipts looking to the 30 per cent. rate applied by the Assessing Officer in the assessment order dated December 28, 2006, relating to respondent No. 2 for the assessment year 2004-05. This suggestion was made by the Commission and was accepted by the respondents on September 10, 2007, i.e., before the Supreme Court rendered its decision in Ajmera Housing Corporation (supra). Therefore, on application of the aforesaid rate, at the instance of the Commission, without altering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents when they filed their application on March 5, 2007. This additional income offered does not disclose any variance from the manner in which the additional income had been earned. This also lends credence to the respondents' submission that the same was made at the instance of the Commission as evidence of its bona fides. Therefore, at one stage in view of the above facts, we were contemplating setting aside the impugned order dated September 11, 2007, of the Commission to the extent it holds that on revision of income by ₹ 150 crores, there is full and true disclosure of income for purpose of section 245D(2C) of the Act and directing the Commission to consider the application for settlement, ignoring the additional offer of ₹ 150 crores for the purpose of section 245D(2C) of the Act. However, on further consideration taking into account the following facts : (i) In this case, the application for settlement was not made as a consequence of search proceedings as in the case of Ajmera Housing (supra) ; (ii) Application for settlement is still awaiting disposal since 2007 at the stage of admission before the Commission ; (iii) At the time when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the peculiar facts and circumstances of this case, particularly the additional disclosure of income of ₹ 150 crores made at the instance/suggestion of the Commission, with a view to end litigation at the earliest, that we do not interfere with the order dated September 11, 2007, at this stage. This finds support in the legal maxim actus curiae neminem gravabit, i.e., the act of court shall prejudice no man. However, we make it clear that at the stage of section 245D(4) of the Act, also the Commission would consider whether or not, the assessee's application for settlement as originally made did fully and truly disclose the additional income. This view is being taken by us in this case only in the context of the peculiar and special facts of this case as cumulatively pointed at herein above in paragraph 13. The petitioner has also raised various other objections with regard to the Commission having no jurisdiction to entertain the application which we shall now deal with as under : (a) One issue raised by the petitioner is that the Commission has no jurisdiction as there are no complex issues on facts arising in the application for settlement. The above issue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch 5, 2007, containing true and full disclosure of its income. In fact, if the Commission at the final hearing under section 245D(4) of the Act determines higher income, than that disclosed in the original application, the entire process will not be rendered bad only on account of failure to pay the tax along with the application as is subsequently determined by the Commission at the final hearing stage. Therefore, the requirement is only to pay the tax on the full and true disclosure of income made at the time of filing the application. Thus, the further amounts disclosed as income by way of goodwill measure or far any other reasons such as a particular expenditure being disallowed at the final hearing will not be hit by section 245C of the Act to make the entire exercise bad for failure to make a full and true disclosure of income unless of course a specific finding to that effect is arrived at by the Commission at the final hearing stage under section 245D(4) of the Act. (d) One more submission made on behalf of the petitioner was that the respondents' source of income, namely, advertisement and subscription was known to the Revenue at all times. Therefore, the applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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