TMI Blog2000 (12) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... out under several contracts. The aforesaid contracts were with Hindustan Steelworks Construction Co. Ltd. (in short, "HSCL"). These related to the construction of steel plant, complex at Bokaro during the period from 1967 to 1984. In respect of these contracts, disputes arose between the assessee and HSCL in the matter of settlement of claims for payment claimed to be due to it. The payments related to extra or additional items of work executed by the assessee, which was accepted by HSCL in respect of two items, that is, in relation to contract No. LI/CE/6 and GM/386/75, dated June 27, 1967, and April 25, 1975, respectively. The contracts were completed in 1973 and 1978, respectively. Similarly, contract No. GM/469/78 and contract No. CM/486/79 were closed in May. 1981. HSCL refused permission to the assessee to remove its constructional machinery and equipment from the work sites and also issued notices to the effect that the additional work would be carried out by HSCL at the risk and expense of the assessee. A substantial part of the claims of the assessee related to four contracts referred to above. There was exchange of correspondence between the parties in regard to the sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 357 in respect of all the contracts. These were subjected to certain conditions. The assessee debited in its books in the account of MEL litigation expenses of Rs. 67,886 in respect of various actionable claims. In 1992, a sum of Rs. 71,89,770 was determined to be payable to MEL in respect of actionable claims. MEL in turn accounted for the aforesaid receipt in its books of account for the period ended on March 31, 1992. The amount was accounted for as capital receipt arising from the realization of alleged actionable claims as transferred. During the assessment of the assessee for the relevant assessment year, the Assessing Officer brought an amount of Rs. 71.89 lakhs (approximately) as income chargeable under section 28(iv) of the Act. The matter was carried in appeal before the Commissioner of Income-tax (Appeals) (in short, "the CIT(A)"), by the assessee. The Commissioner of Income-tax (Appeals) confirmed the aforesaid addition. The matter was carried further in appeal before the Tribunal. Referring to the factual aspects, as highlighted above, the Tribunal came to the conclusion that it is permissible to lift the veil of corporate entity if it is used for tax evasion or to cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst HSCL (Hindustan Steelworks Construction Ltd.) in respect of its four completed/closed civil works construction contracts with it, to BPL (Bhagat Papers Ltd.) under the instrument of transfer dated December 14, 1981, and the subsequent transfers thereof by BPL to DRBBL (D.R. Bhagat Brothers Ltd.) under the instrument of transfer dated October 12, 1982, and the DRBBL to its subsidiary company, MEL (Maya Enterprises Ltd.) by way of an absolute gift under an instrument of transfer dated April 30, 1987, were not genuine transactions? (3) Whether, on the facts and in the circumstances of the case borne on the record, the Appellate Tribunal is right in law in holding that the transactions of the transfer by the assessee-company of its actionable claims against HSCL (Hindustan Steelworks Construction Ltd.) in respect of its four completed/closed civil works construction contracts with it, to BPL (Bhagat Papers Ltd.) under the instrument of transfer dated December 14, 1981, and the subsequent transfers thereof by the concerned transferees, ending with the transfer of the said actionable claims by DRBBL (D.R. Bhagat Brothers Ltd.) to its subsidiary company, MEL (Maya Enterprises Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity to find out the true nature of the transactions. In fact, the questions do not have any relevance with any question of law and, therefore, this appeal is thoroughly misconceived. Section 260A(l) of the Act reads as follows: "An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law." It is to be noted that what can be the subject-matter of examination in an appeal under section 260A of the Act is a substantial question of law. It was observed by the apex court in Sir Chunilal V. Mehta and Sons Ltd. v. Century Spinning and Manufacturing Co. Ltd., AIR 1962 SC 1314, that the proper test for determining whether a question of law raised in the case is substantial would be whether it is of general public importance or whether it directly or substantially affects the rights of the parties and if so, whether it is either an open question in the sense that it is not finally settled by the Supreme Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. In Sree Meenakshi Mills Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue has not been settled by pronouncement of the Supreme Court or the Privy Council or by the Federal Court, or (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view. These aspects were highlighted by us (Arijit Pasayat, Chief Justice) in Mahavir Woollen Mills v. CIT [2000] 245 ITR 297 (Delhi). Section 260A is analogous to the provisions of section 100 of the Civil Procedure Code, 1908 (in short, "the Code"). Under section 100 of the Code, a second appeal can be entertained only when a substantial question of law is involved, Such substantial question of law is required to be formulated in the memorandum of appeal. If the High Court is satisfied that a substantial question of law is involved in the case, then the court is also required to formulate that question. The appeal is required to be heard only on the question so formulated. An amendment was introduced in this regard in the Code in the year 1976, which has brought about a change in the context of substantial nature. In Kondiba Dagadu Kadam v. Savitribai Sopan Gujar, AIR 1999 SC 2213, the apex court dealt with scope and ambit of the provision and inter alia observed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to the Tribunal was whether the Department is entitled to probe into the genuineness of the transaction or whether it has been effectively done or not. Therefore, the Tribunal did not go into the validity of the transaction, specifically when it was stipulated as per clause 5(a) of the General Condition; of the contract that the contractor is not supposed to assign contract or any part thereof or any benefit thereon or thereunder without the written consent of the employer. Breach of terms of the contract of the clause and its effect on the transaction was not the issue before the Tribunal as it was not considered by the Revenue authorities. In the aforesaid background, the Tribunal confined itself to the issue whether, on the facts, the Department has been able to prove that the series of transactions as resorted to constitute colourable device to evade tax. The following conclusions on facts were recorded by the Tribunal: (1) The assessee transferred an alleged actionable claim for a sum of Rs. 50,000 when as per its own version it was of far greater value than that for what it was transferred. While the money suit was filed some time in 1988, the assessee's claim before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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