TMI Blog1996 (8) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... " An additional question, as reproduced below, was also referred by the Tribunal for the assessment year 1968-69 to the court in deference to this court's order dated August 6, 1980, in D. B. Income-tax Reference Case No. 55 of 1979 : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the contract. of the assessee-company with Dhartidhan (P.) Ltd., Bombay, for granting exhibition rights of Maratha Mandir at Bombay belonging to the assessee was real and genuine and income arising therefrom do not belong to the assessee-company ? " The Tribunal has referred the above questions to this court, vide its combined order dated October 28, 1983, on the basis of the following facts as found by it for the assessment years involved. The assessee is a private limited company incorporated under the Companies Act, 1956. It is engaged in the business of exhibition of cinematograph films at its theatres known as "Golcha Theatre, Delhi" and "Marathas Mandir, Bombay", the former being a proprietary concern and the latter a lease-hold property. On an application by its creditors, the assessee-company was wound up by this court, vide ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by them in the assessee's cinemas at Bombay and Delhi in exchange for fixed weekly rental. The profit and loss in exhibiting the films was to be enjoyed or borne by the two concerns named above. The assessee had nothing to do with the ultimate profits or loss incurred on the exhibition of the films in the theatre. The management of the said cinema halls was, of course, to remain the responsibility of the appellant. The cinema at Bombay was let out on a weekly rent of Rs. 13,000 by agreement dated April, 1963. For some time Golcha cinema, Delhi, was let out for Rs. 11,000 from April 1, 1964, to April 23, 1964, to Madans, Bombay and then on weekly rental of Rs. 9,500 to Dhartidhan (P.) Ltd. It has been admitted by the learned Appellate Assistant Commissioner that the aforesaid system of appointing contractors for a particular period of time for a particular film on fixed weekly rental is quite common in the cinema trade. The case of the authorities below is that the contracts between the appellant company and the aforesaid two concerns were not genuine. The Income-tax Officer points out that the two contractors were closely connected with Shri M. C. Golcha and Shri H. C. Golcha, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aragraph 12 of its order, as aforementioned, the Tribunal recorded its findings in the following manner : "We have carefully examined the rival submissions. It is common ground that Dhartidhan Pvt. Ltd. have their individual existence and that they are having income from various sources, including the income from the contract taken for exhibiting the film in the cinemas of the assessee company. They have executed the contracts in accordance with the agreement entered into. They have earned the income and have utilised it for their own benefit. The official liquidator has scrutinized their arrangement and he did not regard that as being collusive or fake or sham or even against the interest of the assessee-company. It is the Department which is alleging that the income of the two contractors from the exhibition of the films in cinemas of the assessee-company belonged to the assessee-company. When the Department makes such a positive averment, it is apparently for the Department to substantiate or prove its averment. The case of benamiship cannot be made out merely on the basis of certain inferences and presumptions. There must be some positive evidence to show that it is the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. Past record also showed that these films were always booked by the assessee-company itself. 4. From the assessee's own books of account it was proved that the assessee-company had been booking pictures and dealing with the distributors in a manner suggestive of complete non-existence of its so called contractor. 5. At Golcha cinema, Delhi, the picture 'Sanjh-Savera' was booked by the assessee-company and it was the assessee which had made an advance of Rs. 60,000 to Pandav Pictures, who were the distributors of this picture. 6. Agreement for release of the picture 'Rajkumar' was entered into by the assessee-company on making an advance of Rs. 1,10,000. If Madans were genuine contractors this advance of Rs. 1,10,000 should have been made by Madans and not by the assessee. 7. The picture 'Pyar Kiya To Darna Kya' was run against the wishes of Pandav Pictures at Golcha Cinema, Delhi, beyond the 4th week and it was the assessee-company which had been dealing with Pandav Pictures as there was no account of Dhartidhan in the books of Pandav Pictures qua their pictures run at Golcha Cinema, Delhi. Then, it was the assessee company which had made advances of Rs. 30,000 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal further held that the case of benamiship could not be made out merely on the basis of certain inferences and presumptions and there must be some positive evidence to show that the income of the contractors was in fact the income of the assessee. It has observed that as there was nothing on the record to prove that there was evidence in the present case on the basis of which it could be held that the transactions were benami. In arriving at this conclusion, in our view, the Tribunal took a wrong approach. The Tribunal was wrong in taking the view that in such cases the Department has to bring some positive evidence. On the basis of primary facts proved on record, the Tribunal should have arrived at a finding whether the transactions were genuine or not. In this view of the matter, the Tribunal has committed an error in taking a wrong approach of the case and in holding that the Department must prove by positive evidence the case of benamiship and ignored the primary facts proved on record. In other words, the Tribunal committed an error of law in taking the view that such burden could only be discharged by the Department by leading positive evidence only. It was observed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion of the Tribunal that the income was retained with Dhartidhan and Madans cannot be considered sufficient for the purpose of finding out whether it was a device to divert the income by the assessee-company and whether the transaction was genuine or not. It was to be examined on the basis of the evidence on record. It was not necessary for the Department to bring positive evidence. The evidence could be from primary facts which were collected by the Department and placed on record. The evidence could be oral or documentary and it could be by way of inference from the queries made by the Income-tax Officer from the assessee-company. If on the basis of the reply given by the assessee-company an inference was drawn by the Income-tax Officer, it would be discharging of the obligation of the Department. In view of the observations of this court as mentioned above, the view of the Appellate Tribunal is not correct. The order of the Tribunal is liable to be quashed. The matter should be heard de novo by taking into consideration various circumstances mentioned by this court and the basic facts which were taken into consideration by the Income-tax Officer. Consequently, we quash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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