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TMI Blog2007 (10) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... al gains of Rs.19,74,489/- are not to be taken into account while computing the profits liable to be taxed u/s.115JA of the I.T. Act 1961 and that the decision of the Hon'ble Bombay High Court in CIT v. Veekaylal Investment Co. P. Ltd. case [ 2001] 249 ITR 597 was not applicable?" 2. In so far as question "C", our attention is invited to the judgment of the Supreme Court in Apollo Tyres Ltd. vs. Commissioner of Income-tax (2002) 255 ITR 273. The question framed therein which is similar to the Question "C" has been answered in favour of the assessee and against the Revenue. In the light of that the question of law as framed would not arise. 3. We may now consider questions "A" and "B", as they are inter-related. The case of the Revenue is that the assessee let out three properties to M/s. Elite Mercantile Pvt. Ltd., Saumya Finance & Leasing Pvt. Ltd. and Bloom Trading Pvt. Ltd. Those tenants further sub-let the same property to M/s. Reliance Industries Ltd., for a higher consideration. Based on this it is submitted, that the intermediate tenant was in fact the alter ego of Reliance Industries Ltd. If the Corporate veil is lifted, it is nothing but another face of Reliance. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of the Agreement. Dealing with the contention urged on behalf of the Revenue that the contract between its tenant and Reliance is sham. It is submitted that the finding of the A.O. was reversed in Appeal by the Commissioner (Appeals). The Revenue did not challenge the same before the Tribunal. Once that was not an issue before the Tribunal it is now not open to the Revenue to raise the questions that the contract was a sham. Questions "A" and "B" do not arise from the order. 8. We have given our anxious consideration to the matter. Considerable time was spent as to whether there has been a departure from the ratio decadenti in McDowell and Co. Ltd. vs. Commercial Tax Officer, [1985] 154 ITR 148 (SC) in the case of Union of India and Anr. vs. Azadi Bachao Andolan & Anr [2003] 263 ITR 706 (SC). We may address ourselves to that issue. The judgment in McDowell & Co., (Supra) was of a Constitution Bench. The majority judgment in so far as the issue of colourable exercise and tax planning observed as under (page 171):- "Tax planning may be legitimate provided it is within the framework of the law. Colourable devices cannot be part of tax planning and it is wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity." (emphasis supplied). 12. The Supreme Court has thus explained as to how it is understood the law laid down in McDowell (1985) 154 ITR 148 (SC). There is, therefore, no departure from the law laid down in McDowell & Co. Ltd., (1985) 154 ITR 148 (SC). in Azadi Bachao Andolan. [2003] 263 ITR 706. (s.c). In our opinion, therefore, the ratio of McDowell (1985) 154 ITR 148 as understood by the Supreme Court in Azadi Bachao Andolan, [2003] 263 ITR 706 (SC). is the law, considering that that is how the Supreme Court understood the ratio decedandi of the Judgment in McDowell & Co. Ltd. (1985) 154 ITR 148 In our opinion, therefore, it is not possible to contend that there is departure on the principles laid down in McDowell & Co. Ltd. (1985) 154 ITR 148. 13. That bring us to the facts of the case. It is no doubt true that the Assessing Officer had recorded a finding in para.5.4 that the share holding of the Assessee Company as well as the intermediary company is held by another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enant by the Assessee was a colourable device. In these circumstances considering Section 23, what is assessable to tax is the income received from the tenant falling either under sub-section (a) or (b) of Section 23(1). The compensation received by the tenant would be taxable in the hands of the tenant. Appeal would lie on substantial question of law from the order of the Tribunal in respect of the matters which were taken up before it and/or on a pure question of law based on undisputed material on record. That is not the case over here. 17. We may also note that Section 23 before its amendment by Finance Act, 2001 with effect from 1st April, 2001 read as under:- "23(1) For the purposes of Section 22, the annual value of any property shall be deemed to be- (a) the sum for which the property might reasonably be expected to let from year to year; (b) where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable." 18. This was necessitated on account of the Supreme Court interpreting Section 23(1) as it then stood and to bring within its ambit those cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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