TMI Blog2009 (8) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... J. - This appeal is filed against the order of the Income Tax Appellate Tribunal dated 26.09.2008 made in ITA No.1374 of 2008. The appeal was admitted on the following substantial question of law: "Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal is right in law in confirming the assessment of a sum of Rs.2,74,12,447/- as income?" The appellant Ambika Cotton Mills Private Limited, originally incorporated on 06.10.1988 and later changed to Ambika Cotton Mills Limited on 06.09.1994. There were three group of promoters, viz., P.V.Chandran (the appellant herein), P.K.Ganeshwar, and M.Rathnaswamy. The appellant had 19% share holding in the company while the group of P.K.Ganeshwar and M.Rathnaswamy had 38% share holding. The business of the company was that of operating spinning mills. As of 2005, the company had the bank liability to the tune of approximately Rs.140.00 crores. In the said circumstances, the company proposed to increase the share capital. After negotiations with Unit Trust of India Investment Advisory Services, the appellant allotted to them 8,75,000 equity shares of the face value of Rs.10 each and at a premium of Rs.175/- p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by rejecting the claim of the appellant that the receipt is capital in nature. The appellant filed an appeal before the Commissioner of Income Tax contesting the assessment of the said sum and also a sum of Rs.17,50,000/- which was disallowed rejecting the claim of the appellant that the sum was expended on professional services. The assessment was confirmed by the Commissioner of Income Tax (Appeals). The appellant carried the matter before the Income Tax Appellate Tribunal, which by reason of the order impugned held that the income received was liable to be taxed. The correctness of the same is canvassed in this appeal. 3. Mr.Ramachandran, learned senior counsel for the appellant contended that the Tribunal has committed a serious error in not considering various judgments placed before it at the time of argument and the written submissions placed before it. The assessing authority, in paragraph 5 of the assessment order, has observed that the appellant had not undertaken any activity in the course of business and hence, the amount could not be assessed as income from business, but should be assessed under the head 'other sources'. This finding of the assessing authority cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 33 ITR 786; 6. Kanpur Tannery Ltd. v. CIT , 34 ITR 863; 7. Ramnarain Sons (Pr.) Ltd. v. CIT, Bombay , (1961) 41 ITR 534; 8. Nalinikant v. Ambalal Mody v. S.A.L. Narayan Row, Commissioner of Income Tax, Bombay City I , (1961) 41 ITR 428; 9. Seth Champalal Ramswarup, Brewar v. CIT , 52 ITR 201 10. CIT v. Canara Bank Ltd ., 63 ITR 328. 11. CIT v. Elphinstone Dye Works (P) Ltd., 82 ITR 634. 12. Dolores Hay McClelland v. Commissioner of Taxation of the Commonwealth of Australia , (1971) 1 WLR 191 : 82 ITR 272; 13. CIT v. Elphinstone Dye Works (P) Ltd., 82 ITR 634; 14. CIT v. Scindia Workshop Ltd., 119 ITR 526; 15. CIT v. Ramalakshmi Reddy , 131 ITR 415. 16. CIT v. Bokaro Steel Ltd., 236 ITR 315; 17. Oberoi Hotel Pvt. Ltd. v. CIT , 236 ITR 903; 18. CIT v. T.I. M.Sales Ltd., 259 ITR 116; 19. CIT v. D.P.Sandu Bros ., 273 ITR 1 20. CIT v. Wardekar , 283 ITR 432; 21. CIT v. Industrial Credit and Development Syndicate Ltd ., 285 ITR 310. 22. Addl. CIT v. Rama Leasing Co. P. Ltd., (2008) 20 SOT 505. 5. Relying on these decisions, the senior counsel contended that the transaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Contribution Assessment Act, 1936-1963, contending that the profit arose from the sale of property acquired for the purpose of profit making by sale or alternatively from the carrying out of a profit making scheme. Allowing the appeal, the Privy Council held that the tax payer acquired her share in the land through the bounty of the testator and not for the purpose of profit making by sale; that a single transaction would only produce assessable income rather than a capital accretion if it was an 'undertaking or scheme' which exhibited features giving it a character of a business deal, but that the sale of part of the land in order buy out her brother's share was not such an undertaking or scheme and was therefore not caught by section 26(a) of the Act; and that the profit was not income in the realisation of capital. 10. On the other hand, Mr. J. Nareshkumar, learned standing counsel appearing for the respondent contended that in view of section 56 of the Income Tax Act, 1961, income of every kind, which is not to be excluded from the total income under the Income Tax Act shall be chargeable to income tax under the head, 'income from other sources' if it is not charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Navinchandra Mafatlal v. CIT, (1954) 26 ITR 758 : "What, then, is the ordinary, natural and grammatical meaning of the word income? According to the dictionary it means a thing that comes in. (see Oxford Dictionary, Volume V, page 162 ; Stroud, Volume II, pages 14-16 ). In the United States of America and in Australia both of which also are English speaking countries the word income is understood in a wide sense so as to include a capital gain. Reference may be made to Eisner v. Macomber [1919] 252 US 189 ; Merchants Loan and Trust Co. v. Smietanka [1920] 255 US 509 and United States of America v. Stewart [1940] 311 US 60 and Resch v. Federal Commissioner of Taxation [1943] 66 CLR 198. In each of these cases a very wide meaning was ascribed to the word income as its natural meaning. The relevant observations of the learned judges deciding those cases which have been quoted in the judgment of Tendolkar J., quite clearly indicate that such wide meaning was put upon the word income not because of any particular legislative practice either in the United States or in the Commonwealth of Australia but because such was the normal concept and connotation of the ordinary English word i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the amounts received by the assessee were liable to tax. 19. It is thus clear that the term income is a word of the widest amplitude connoting as it does that which comes in emphasising thereby the point at which, or the person by whom the amount is received. If the amount so received is not an amount which is excluded from the ambit of income. The Act does not provide that the sum received by the assessee pursuant to an agreement to sell the shares does not constitute income. Even casual and non recurring receipt beyond the specified limit are expressly regarded as income. 20. In this case the appellant has entered into Escrow agreement for sale of the shares of divesting promoters at an agreed price, which is based on certain calculation. In order to see that the shares are being sold at the agreed price, the assessee put in certain efforts by way of marketing and placement of the company shares to the institutional fund through M/s. Polar Securities Growth Fund, Bangalore for which the appellant has paid a sum of Rs.30 lakhs as commission. The appellant had contact with M/s.CLSA India Limited, the broker and had arranged for the delivery slips of the shares to the bro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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