TMI Blog1975 (7) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 17,16,369 by selling certain mining rights, buildings and other plants and machinery to those subsidiaries. The assessee did not disclose those transactions in the assessment year and accordingly they were not taken into consideration by the tax officer and from his assessment order dated March 29, 1962, the assessee filed an appeal on some other grounds with which we are not concerned. While that appeal was pending, the Commissioner of Income-tax caused a show-cause notice, dated September 6, 1962, under section 33B of the Act to be served on the assessee. Instead of appearing before the Commissioner and without making out any case whatsoever on the merits, the assessee wrote two letters dated September 26, 1963, and February 2, 1964, to the Commissioner, who, on February 24, 1964, passed an ex parte order under section 33B by cancelling the said assessment order and directing the tax officer to make a fresh assessment after serving the statutory notice on the assessee and giving the assessee an opportunity of being heard on these transactions. On appeal, the Tribunal set aside the said order of the Commissioner by its order dated August 2, 1967, in which the Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in I.T.A. No. 16788 of 1965-66, in which the present assessee was the appellant and its subject-matter was the order of the Appellate Assistant Commissioner dismissing the appeal filed by the assessee from the assessment order for the assessment year 1958-59. In the instant reference before us the assessment order for the year 1958-59, and the order of the Appellate Assistant Commissioner dismissing the said appeal filed by the assessee do not form part of the statement of the case and their copies are not included in the paper book. Now, the relevant portion of the earlier order dated April 22, 1967, is as follows : " Grounds Nos. 30 to 38.---These relate to the assessment of profit on transfer of mining rights and machinery to the subsidiary companies. The Income-tax Officer brought to assessment a sum of Rs. 4,21,023 as arising from the sale of mines and mining rights and Rs. 52,778 as profit on sale of plant and machinery to Kariatari Mica Mining Co. Ltd. The Income-tax Officer has dealt with these points in paragraphs 19 to 31 relating to the sale of plant and machinery. In reply to a query of the Income-tax Officer as to why the profit in question should not be assessed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the exigencies of change in the mining laws. There was also a circumstance that the transfer of the assets was to a 100% subsidiary of the assessee-company. As regards plant and machinery it was further stated that the agreement for sale was made on October 31, 1956, and the sale was completed on January 4, 1957. It was submitted that so far as the plant and machinery were concerned, possession was handed over even before the previous year and it could not be said that the sale took place this year. The transfer of assets to M/s. Kariatari Mica Mining Co. Ltd. was effected by the deed dated January 4, 1957. Clause (d), inter alia, provides that " the sale of the said immovable properties being the subject-matter of these presents shall be distinct and separate from the sale of the movable properties as aforesaid which are not the subject-matter of these presents shall be treated separately". Clause (e) provides " that all machinery, plant, implements and other movable properties, effects and things referred to above have already been delivered by the vendor-company to the purchaser-company and the title thereto is not intended to be passed by these presents or any recital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. did not amount to a venture in the nature of trade or a trading transaction and as such the sum of Rs. 4,21,023 was not assessable as business profit ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in any event no profit was earned by the assessee-company is a result of the said sale, and in directing accordingly the exclusion of Rs. 4,21,023 and Rs. 52,778 out of the assessee's total income ? " In the statement of the case in Income-tax Reference No. 153 of 1968 [Commissioner of Income-tax v. Chrestian Mica Industries [1977] 109 ITR 324 (Cal)] the assessment order for the assessment year 1958-59 and the order of the Appellate Assistant Commissioner were included and their copies were also printed in the paper book. But, as already stated, these two documents do not form part of the statement of case of the instant reference before us. It is well-settled that the principles relating to res judicata do not apply to the income-tax proceedings. Similarly, we cannot take into consideration the facts found by the tax officer in the assessment year 1958-59 inasmuch as the said order of the tax officer do not form part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of our High Court in the case of Commissioner of Income-tax v. A. K Das [1970] 77 ITR 31 (Cal). Hence, we are unable to express any opinion on this point raised by Mr. Roy and it will be decided by the Tribunal at the appropriate stage. By placing strong reliance on the observation of the Supreme Court in the case of Commissioner of Income-tax v. Calcutta Discount Co. Ltd. [1973] 91 ITR 8, 13 (SC) to the effect that an assessee is entitled to arrange his own affairs " to minimise his tax burden ", it has been contended by Mr. Roy that the assessee has done the same thing by selling its mining rights to the subsidiary companies. But this plea was not taken before the Tribunal, and that apart, there is no merit in this contention, for the case of the assessee before the Tribunal was that the transfers were made to evade the ceiling on mining areas fixed by the Mineral Concessions Development Rules, 1956, and not for reducing its tax burden. We will now take up the main contentions of Mr. Roy. His submission is that these 100 per cent. newly formed subsidiary companies cannot be treated as third parties, because the assessee has floated them and, therefore, sale to them is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, there is no merit in the contention of Mr. Roy that the circumstances under which the subsidiaries were brought into existence is the only factor which determines the character of these transactions. It has also been contended by him that we must accept the finding of the Tribunal, namely, that " the transfer of the mining rights was not in the course of adventure in the nature of trade or in the course of the trading transaction (having regard to the circumstances under which the formation of subsidiary companies had to be brought about) ", in view of the decisions of the Supreme Court in the cases of India Cements Ltd. v. Commissioner of Income-tax [1966] 60 ITR 52 (SC), Hooghly Trust (Private) Ltd. v. Commissioner of Income-tax [1969] 73 ITR 685 (SC), Karam Chand Thapar Bros. P. Ltd. v. Commissioner of Income-tax [1971] 80 ITR 167 (SC) , Commissioner of Income-tax v. Rajasthan Mines Ltd. [1970] 78 ITR 45 (SC), Commissioner of Income-tax v. Kamal Singh Rampuria [1970] 75 ITR 157 (SC) and Karnani Properties Ltd. v. Commissioner of Income-tax [1971] 82 ITR 547 (SC), inasmuch as the revenue has not questioned the above finding of the Tribunal as perverse. We are, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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