Commissioner of Income Tax vs BADULIPUR TEA CO. LTD.

In the Calcutta High Court Y.R. Meena & Ashim, Kumar Banerjee, JJ.

BY THE COURT:

By this reference application u/s 256(2) of the Income Tax Act, 1961, the following question has been referred for our opinion :

"Whether, on the facts and in the circumstances of the case and on a correct interpretation of the sale agreement, the Tribunal was correct in law in maintaining the order of the Commissioner (Appeals) in deleting the addition of Rs. 32,00,000 and Rs. 50,000 made by the Income Tax Officer under the head ''business'' and ''other sources'' respectively?"

The assessee is a limited non-resident company. The assessment order for the assessment year 1981-82 was passed by the Income Tax Officer on 27-3-1986, estimating the business income of Rs. 32,00,000 against the return income shown at nil. The Income Tax Officer has also made addition of Rs. 50,000 on own estimate basis as income from other sources. The order was passed u/s 144 of the Income Tax Act, 1961. In appeal before the Commissioner (Appeals) the assessee has submitted that the assets and liability of the assessee-company had been taken over by the Indian company as per agreement and that agreement has been approved by the Reserve Bank of India on 30-4-1982, with effect from 1-1-1978.

As the approval of the Reserve Bank of India has not been given by the Reserve Bank of India in the relevant previous year, the Income Tax Officer did not accept the transfer effective on the basis of agreement and assessed the income from tea garden in the hands of the assessee.

Commissioner (Appeals) followed the decision of Tribunal in case of Jhanzie Tea Association and case of Chulst Tea Co. Ltd. and also considered the fact that income from the tea garden concern in the assessment year 1981-82 has already been assessed in the hands of transferee, i.e., Indian company. Therefore, he took the view that there is no justification to assess the same income in the hands of this assessee who is transferor.

At the outset learned counsel for the revenue brought to our notice the decision of this court in the case of Commissioner of Income Tax Vs. Jhanzie Tea Association, , wherein this court has considered that if some transfer is made on the basis of agreement by the non-resident company and subsequently that agreement has been approved by the Reserve Bank of India with retrospective effect, the transfer should be taken to have taken effect from the date of agreement and from that date the income from such tea garden, which was transferred, cannot be assessed in the hands of transferor.

We have considered the submission of the learned counsel for the parties in the case of Jhanzie Tea Association (supra) even the sale deed was not executed but there was an oral agreement providing for transfer of income from assets of the purchaser before execution of the sale deeds. This court has taken the view that though the sale deed was executed subsequently but with retrospective effect the income cannot be assessed in the hands of the transferor from the tea estate when both the parties agreed that the income from the property shall be taken as income of the transferee and both the parties have acted upon on the basis of that oral agreement.

Considering the submissions and the approval of the agreement by the Reserve Bank of India, in the instant case and also the fact that the income in the year under consideration from the tea estate has already been assessed in the hands of the transferee, i.e., Indian company, there is nothing wrong in the order of Tribunal deleting the addition of income made by the assessing officer. When the concurrent finding of fact of Commissioner (Appeals) as well as the Tribunal that transfer took place from the date of agreement we find no perversity in their finding. We concur with the view taken by both the authorities.

Considering the aforesaid facts, we answer the question in affirmative, i.e., in favour of the assessee against the revenue .

The reference application is accordingly disposed of.