ITA No. 3 of 2005. Case: Asia Resorts Ltd. Vs Commissioner Income Tax (Central). Himachal Pradesh High Court
| Case Number | ITA No. 3 of 2005 |
| Judges | R.B. Misra and Surinder Singh, JJ. |
| Issue | Income Tax Act, 1961 - Sections 120, 129, 144A, 154, 154(1), 254, 254(1), 253, 253(1), 254(2), 254I, 256, 260A, 263, 263(1) and 494; Civil Procedure Code (CPC), 1908 - Sections 114 and 151 - Order 41, Rule 33 - Order 47, Rule 1; Constitution of India - Articles 32, 136, 137, 145 and 226; Supreme Court Rules, 1966 - Rule 1; Supreme Court Order -... |
| Judgement Date | September 07, 2011 |
| Court | Himachal Pradesh High Court |
Judgment:
R.B. Misra, J., (At Shimla)
1. The present appeal has been preferred under Section 260A of the Income Tax Act, 1961 (in short 'Income Tax Act') against the judgment and order dated 6.4.2004 of the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh ( in short 'ITAT') passed in Miscellaneous Application 91/Chandi/03 preferred in ITA No. 219/CHD/2002 pertaining to the assessment year 1997-98 thereby reviewing its earlier order.
2. The present appeal, in question, has been admitted for consideration on the following substantial questions of law:
(A) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in modifying its earlier order.
(B) Whether on the facts and in the circumstances of the case the findings of the Income Tax Appellate Tribunal in accepting the 'Miscellaneous Petition for rectification' of the department are wrong and perverse.
(C) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that there is a mistake apparent from the record committed in its earlier order and thus liable for rectification.
(D) Whether on the facts and in the circumstances of the case, the action of Income Tax Appellate Tribunal amounts to review of its earlier order passed after due deliberations to the past history, legal provisions, judicial pronouncements and due application of mind, and thus impermissible under the provisions of the Income Tax Act, 1961.
(E) Whether on the facts and in the circumstances of the case, once the ITAT had granted a relief vide order passed under Section 254(1) of the Income Tax Act, 1961 to the Appellant which he was entitled as per law, was it justified in imposing unlawful taxes on Appellant by way of rectification on the technical ground that it cannot grant such relief, when there is no dispute as such to the legality, genuineness and correctness of the tax treatment to the receipts under dispute.
(F) Whether on the facts and in the circumstances of the case the order of Income Tax Appellate Tribunal was self contradictory vis--vis paras 11, 17 and 16 thereof, justifying the alleged review / rectification.
3. In order to adjudicate the above substantial questions of law, it is necessary to give brief history of the case. The Appellant is running various Resorts at various places and is offering the occupation of the various huts / flats / suites to the public on 'time sharing basis' for different time period, against the payment of different quantum of charges, called fee, payable in lump-sum and once for all. Against such allotment of time sharing the Appellant retains the liability to provide the agreed type of accommodation and other services / facilities, as per the written agreement arrived at the time of allotment of such time sharing occupation for whole of the period of the scheme called lease period. During the period relevant to the assessment year under appeal the Appellant had received a total fee on account of sale of such time sharing periods of `1,27,81,072/- from 459 members, out of whom only 249 members had paid full amount of the time share amounting to `54,68,088/-. During the course of assessment proceedings the Assessing Officer (in short 'AO'), after referring to the assessment of another Assessee, namely, M/S. Sterling Resorts, carrying the same business like the Appellant, came to the conclusion that 45% of the total receipts were attributable to Appellant's liability to provide stay to the members and, therefore, was attributable to the fixed assets such as building and other infrastructure which the Appellant had permanently acquired and consequently considered that 45% part of the receipts as capital receipts liable to be adjusted against the cost of such permanent assets. The Appellant agreed to this conclusion of the 'AO' and consequently 45% of the receipts were considered as capital receipts and were adjusted against the building cost. The balance 55% was considered as revenue receipt, attributable to the Appellant's liability for whole of the period of lease i.e. for 99 years; and, therefore, only 1/99th part of 55% of the receipts was considered as revenue receipt for the assessment year under appeal.
4. The order for the assessment year 1997-98 was passed on 29.2.2000 (Annexure A-2), however, the Appellant was served with a notice (Annexure A-3) dated 18.3.2002 under Section 263 of the 'Income Tax Act' by the Commissioner of Income Tax (Central) (for short 'CIT') who after considering the objections of the Appellant vide its order dated 28.3.2000 (Annexure A-4) set aside the assessment order, treating the whole of the receipt taxable in the year when the membership fee was received, thereby treating the verdict of 'AO' erroneous and prejudicial to the interest of the revenue and giving direction to 'AO' to make it de novo. Being aggrieved, Appellant preferred an appeal i.e. ITA No. 219/Chandi/2002, which too was disposed of by 'ITAT' vide its order dated 11.3.2003 with directions and observations.
5. The Respondent / revenue, being aggrieved, filed an appeal before this Court, namely, ITA No. 40 of 2003 which is pending adjudication. The Respondent / CIT (Central) preferred a miscellaneous petition under Section 254(2) of 'Income Tax Act' before 'ITAT' for rectification of its earlier order dated 11.3.2003. The said application of Commissioner / revenue was allowed by 'ITAT' vide impugned order dated 6.4.2004, reviewing / rectifying its earlier order.
6. The 'CIT' in Para-3 of his notice dated 18.3.2002 / (Annexure A-3) has mentioned as below:-
Even otherwise the non-refundable fees received from the member is constituted of 2 parts - one is towards the free stay in the hotel and the other is for other facilities agreed to be provided. As regards the stay, the infrastructure is already in existence and on which the Assessee is claiming depreciation. The fee towards this, which of course is to be estimated and in this case has been estimated at 45% has accrued for good and against which there is no recurring liability. As regards the second part, which again is a revenue receipt but is fasten with a recurring liability the same can be regarded as belonging to the entire period.
7. The 'CIT' in its order dated 28.3.2002 / (Annexure A-4) discussed in brief about the treatment of 45% of the receipts treated by 'AO' to be of capital in nature and held the same to be of revenue in nature (as originally treated by Assessee in his return) but in addition thereto held that the same should be treated as taxable fully in the year of receipt. While concluding his order, the 'CIT' considered the whole receipt as taxable in the year of receipt and directed the 'AO' accordingly. As such, 'CIT' has not only travelled against his own notice rather contradicted his opinion as indicated in his notice regarding rest of 55% receipt which he in his notice agreed to be fastened with a recurring liability and pertaining to whole period of membership.
8. 'ITAT' in its order dated 11.3.2003 / (Annexure A-6) dealt with all the issues. The relevant extract is given as below:
(A) Regarding 45% share: ('AO' treated such share as capital receipt and reduced the same from 'Block of Assets' but 'CIT' treated it as revenue taxable wholly in the year of receipt).
(i) 'ITAT' has analyzed the issue in Paragraph-10 of its order and observed in Paragraph-11 as below: -"11. After having considered the rival submission and the facts and circumstances of the case and various decisions, we are of the opinion that so far as 'AO's reliance on the assessment order of M/S. Sterling Resorts for attributing 45% of the receipts towards fixed assets and considering the sum as of capital nature is concerned, the assessment order of M/S. Sterling Resorts is really silent on this point. We have no option but to accept the submission of Ld. Departmental Representative that the actions of 'AO' considering 45% of the receipts as of capital nature by relying on assessment order in case of M/S. Sterling Resorts was misplaced and had rendered the assessment order to that extent erroneous in nature. Further, this erroneousness having resulted in loss to the revenue, the assessment to that extent was erroneous so as to be prejudicial to the interest of the revenue. We, therefore, uphold the validity of order Under Section 263 to that extent, though subject to our further findings on the issue.
(Emphasis by Appellant)
(ii) In Paragraph-16 of its order, 'ITAT' further indicated in continuation to his observations made in Paragraph-11 (above). The contents of Paragraph-16 read as under:
16. Coming to the 45% part of the receipts, which has been considered by the Commissioner not only as revenue nature but also as income in the current year alone, we, so far as the revenue nature is concerned, have already upheld the order of Commissioner (Para 10), but so far as the period to which the receipts relate is concerned, we are, in view of the revenue's own stand in Assessee's own case for assessment year 1996-97 and the fact that there is no provision of law to support the Commissioner's stand that 45% of the receipts were relatable to 'stay part' of the agreement and Assessee has no recurring liability on that account nor such a presumption of the Commissioner is sustainable on facts because even if it is made relatable to the 'stay part' of the agreement then also the Assessee is bound to have recurring liability in future such as repair, maintenance, renovation, replacement and safety of the infrastructure for 99 years, are of the opinion that there is no justification for segregating the receipts being relatable and part of a composite agreement applicable to the whole of the period of lease and Assessee's liability being to fulfill the terms and conditions of the agreement throughout the period of lease, such an opinion of the Commissioner which is otherwise also...
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