Novartis Ag Basle Vs. Additional Commissioner of Income-tax

Novartis Ag Basle vs Additional Commissioner of Income-tax

Disposition Appeal allowed Court Mumbai Decided Sep 19, 2006

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Citation: sooperkanoon.com/364667
Court: Mumbai High Court
Judge: H.L. Gokhale and ;J.P. Devadhar, JJ.
Decided On: Sep 19, 2006
Case Number: Income-tax Appeal No. 788 of 2004
Subject: Direct Taxation
Disposition: Appeal allowed

Case Summary

AI-generated summary - not the official court judgment text.

- Article 14: [R.M. Lodha, S.A. Bobde & S.B. Deshmukh, JJ] Retiral benefit - Classification between part time Lecturers and full time teachers Held, The part-time Lecturers form a class by themselves and the said classification between part time Lecturers and full-time Teachers for purpose of granting retrial bene...

Key legal issue: Direct Taxation
Outcome / disposition: Appeal allowed
Acts & sections: Income Tax Act, 1961 - Sections 48, 55, 55(2) and 234B

Parties & Advocates

Appellant / Petitioner

Novartis Ag Basle

Advocate J.D. Mistri and ;Damodhar, Advs., i/b., Kanga and Co.

Respondent

Additional Commissioner of Income-tax

Advocate Shiv Motariya, Adv.

Legal References

Acts: Income Tax Act, 1961 - Sections 48, 55, 55(2) and 234B
Reported In: (2007)209CTR(Bom)113; [2006]287ITR409(Bom)

Excerpt

- article 14: [r.m. lodha, s.a. bobde & s.b. deshmukh, jj] retiral benefit - classification between part time lecturers and full time teachers held, the part-time lecturers form a class by themselves and the said classification between part time lecturers and full-time teachers for purpose of granting retrial benefits cannot be said to be unconstitutional or bad in law -- consumer protection act, 1986 -- article 16; right to pension held, it is true that the pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer. however, the right of pension is always subject to the rules. it is not inherent in the employment. though pension is a payment for a past service rendered and it is a social welfare measure, but it is well settled that an employee is not entitled to pension de hors the rules. in the instant case the government resolution dated 21.7.1983 held that the said pension scheme is only applicable to the employees covered therein. a part time teacher, unfortunately, is not covered by the said scheme and, therefore, not entitled. retirement benefit; differentiation between full time teachers and part-time lecturers government resolution providing for retrial benefits to full-time teaching staff part-time lecturer were not entitled to said benefit held, it is true that the pension is neither a bounty nor a matter of grace depending upon the sweet will of the employer. however, the right of pension is always subject to the rules. it is not inherent in the employment. though pension is a payment for a past service rendered and it is a social welfare measure, but it is well settled that an employee is not entitled to pension de hors the rules. in the instant case the government resolution dated 21.7.1983 held that the said pension scheme is only applicable to the employees covered therein. a part time teacher, unfortunately, is not covered by the said scheme and, therefore, not entitled. .....claim is rejected only on the ground that section 48 was not available to the non-resident appellant.5. the appellant has, therefore, raised the following three questions in this appeal which involve substantial questions of law:(i) whether, on the facts and in the circumstances of the case the tribunal erred in holding that the assessee was not entitled to exercise the option under section 55(2)(b)(i) of the act to adopt the fair market value of shares as on april 1, 1981, as the cost of acquisition of such shares when computing the capital gain/loss arising on the transfer of the said shares?(ii) whether the tribunal erred in holding that the first proviso to section 48 of the act was charging section and therefore erred in holding that section 55(2)(b)(i) of the act was not available to the assessee being a non-resident?(iii) whether the tribunal erred in holding the levy of interest under section 234b of the act without appreciating that in cases where tax is deductible at source there is no liability to pay advance tax and hence there can be no liability to pay interest under section 234b which is leviable only in the cases of default of payment of advance tax?6. as far as questions nos. (i) and (ii) are concerned, we expect the tribunal to decide the liability of the appellant independent of section 48 of the income-tax act. similarly as far as the penal interest is concerned, the tribunal is expected to discuss as to how there was delay in not paying the advance tax in time and if so, whether penal interest could be charged on to the appellant. inasmuch as there is no appropriate discussion on both these aspects, we allow this appeal, set aside the order dated april 15, 2004 passed by the income-tax appellate tribunal, mumbai and revive the appeal to the file of the tribunal for determination on both these aspects.7. independent of what is stated above, we do not express any opinion on the merits of the controversy and submissions of both the parties will.....

Full Judgment

1. Heard learned Counsel for the parties.

2. The appellant herein is a company registered under the laws of Switzerland. The appellant had held some 40,50,000 shares of an Indian company named Clariant (India) Limited. During the assessment year 1998-99, it transferred this entire lot of shares and claimed the capital loss of Rs. 43,29,28,296. This claim of the appellant has been disallowed. The matter was carried up to the Income-tax Appellate Tribunal which dismissed the appeal filed by the appellant by its judgment and order dated April 15, 2004. This has been done on the ground that according to the Revenue the appellant was not entitled to indexation under Section 48 of the Income-tax Act, 1961 ('the said Act' for short) and, therefore, was not eligible to rely on Section 55(2)(b)(i) of the said Act. For not paying the advance tax in time as claimed by the Department, penal interest has been levied and that has been upheld by relying upon the two judgments of the apex court in CIT v. Hindustan Bulk Carriers reported in : [2003]259ITR449(SC) and in the case of CIT v. Anjum M.H. Ghaswala reported in : [2001]252ITR1(SC) .

3. Mr. Mistri, learned Counsel appearing for the appellant, has taken us through the judgment of the Tribunal. As far as the penal interest is concerned, he points out that there is no discussion at all as to how the penal interest would become payable and the reliance on the judgment in Ghaswala's case : [2001]252ITR1(SC) is totally misplaced. As far as the reliance on Section 48 is concerned, he points out that indexation has been provided, principally as a method of finding out what will be the cost of acquisition for Indian buyers as a sort of yardstick which would not be applicable in the case of non-resident companies.

4. Mr. Motariya appearing for the Revenue tried to defend the order. However, as far as the submission on penal interest is concerned, it is quite clear from the judgment of the Tribunal that there is no discussion as to how it was justified. Even for the non-grant of the benefit under Section 55 of the said Act, there is no discussion on the merits. The claim is rejected only on the ground that Section 48 was not available to the non-resident appellant.

5. The appellant has, therefore, raised the following three questions in this appeal which involve substantial questions of law:

(i) Whether, on the facts and in the circumstances of the case the Tribunal erred in holding that the assessee was not entitled to exercise the option under Section 55(2)(b)(i) of the Act to adopt the fair market value of shares as on April 1, 1981, as the cost of acquisition of such shares when computing the capital gain/loss arising on the transfer of the said shares?

(ii) Whether the Tribunal erred in holding that the first proviso to Section 48 of the Act was charging section and therefore erred in holding that Section 55(2)(b)(i) of the Act was not available to the assessee being a non-resident?

(iii) Whether the Tribunal erred in holding the levy of interest under Section 234B of the Act without appreciating that in cases where tax is deductible at source there is no liability to pay advance tax and hence there can be no liability to pay interest under Section 234B which is leviable only in the cases of default of payment of advance tax?

6. As far as questions Nos. (i) and (ii) are concerned, we expect the Tribunal to decide the liability of the appellant independent of Section 48 of the Income-tax Act. Similarly as far as the penal interest is concerned, the Tribunal is expected to discuss as to how there was delay in not paying the advance tax in time and if so, whether penal interest could be charged on to the appellant. Inasmuch as there is no appropriate discussion on both these aspects, we allow this appeal, set aside the order dated April 15, 2004 passed by the Income-tax Appellate Tribunal, Mumbai and revive the appeal to the file of the Tribunal for determination on both these aspects.

7. Independent of what is stated above, we do not express any opinion on the merits of the controversy and submissions of both the parties will be available to them when the matter is decided by the Tribunal.

8. The appeal is allowed in the aforesaid terms. No order as to costs.

Same Court & Year Mumbai · 2006 Same Parties Novartis Ag Basle vs Additional Commissioner of Income-tax Same Subject Direct Taxation Same Judge H.L. Gokhale and ;J.P. Devadhar, JJ. Acts & Sections Income Tax Act, 1961 - Sections 48, 55, 55(2) and 234B

Direct Taxation