LexCOMMNR. OF INCOME TAX, AHMEDABAD versus SARABHAI HOLDINGS PVT. LTD.
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[2008] 14 S.C.R. 988 ' ~ ' , A COMMNR. OF INCOME TAX, AHMEDABAD ~ 'I- v. SARABHAI HOLDINGS PVT. LTD. (Civil Appeal Nos. 482-483 of 2003) OCTOBER 21, 2008 L B 1.- [LOKESHWAR SINGH PANTA AND V.S. SIRPURKAR, j- ~ JJ.] '~ Income Tax Act, 1961 - ss. 210 and 273 (2)(a) -Asses- r c see getting interest from 1.3.1977 on the deferred sale con- ,1 ' sideration which was to be paid in instalments - Subsequent \._ modification to the effect that the instalments were to be paid w.e.f 1.7.1979- By Resolution dated 30.6.1.978 requirement of payment of interest done away with - Demand of advance D tax by Revenue for the Assessment Years 1979-80 and 1980- 81 - Interest on the deferred amount computed in the assess- able income -Assessee showing NIL amount of advance tax )- for AY 1979-80 and showing loss for AY 1980-81 - Assess- ..., ment order - Courts below holding that interest to be included in the assessable income for· A Y 1979-80 and not to be in- E eluded in the income for the A Y 1980-81 - Assessing Officer " also imposing penalty uls. 273(2)(a) for furnishing untrue es- timate of advance tax - Penalty confirmed by appellate court and Tribunal but set aside by High Court -On appeal held: Interest was to be computed in the assessable income for A Y F 1979-80 as the same had accrued vide agreement dated ~ 4.3. 1-977 - Interest not to be included in the income for the AY )- ' >- 'r 1980-81 8s the same did not accrue by virtue ~f resolution ( dated 30. 6. 1978 - Penalty rightly set aside by High Court- In ·,... the facts of the case it cannot be said that the assessee had 1-- G reason to believe that the estimate of income filed by him was r I untrue. Assessee-..respondent sold industrial undertaking f- and business activity of one of its units as a going con- H 988 COMMNR. OF INCOME TAX, AHMEDABAD v. 989 SARABHAI HOLDINGS PVT. LTD. -1- cern, to its own subsidiary company (vendee company). A The agreement dated 4.3.1977 provided an interest clat1se, whereby interest was to be payable at the rate of 11% P.A. on balance sale consideration which would remain un- paid from time to time. Vendee Company by its letter dated 15.6.1978 proposed to modify the terms of payment , by B charging the interest on deferred sale consideration from , 1.7.1979 instead of 1.3.77. The proposal was accepted by y. the assesee. In the meantime a resolution was passed on 30.6.1978 doing away with.the requirement of payment .of interest. c Assessee-respondent received notices from the ap- < pellant-Revenue demanding advance tax. Assessee filed I an P.stimate, showing NIL amount of advance tax for th.e Assessment year 1979-80. In respect of Assessment year 1980-81, it filed its return declaring a loss. D ~ Assessing Officer passed assessment order deter- 'y mining the total income, which included the amount of interest accrued on deferred sale consideration receiv- able from the vendee company. CIT (Appeals) confirmed E the assessment orders. Income tax Appellate Tribunal held that so far as Assessment Year 1979-80 is concerned, since the interest had already accrued vide agreement dated 4.3.1977 i.e. prior to passing of resolution dated 30.6.1978, the resolution was of no consequence. In re- -I spect of Assessment Year 1980-81, it held that the inter- F ·--< est income could not be said to have accrued as the reso- lution dated 30.6.1978 was passed prior to commence- ment of relevant accounting year. Assessing Officer imposed penalty u/s. 273(2)(a) for G furnishing untrue estimate of advance tax. The same was -~ confirmed by CIT (Appeals) as well as the Tribunal. Refer- ences were filed at the instance of the Revenue as wen as the asessee. In the reference which pertained to As- sessment Year 1979-80, High court held in favour of Rev- H 990 SUPREME COURT REPORTS [2008] 14 S.C.R. A enue and so far as it pertained to Assessment Year 1980- + 81, High Court held in favour of assessee. In the refer- ence as regards penalty proceedings u/s. 273(2)(a), High Court held that though the finding was against the as- sessee for the assessment Year 1979-80, still there would B be no penalty u/s. 273(2)(a). Hence the present appeals by Revenue. Dismissing the appeals, the Court -~ HELD: 1.1 The genuine nature of the Re.solution c dated 30.6.1978 was not and could not be disputed. Merely because by Resolution dt. 30.6.1978, the assessee agreed to defer the payment of i
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