Commissioner of Income Tax, Kanpur vs Naresh Babu Suresh Chandra

The income tax Appellate Tribunal, Allahabad has referred the following question of law u/s 256(1) of the income tax Act, 1961 hereinafter referred to as the Act for the opinion of this Court:-

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in law holding that Nirgam Mulya was part of the bid money and, therefore, was beyond the purview of section 44AC of the income tax Act, 1961?"

The reference relates to the assessment year 1991-92.

Briefly stated facts giving rise to the present petition are as follows:-

The assessee is a liquor contractor. The taxable income was computed at Rs. 29,89,680 by invoking the provisions of section 44AC(1) of the Act by applying a rate of 40 per cent on an amount of Rs. 74,74,200 which inter-alia included "Nirgam Mulya" amounting to Rs. 26,34,552. In the course of proceedings before the Assessing Officer, the assessee contended that "Nirgam Mulya" was "Issue Price" and formed part of ''Bid Money''. It did not come within the ambit of ''purchase price'' as contemplated u/s 44AC. The assessee drew support from the U.P. Govt. Ordinance dated 10-1-1991 amending the U.P. Excise Act with effect from 1-4-1990. However, keeping in view the explanation inserted in section 44AC with effect from 1-4-1991 the Assessing Officer held that ''Nirgam Mulya'' was a part of the ''purchase price'' for the purposes of section 44AC and that the U.P. Government Ordinance did not alter that position.

In appeal the Ld. Commissioner (Appeals) after taking note of the explanation inserted in section 44AC with effect from 1-4-1991 which reads as under upheld the order of the Assessing Officer. "Explanation for the purposes of the clause, ''purchase price'' means any amount (by whatever name called) paid or payable by the buyer to obtain the goods referred to in the clause but shall not include the amount paid or payable by him towards the Bid Money in an auction, or as the case may be the highest accepted offer in the case of tender or any other mode."

The assessee being aggrieved of the order of the authorities carried the matter to the Tribunal and the Tribunal vide order dated 19-3-1993 held that the amount of Rs. 26,34,552 representing ''Nirgam Mulya'' could not be considered as ''Purchase Price'' and formed part of ''Bid Money'' and, therefore, was beyond the purview of section 44AC of the Act.

We have heard Shri R.K. Upadhyaa, learned counsel for the revenue and Shri S.K. Garg, learned Standing Counsel appearing for the respondent assessee.

We find that the question raised herein is clearly covered by the Division Bench decision of this Court rendered in the case of the CIT v. Ram Sanehighat Contractor [2008] 154 Taxman 536. This Court relied upon the decision of the Apex Court in the case of the Union of India v. A. Sanyasi Rao [1996] 219 ITR 330 1 has held that the provisions of section 44AC of the Act is applicable only respect of section 306(c) of the Act. It does not provide for making presumptive assessment. The question referred has been rendered academic and is accordingly returned unanswered.