Himalaya Transport Syndicate (Pvt.) Ltd. vs Commissioner of Income Tax and Another

M.R. Sharma, J. 1. This judgment will dispose of C.W.Ps. Nos. 1465 and 1466 of 1970 as they involve the same point.

The petitioner is a transport company duly registered under the Indian Companies Act, 1913. Various taxi owners used to ply their taxis on the Simla-Kalka road on individual basis. This led to an unhealthy competition. The Government, therefore, called upon the various bus owners and taxi owners to form companies to run their business collectively. The petitioner-company came into being pursuant to these Government instructions. Smt. Durga Devi, wife of late Lal Krishan Chand Sehgal, Kalka, had four permits of taxis. She joined the petitioner-company and was allotted 200 shares. Later on, she was able to procure one more permit because of which the shares standing in her name were increased to 250.

For many years, the petitioner-company was not able to pay any dividend to its shareholders. The said Smt. Durga Devi started pressing for repayment of her share capital. That request could not be granted by the company till it was able to reduce its capital or the controlling shareholders were able to take over her shares. To get over this crisis, the petitioner-company decided in April, 1953, that one bus No. PNS 460 be given to Smt. Durga Devi and in consideration thereof the shares standing in her name be transferred in favour of the controlling group. It was also decided that she would maintain the bus and the staff would also be under her control, but since there were restrictions about the transfer of permits the same would remain in the name of the petitioner-company who would collect the passenger tax from her and make it over to the Government.

During the assessment proceedings for the year 1954-55, this arrangement was disclosed to the ITO, who accepted the position that the income from bus No. PNS 460 belonged to Smt. Durga Devi and her brother. The I.T. Dept. continued to accept this position till the assessment year 1959-60. However, in the course of assessment proceedings for the year 1960-61, the ITO noticed that the afore-mentioned bus and the permit continued to stand in the name of the company and yet its income was not disclosed in the total income earned by the company during the relevant assessment year. He accordingly estimated the income from this bus at Rs. 5,000 and added it towards the income of the petitioner-company. The ITO also issued a notice to the petitioner-company u/s 148 of the I.T. Act, 1961 (hereinafter referred to as "the Act"), for reassessment for all the previous years commencing from April, 1953. Inconsequence of the said notice, an addition of Rs. 5,000 was made in each year towards the yearly income of the company. The appeals filed by the asses-see were dismissed by the AAC. The company went up in further appeals for the years 1960-61, 1961-62, 1962-63 and 1966-67, before the Income Tax Appellate Tribunal and also filed petitions u/s 264 of the Act before the Commissioner. The Income Tax Appellate Tribunal accepted the appeals of the petitioner-company and remanded the cases for fresh decision. The AAC again dismissed the appeals primarily on the ground that even though the income from the bus was being appropriated by Smt. Durga Devi, the bus and the permit were in the name of the company, who could file a suit for claiming the income of the bus.

In the meantime, the petitions for the years 1962-63 to 1966-67, filed u/s 264 of the Act, came up for hearing before the Commissioner. It was argued before him that the company acted only as an agent of Smt. Durga Devi for the collection of passenger tax and depositing the same with the Government. This plea did not prevail with the Commissioner and he dismissed the petitions filed by the company. These orders of the Commissioner are being challenged in the instant petition.

At the very outset, Mr. Aggarwal, learned counsel for the petitioner, brought to my notice the order passed by the Income Tax Appellate Tribunal for the assessment years 1960-61 and 1961-62, which reads as under :

"2. The only question in both the appeals is regarding the income from bus No. PNS 460. According to the assessee the bus belonged Smt. Durga Devi, but the Income Tax Officer was of the view that the bus belonged to the company, the assessee before us. This matter arose in an earlier year when we set aside the order of the Appellate Assistant Commissioner for fresh disposal in accordance with law and on the material which may be produced before him. We are given to understand that the Appellate Assistant Commissioner has come to the view that the bus belongs to the lady. Keeping that in view we see no reason why the income from bus No. PNS 460 be not deleted from the hands of the assessee-company before us.

There is another aspect of the matter which is noteworthy. The contention of the assessee was originally accepted by the Income Tax Officer when he passed the original assessment but assessed the income of this bus in the hands of the company in reassessment proceedings. The assessee has been contending all the time that the bus belongs to the lady and the lady has been affirming so. We see no reason why such small matters should be put to rest. Looking at the matter from this angle, we see no reason to sustain the addition, which is deleted."

It was argued by the learned counsel that these orders had become final and it is not open to the Revenue to take up a contrary position. On this basis, it was submitted that the Commissioner should have accorded due weight to the arrangement arrived at between the company and Smt. Durga Devi instead of merely emphasizing the legalities of the case.

It cannot be disputed that there was indeed a restriction about the transfer of permits. Because of that the bus in question could not have been transferred in favour of Smt. Durga Devi. It is also a fact that Smt. Durga Devi did have 250 shares with the company and the transfer of bus in her favour was for valid consideration. In other words, it was not a case in which the company for some ulterior purpose was trying to deceive the Revenue in order to evade tax. The position put forth on behalf of the company had earlier been accepted by the Department. It is nowhere stated that the petitioner concealed the facts from the ITO, who originally accepted this position. In these peculiar circumstances, the Tribunal could have come to the conclusion that the bus in question had been virtually transferred in favour of Smt. Durga Devi and the company derived no income therefrom. If the Revenue accepted this finding in the sense that the order passed by the Tribunal was not further challenged in a reference, it could not turn round and urge that this position should not be accepted for some otlier years of assessment.

Mr. Awasthy, relied upon The Commissioner of Income Tax, Punjab Vs. Shri Thakur Das Bhargava, Advocate, Hissar, , for the proposition that it is open to the Revenue to tear the veil surrounding a transaction and to come to the conclusion that it was in fact a device to conceal income. The facts of that case are, however, distinguishable. Therein, an advocate became the beneficiary of a trust in consideration of conducting a case. It was, in, those circumstances, held that the benefit accruing from the trust was in the nature of income belonging to the advocate.

For the reasons aforementioned, I hold that the Revenue was not entitled to add an income of Rs. 5,000 per year towards the income of the company for the assessment years under reference because the bus in dispute had been transferred to Smt. Durga Devi, who had been appropriating the income of the bus to herself. Orders dated October 10, 1969, of the Commissioner, dated September 8, 1969, of the AAC and dated July 21, 1955, of the ITO, are hereby quashed. The petitions are allowed with no order as to costs.