Delhi High Court
Mahavir Irrigation (P.) Ltd. vs Ito on 11 October, 2006
Bench: V Sen, S Muralidhar
ORDER
1. This appeal challenges the decision of the ITAT to the effect that the sum of Rs. 3 crores received by the assessed on 2-3-1998 was correctly brought to tax by the Commissioner (Appeals) as the assessed's income for the year under consider-ation. It is remarkable that although this question had been raised bef ore the assessing officer he has totally glossed over this question and has cryptically proceeded to assess the income of Rs. 88,582.
2. In the circumstances of the case, it was imperative for the assessing officer to have dealt with this question. Be that as it may, thereafter there is a concurrent finding of the Commissioner (Appeals) as well as the ITAT.
3. Mr. Jayant Bhushan, learned Senior Advocate for the appellant, hastaken us to the Memorandum of Understanding dated 23-2-1998 between the appellant (MIL) and Daewoo Motors India Ltd. (DMIL), the salient clauses of which are reproduced below:
8. That in consideration of the work, duties and functions undertaken by MIL to be performed under this Memorandum of Understanding, DMIL will pay to MIL fee in the sum equal to 1 per cent of the value of the contract that may be awarded by the DTC to DMIL pursuant to the DTC Tender, subject to a minimum of Rs. 3 crores.
9.That the fee payable by DMIL to MIL in terms of Clause 8 ante, will be deemed to accrue on the date on which the contract between the DTC and DMIL is signed or on which the DTC places an order on the DMIL for the supply of the buses, as the case may be, and DMIL undertake to make payment of the fee to MIL within 15 days of its accrual.
10. That DMIL will make an interest-free deposit of Rs. 3 crores with MILwithin six months f rom the date of this Memorandum of Understanding, that this deposit will be adjusted against the fee that may become payable to MIL in terms of Clause 8 ante.
11. That in the event of DMIL withdrawing from its offer against the DTC Tender or no order is being placed on it by DTC for any reason what so-ever, the amount paid to MIL under Clause 10 ante, shall not be refund-able by MIL.
4. There is no room for controversy that so far as the present payment is concerned it was a minimum payment in terms of Clause 8. Larger amounts could have been receivable by the assessed had a contract been placed on the DMIL by the Delhi Transport Corporation (DTC). Clause 11 uses the words "for any reason whatsoever" making it amply clear that the payment for Rs. 3 crores would not be as reclaimable by DMIL. Referring to the Commissioner (Appeals)'s order which holds that the appellant could retain the amount even where it "renders no service whatsoever". Mr. Bhushan contends that it would be inconceivable that the sum of Rs. 3 crores, which is a minimum commission or assured commission, could be retained by the assessed even if he had refused to render any service. We are of the view that this is reading too much into the words used by the authorities below. Reliance has also been placed on CIT v. A.V.M. Ltd. (1984) 146ITR 3551, which is a decision of the Division Bench of the Madras High Court. The facts there were totally different. The assessed was carrying on business as a distributor of cinematograph films and had taken security deposits from exhibitors which was to be adjusted against receipts by way of ticket sales. This is not the case here. For the same reason the decision in CIT v. T.V. Sundram Iyengar & Sons Ltd. (1996) 222 ITR 3442 (SC) is not of any advantage to the appellant. The question there was at what stage would a deposit of a capital nature become an income in the hands of the assessed. On our reading of the agreement between the appellant and DMIL, the amount of Rs. 3 crores had already accrued to them as income in the year in which it was received by the appellant. No substantial question of law arises.
5. The appeal and all pending applications stand dismissed. Interim orders dated 23-3-2005 passed in CM No. 4438/2005 are vacated.
