High Court · 2007

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 04.06.2007Coram :THE HONOURABLE MR.JUSTICE P.D.DINAKARANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJATax Case (Appeal) Nos.147 to 149 of 2004The Commissioner of Wealth-tax,Tamil Nadu V, ..Appellant in Chennai. T.C.(A) Nos. 147 & 148 of 2004The Commissioner of Gift-tax,Tamil Nadu V, ..Appellant in Chennai. T.C.(A) No. 149 of 2004 Vs.C.R.K.Swamy (since deceased)Represented by Legal Representatives1. Josephine Adhilakshmi2. C.R.K.Arokiaraj Karunakaran3. Regina Mohandass4. Mary Clemence5. B.Vinod Kumar6. B.Jayanthi7. B.Suganthi ..Respondents in all the T.C.(A)s.T.C.(A) Nos.147 and 148 of 2004:Appeals under Section 27A of the Wealth-tax Act, 1957 against theorder of the Income-tax Appellate Tribunal, Madras Bench "D" in W.T.A.Nos.1500 & 1501(Mds)/1992 dated 26.02.1999 for the assessment years 1985-86 and 1986-87. T.C.(A) No.149 of 2004:Appeal under Section 27A of the Wealth-tax Act, 1957 read with Section76 of the Finance (No.2 at 1998), against the order of the Income-taxAppellate Tribunal, Madras Bench "D" in G.T.A. No.49(Mds)/1992 dated26.02.1999 for the assessment year 1984-85. https://hcservices.ecourts.gov.in/hcservices/ For Appellant :Mrs.Pushya Sitaraman,Sr.Standing Counsel forIncome-tax DepartmentFor Respondents: Mr.M.P.Senthil KumarCOMMON JUDGMENT(Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.)These appeals are filed by the Revenue against the order of the IncomeTax Appellate Tribunal, Madras Bench "D" in W.T.A. Nos.1500 & 1501(Mds)/1992 and G.T.A. No. 49(Mds)/1992 for the assessment years 1985-86, 1986-87and 1984-85. On 03.03.2004, this Court admitted the appeals andformulated the following substantial questions of law:-"i) Whether on the facts and in the circumstances ofthe case the Appellate Tribunal is right in law inconfirming the order of the Commissioner of Income Tax(Appeals) directing the Assessing Officer to recomputethe assessee's net wealth after excluding the wealth ofhis wife, daughters-in-law and grand childrenattributable to the lottery winnings?ii) Whether on the facts and in the circumstances ofthe case the Appellate Tribunal is right in law inconfirming the order of the Commissioner of Income Tax(Appeals) cancelling the gift tax assessment order?"2.The facts leading to the above substantial questions of law areas under:The assessee C.R.K.Swamy purchased two lottery tickets of MeghalayaState Lottery and ten lottery tickets of Aero Sports Raffle conducted byAero Club of India by spending Rs.52/- and settled them on C.R.K.SwamyTrust on 14.08.1983 for the benefit of 15 beneficiaries and handed overthe said lottery tickets to the trustees Shri.D.Mohandoss, Shri.K.Bhaskaran and Shri.C.R.K.Arokiaraj. The deed of trust was executed onstamp papers of Rs.30/- purchased on 14.08.1983 from a stamp vendor inCuddalore. The lottery was conducted on 15.08.1983. The ticket bearingNo.408697 of the Aero Club of India won the first prize of Rs.1 Crore.The name of the Trust is called C.R.K.Swamy Trust. The Trust is also anassessee and it has also filed its Return. The assessee contended thatthe price money has to be assessed in the hands of the respectivebeneficiaries as the beneficiaries and their shares are determinate andknown. The Assessing Officer did not agree with the plea of the assessee.The deed of trust appeared ante-dated and it was the result of anafterthought when the results of the lottery had been declared, because14.08.1983 happened to be Sunday and 15.08.1983 happened to beIndependence Day and that Sri C.R.K.Swamy was an aged man residing at https://hcservices.ecourts.gov.in/hcservices/ Villupuram. The stamp paper was purchased on 14.08.1983 at Cuddalore andthat the same was brought to Villupuram and got typed at Villupuram on thesame day. The Assessing Officer was of the opinion that the lotterytickets were purchased at least 20 days before the date of draw of thelottery, but the Trust was formed not immediately after the purchase ofthe tickets, but only a day before the date of draw of the lottery.Further the Assessing Officer was of the view that corpus of the Trust,being lottery tickets numbering 12, cannot be called a property asunderstood in the general sense. Further the Assessing Officer held thatit does not make the lottery ticket in which the buyer has speculativeinterest, a property with which a person could form the Trust. If thelottery tickets had not won any prize, the Trust, which was formed on14.08.1983 would have ceased to exist on 15.08.1983 and that the tenureand period of validity of the Trust could not be a matter of speculation.The Assessing Officer also held that the income actually arose in thehands of the assessee in the present tax cases and that that there willnot be any assessment in the hands of the Trust. As a protective measure,the assessment was completed in the name of C.R.K.Swamy Trust taking theincome as "nil". The said assessment was processed under Section 143(3)in the status of an Association of Persons on 30.03.1988. In view of thesame, the Assessing Officer held that the Trust was not a genuine one andhence it is not a valid Trust. In view of the same, the Assessing Officerheld that the prize money has to be assessed only in the hands of theassessee and not in the hands of the Trust. The Wealth-tax Officerincluded the wealth of the appellant's wife, daughter-in-law and minorgrand children and others on the same basis. In the Gift-tax assessmentalso, the Gift-tax Officer initiated and levied gift tax on the groundthat the assessee had distributed the prize money to his close relatives.Aggrieved by the same, the assessee filed appeals to the Commissioner ofIncome-tax (Appeals). The C.I.T.(A) allowed the appeals and set aside theorders of the Assessing Officer. Aggrieved, the Revenue filed appeals tothe Income-tax Appellate Tribunal ("Tribunal" in short). The Tribunaldismissed the Revenue's appeals by following the earlier Tribunal Order inC.R.K.Swamy Trust as well as the assessee's own case. Hence the presenttax cases by the Revenue.3.Learned Standing Counsel appearing for the Revenue submitted thatthe Trust is not a genuine one and hence the levying of wealth-tax andgift-tax is justified and is in accordance with law. 4.Learned counsel for the assessee submitted that the earlierTribunal order reached finality and also the beneficiaries received theirrespective shares and they have been assessed under the Act. Hence, theorder passed by the Tribunal is in confirmity with law. 5.Heard the counsel. In the present cases, the Tribunal merelyfollowed the C.R.K.Swamy Trust's case as well as the assessee's own casein I.T.A. No.1969/Mds/1989 and ITA Nos.4131 to 4133/Mds/1989, respectivelyand held as follows:-"2. We have heard the rival submissions and perusedthe material on record. The issues raised have https://hcservices.ecourts.gov.in/hcservices/ already been concluded in favour of the assessees videthe order of this tribunal dated 31.3.1992 in ITANo.1969/Mds/1989 and ITA Nos.4131 to 4133/Mds/1989 inthe case of the same assessee. Even the ReferenceApplication filed on the aforesaid order of theTribunal have been rejected vide the order of thisTribunal dated 20.11.1992. The learned counsel forthe assessee at the time of hearing also stated thatthe reference application filed by the departmentunder section 256(2) of the Act have been decided infavour of the assessee by the High Court of Madras.However, he has not been able to produce a copy of theorder of the High Court readily. We, however, findthat the orders of the Commissioner of Incometax (A)which have been contested against before us are basedon the decision of this Tribunal. We therefore,respectfully following the order of this Tribunaldated 31.3.1992, hold that the Commissioner ofIncometax (A) was justified in taking a favourableview on the appeals filed by the assessee. Under thecircumstances, we do not find any reason to interferewith the orders of the Commissioner of Incometax (A)on these issues. 3. In the result, the appeals filed by the revenue aredismissed."Against the above mentioned order of the Tribunal, the Revenue filedappeals to the High Court. The appeals were filed belatedly. The saidmatter came up before this Court in T.C.M.P. Nos.995 and 996 of 1997 on04.08.1998 wherein the following substantial questions of law have beenraised:-"1. Whether in the facts and in the circumstances ofthe case the Appellate Tribunal is right in law inholding that the trust is a genuine trust?2. Whether on the facts and in the circumstances of thecase, the Appellate Tribunal is right in law incancelling the assessment made in the hands ofC.R.K.Swamy individual?"After hearing the arguments this Court dismissed the said T.C.M.Ps. andheld as follows:-"The delay cannot be condoned the affidavit is asheld as it can possibility be.The respondent has rightly complained that eventhe copy served upon herein merely, Court aimed blanksand that not specify the period of delay. No reasonworth mentioning is given in support of the prayer forcondonation of delay for period of delay is not fewdays but runs into year. The application forcondonation of delay are dismissed."In view of the dismissal of the Revenue's petitions by this Court, theTrust's case reached finality. In respect of the assessee's own case https://hcservices.ecourts.gov.in/hcservices/ relating to the earlier assessment years 1984-85, 1985-86 and 1986-87, theRevenue is unable to furnish the details as to whether they have filed anyappeal against the said orders or not. No fresh evidence or any othermaterial produced before us to substantiate the claim of the Revenue. TheTribunal correctly followed its own orders and decided the matter infavour of the assessee. Hence, we do not find any error or legalinfirmity in the order of the Tribunal so as to warrant interference.6.Under these circumstances, the questions referred to above areanswered in favour of the assessee and against the Revenue and accordinglythe tax cases are dismissed. No costs.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.kmTo1. The Assistant Registrar, Income-tax Appellate Tribunal, Madras Bench 'D', Madras.2. The Secretary, Central Board of Direct Taxes, New Delhi.3. The Commissioner of Income-tax (Appeals) III, Madras-34.4. The Wealth Tax Officer, Ward I(2), Tambaram.5. The Gift Tax Officer, Ward I(2), Tambaram.+ 1 CC To Ms.Pushya Sitaraman, Advocate SR NO.31674 T.C.(A) Nos.147 to 149 of 2004kg[co]gp/16.7.