Doctrine of unjust enrichment - recovery of entertainment tax from cinema goers during availment of exemption is recoverable; when law is not clear, superior courts not to interpret law in such a way as to confer unjust benefit to any party: SC
NEW DELHI, AUGUST 08, 2009: THE Supreme Court had recently delivered a landmark Judgment on the doctrine of unjust enrichment. In instances where an assessee recovers tax from taxpayers in spite of an exemption (absolute or partial) from levy of tax and retains the same without depositing the same with the State, by following the ratio laid down by the Apex Court in Mafatlal Industries Ltd vs. Union of India 2002-TIOL-54-SC-CX , the Court held that it amounts to unjust enrichment; but at the same time it was held that if the provisions for recovery are not clear in the Statute then the Superior Courts cannot interpret the statute in such a way so as to confer an unjust benefit to any of the parties, i.e. the taxpayer or tax collector or the State. The brief facts of the case are as follows:
A multiplex theatre in Brihan Mumbai Municipal Corporation limits was enjoying the exemption from levy of entertainment tax conferred by the State Government as per the scheme of exemption applicable to multiplex theatre complexes. In the first three years of operation, the exemption will be absolute i.e. no entertainment tax is payable and in the subsequent two years, the exemption will be to the extent of 75% of the entertainment tax payable and from the sixth year they are subject to a levy of applicable entertainment tax without any exemption. The respondent in this case availed the exemption from levy of entertainment tax conferred by the State but recovered the tax from the cinema goers. The State of Maharashtra initiated recovery proceedings for recovery of the tax collected by the multiplex theatre from the cinema goers. The respondents succeeded in the High Court of Mumbai wherein the High Court held that the State was not entitled to claim more than what could be levied as entertainment duty during the period of dispute irrespective of the fact that the exhibitors have shown on admission tickets issued to patrons 45% of the duty though they were liable to pay only 25% of 45% during the incentive period of 2 years.
The State of Maharashtra appealed to the Supreme Court against this judgment of the High Court and contended that the multiplex theatre complex is liable to pay back the tax collected from the cinema goers in terms of the provisions of Bombay Entertainments Duty Act, 1923 read with Section 72 of the Indian Contract Act, 1872 and Article 296 of the Constitution of India. It was contended that the respondent had collected the tax over and above the exemption provided by the State Government and the tax so collected is liable to be paid back to the State Government. The respondents i.e. the multiplex theatre among other things contended that the admission charges collected by the respondent being a matter of contract by and between them and the cinema goers and the Act having not provided for any forfeiture clause, the question of the respondents being unjustly enriched does not arise, more so when it is not a case where the amount of tax had been deposited which the State was entitled to keep with it having regard to the statutory provisions in this behalf.
The Apex Court after analyzing the relevant provisions of the statute and relying on the decisions of the Court in Mafatlal Industries Ltd vs. Union of India 2002-TIOL-54-SC-CX, Union of India vs. Solar Pesticide Pvt Ltd 2002-TIOL-57-SC-CX , Sahakari Khand Udyog Mandal vs. Commissioner of Customs & Central Excise 2005-TIOL-48-SC-CX-LB and Indian Banks' Association, Bombay and Others v. Devkala Consultancy Service and Others observed as follows:
++ Respondent has shown the net rate of tickets which they charged by way of admission charges & entertainment duty separately. Respondent had indisputably been collecting 45% of the amount of admission fee by way of entertainment duty, i.e. the full duty payable in terms of the provisions of the said Act and the Rules.
++ Whether a statute expressly confers power on an assessee to realize the amount of tax payable to the State from its customers or not is not material. An assessee has to collect such taxes which are required to be levied and collected from the consumers. Once the taxes are levied, Section 3 of the Bombay Entertainments Duty Act entitles the State to collect the same from the owner of the multiplex theatre complex, subject to the concession given to them.
++ The terms "concession" and "exemption" are a form of privilege. When a statute confers a privilege, the same must be confined only to the extent provided for therein.
++ Once it is held that the amount realizable from the cinema goers by way of entertainment duty comes within the purview of the definition of `tax', there is no reason to justify the conclusion of the High Court that the State Government for all intent and purport conferred the retention benefit on the multiplex theatre. If the State intended to provide for a grant, the same should have expressly been stated in the statute. The respondents cannot be granted a huge amount by a welfare State indirectly which it cannot do directly.
++ State has a power to grant exemption or concession in respect of payment of tax and no power under the provisions of the Constitution or otherwise to allow an assessee to collect tax and retain the same.
++ When the provisions are not very clear Superior Courts will not interpret the statute in such a way as to confer an unjust benefit to any of the parties, i.e., the taxpayer or tax collector or the State.
++ When a person collects tax illegally, it has to be refunded to the taxpayers and if taxpayers cannot be found, the court would direct the same to be paid and/or appropriated by the State.
Pursuant to these observations, the Supreme Court concluded that the State has to realize the amount unjustly enriched by respondent and pay the same to a reputed voluntary or a charitable organization, which had been rendering good services to any sections of the disadvantaged people and in particular women and children. The Court put the onus on the Chief Minister of Maharashtra to take up the responsibility of ensuring full, proper and effective utilization of the said amount so given to the charity.
Thursday, July 7, 2011
Doctrine of unjust enrichment - recovery of entertainment tax from cinema goers
ITR (TRIB) Volume 10 : Part 2 Issue dated : 11-07-2011
ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 10 : Part 2 (Issue dated : 11-07-2011)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Fee for utilisation of club facilities by executive officer of assessee--Allowable--Sum towards receivables--Not allowable--Income-tax Act, 1961, s. 37-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
Reimbursement of telephone expenses by assessee to its executives--Perquisites in hands of executives--No addition could be made--Income-tax Act, 1961, s. 37-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
Long-term capital gains--Exemption--Sale of shares--Assessee's primary business, dealing in shares--Assessee holding controlling shares in particular company promoted by assessee and treating shares as investment and not in nature of stock-in-trade--Transfer of shares give rise to long-term capital gains--Assessee entitled to exemption--Income-tax Act, 1961, s. 10(38)-- Asst. CIT v. Stargate Investments P. Ltd. (Chennai) . . . 211
Exemption--Money utilised by trustee to meet his medical emergency--Trustee not beneficiary and trust entitled to exemption--Income-tax Act, 1961, ss. 11, 13(3)-- Vempati Chinna Satyam Kuchipudi Art Foundation v. Deputy CIT (Chennai) . . . 201
Commissioner -Revision-Capital gains-Cost of acquisition--Tiles laying, white washing, electrical rewiring and wood work expenses--Are post-acquisition expenses--To be excluded--Brokerage and legal fees--Part of acquisition cost--To be allowed--Income-tax Act, 1961, ss. 54, 263-- Smt. S. Sudha v. Asst. CIT (Chennai) . . . 206
Depreciation - Higher rate of depreciation--Tractors and trailers--Assessee in business of transportation of goods on hire basis--Entitled to higher rate of depreciation--Circular No. 652 dated June 14, 1993--Income-tax Act, 1961, s. 32-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
Property - Annual letting value- Rent Control Act--Prohibition on charging more than standard rent permissible under Act--Assessing Officer directed to compute annual letting value in terms of standard rent payable under Act--Bombay Rent Control Act--Income-tax Act, 1961, s. 23-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
Reassessment - Cost of construction- Reference to Valuation Officer--No proceedings pending before Assessing Officer--Assessing Officer has no jurisdiction to refer property for valuation to Valuation Officer--Reassessment notice issued on basis of valuation--Not permissible--Income-tax Act, 1961, s. 148-- ITO v. Nisarg Co-op. Housing Society Ltd. (Ahmedabad) . . . 174
Validity of notice - Notice issued after four years--No inquiry in original assessment by Assessing Officer nor disclosure by assessee as to nexus between interest received and interest payment--Non-application of mind by Assessing Officer during original assessment--Reassessment valid--Income-tax Act, 1961, ss. 147, 148-- Nancy Krafts P. Ltd. v. Asst. CIT (Delhi) . . . 193
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
for services rendered outside India - Tax not deductible at source--Fees for technical services--Insulator testing, advertising, etc.--Not technical services--Tax not deductible at source--Circular No. 786, dated February 7, 2000--Circular No. 7, dated 22-10-2009-- Asst. CIT v. Modern Insulator Ltd. (Jaipur) . . . 147
services rendered outside India - Tax not deductible at source--Fees for technical services--Insulator testing, advertising, etc.--Not technical services--Tax not deductible at source--Circular No. 786, dated February 7, 2000--Circular No. 7, dated 22-10-2009-- Asst. CIT v. Modern Insulator Ltd. (Jaipur) . . . 147
services rendered outside India - Tax not deductible at source - Fees for technical services--Insulator testing, advertising, etc.--Not technical services--Tax not deductible at source--Circular No. 786, dated February 7, 2000--Circular No. 7, dated 22-10-2009-- Asst. CIT v. Modern Insulator Ltd. (Jaipur) . . . 147
for services rendered outside India - Tax not deductible at source - Fees for technical services--Insulator testing, advertising, etc.--Not technical services--Tax not deductible at source--Circular No. 786, dated February 7, 2000--Circular No. 7, dated 22-10-2009-- Asst. CIT v. Modern Insulator Ltd. (Jaipur) . . . 147
interested- Loan to shareholder holding more than 10 per cent. voting rights--Loan out of accumulated profits--No evidence that loan was for purposes of business of company--Loan assessable as deemed dividend-- Mrs. Kiran Bansal v. Asst. CIT (Delhi) . . . 180
services rendered outside India- Tax not deductible at source - Fees for technical services--Insulator testing, advertising, etc.--Not technical services--Tax not deductible at source--Circular No. 786, dated February 7, 2000--Circular No. 7, dated 22-10-2009-- Asst. CIT v. Modern Insulator Ltd. (Jaipur) . . . 147
in traditional art forms- Assessee entitled to exemption-- Vempati Chinna Satyam Kuchipudi Art Foundation v. Deputy CIT (Chennai) . . . 201
beneficiary and trust entitled to exemption-- Vempati Chinna Satyam Kuchipudi Art Foundation v. Deputy CIT (Chennai) . . . 201
Trustee not beneficiary and trust entitled to exemption-- Vempati Chinna Satyam Kuchipudi Art Foundation v. Deputy CIT (Chennai) . . . 201
rent permissible under Act--Assessing Officer directed to compute annual letting value in terms of standard rent payable under Act--Bombay Rent Control Act-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
transportation of goods on hire basis- Entitled to higher rate of depreciation--Circular No. 652 dated June 14, 1993-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
evidence- Disallowance of fifty per cent. -Proper-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
not encashed by department--Disallowance justified-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
Allowable--Sum towards receivables--Not allowable-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
Perquisites in hands of executives--No addition could be made-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
for services rendered outside India--Tax not deductible at source--Fees for technical services--Insulator testing, advertising, etc.--Not technical services--Tax not deductible at source--Circular No. 786, dated February 7, 2000--Circular No. 7, dated 22-10-2009-- Asst. CIT v. Modern Insulator Ltd. (Jaipur) . . . 147
charges paid to sister concern--Tug not used for any transportation during relevant period--No case for commercial expediency of payment to sister concern--Disallowance justified-- Urmila and Co. Ltd. v. Deputy CIT (Mumbai) . . . 217
of understatement of sale consideration--Assessing Officer to adopt sale consideration of shares as disclosed by assessee-- Deputy CIT v. Jindal Equipment Leasing and Consultancy Services Ltd. (Delhi) . . . 128
electrical rewiring and wood work expenses--Are post-acquisition expenses--To be excluded--Brokerage and legal fees--Part of acquisition cost--To be allowed-- Smt. S. Sudha v. Asst. CIT (Chennai) . . . 206
Officer has no power to extend period of limitation--Assessment order passed on 29-8-2005 barred by limitation-- Deputy CIT v. Ramachandra Dashrath Hande and Co. (Mumbai) . . . 117
assessment by AO nor disclosure by assessee as to nexus between interest received and interest payment--Non-application of mind by Assessing Officer during original assessment--Reassessment valid-- Nancy Krafts P. Ltd. v. Asst. CIT (Delhi) . . . 193
pending before Assessing Officer--Assessing Officer has no jurisdiction to refer property for valuation to Valuation Officer--Reassessment notice issued on basis of valuation--Not permissible-- ITO v. Nisarg Co-op. Housing Society Ltd. (Ahmedabad) . . . 174
by Assessing Officer nor disclosure by assessee as to nexus between interest received and interest payment--Non-application of mind by Assessing Officer during original assessment--Reassessment valid-- Nancy Krafts P. Ltd. v. Asst. CIT (Delhi) . . . 193
electrical rewiring and wood work expenses--Are post-acquisition expenses--To be excluded--Brokerage and legal fees--Part of acquisition cost--To be allowed-- Smt. S. Sudha v. Asst. CIT (Chennai) . . . 206
assessing authority to levy penalty where it is imperative--Assessee claiming expenses as part of acquisition cost on a bona fide belief--Penalty cannot be imposed-- Smt. S. Sudha v. Asst. CIT (Chennai) . . . 206
acquisition cost on a bona fide belief--Penalty cannot be imposed--Smt. S. Sudha v. Asst. CIT (Chennai) . . . 206
.
ITR Vol 335 Part 2 dated 11-07-2011
INCOME TAX REPORTS (ITR)
Volume 335 : Part 2 (Issue dated 11-7-2011)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
HIGH COURTS
Reassessment --Notice after four years--Failure to disclose material facts necessary for assessment--Original assessment allowing deduction for housing project after examining facts--Notice after four years alleging that assessee was a works contractor and not a developer--No failure to disclose material facts necessary for assessment--Notice not valid--Income-tax Act, 1961, ss. 80-IB(10), 147, 148-- Aayojan Developers v. ITO (Guj) . . . 234
Rectification of mistakes --Application for rectification--Effect of sub-section (8) of section 154--Order on application to be made within six months of receipt of application--Failure to pass order--Application again made to new incumbent upon restructuring of Department--Application cannot be rejected on the ground of limitation--Income-tax Act, 1961, s. 154(8)-- State Bank of India v. CIT (TDS) (Patna) . . . 287
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Income-tax Act, 1961 :
S. 2(17) --Assessee--Person--Sports association is an assessee-- PILCOM v. CIT (Cal) . . . 147
S. 2(31) --Assessee--Person--Sports association is an assessee-- PILCOM v. CIT (Cal) . . . 147
S. 142(2A) --Assessment--Special audit--Order under section 142(2A) directing special audit--Condition precedent--Assessing Officer should be satisfied that accounts were complex and special audit was necessary--Reasons for special audit not mentioned--Order under section 142(2A)--Not valid-- Hind Samachar Ltd . v. Asst. CIT (P&H) . . . 277
Income-tax Rules, 1962 :
r. 5 --Depreciation--Rate of depreciation--100 per cent. depreciation for machinery and plant used in mineral oil concerns--Wireline logging and perforation equipment used for oil companies--Entitled to 100 per cent. depreciation-- CIT v. HLS India Ltd .(Delhi) . . . 292
.Foreign training expenses incurred on son of director, who is not even an e
Wednesday, July 6, 2011
Capital gain on sale of property is assessable in that assessment year only
Once assessee should excess consumption of raw material....
IT : Once assessee should excess consumption of raw material, natural inference was that there would be excess production which would have been sold outside books of account and, thus, matter was to be remanded back to Commissioner (Appeals) with a direction to make separate addition in respect of excess consumption of raw material as deemed sales - [2011] 11 taxmann.com 425 (Agra - ITAT)(TM)
Merely because appeal memo is not signed by all legal representatives, it c
Income-tax : As per section 159, every legal representative is personally liable to the extent of interest in the estate inherited by him and he being deemed assessee under section 159(3), is to be treated as an assessee aggrieved as contemplated under section 246A, and, therefore, entitled to file appeal subject to fulfillment of other conditions [Section 159 of the Income-tax Act, 1961 - Legal representatives] - [2011] 10 taxmann.com 101 (Mum. - ITAT)