Rc/200/1996 Of Commissioner Of Income Tax v. A.p.state Financial Corporation

THE HON'BLE SRI JUSTICE V.V.S.RAOANDTHE HON'BLE SRI JUSTICE RAMESH RANGANATHANR.C.Nos.Nos.200, 206 and 218 of 1996 ORDER: (per Per Hon’ble Sri Justice V.V.S.Rao) These references, at the instance of the revenue, are in respectof the assessment years 1985-86, 1988-89 and 1987-88 respectively.The questions referred in all the three cases are identical and hencethis common order. The A.P. State Financial Corporation – assessee collectedamounts towards credit guarantee commission (CGC). In their returnsthey claimed that it is not income for the reason that the CGC ispayable to the Deposit Insurance & Credit Guarantee Corporation(DICGC); and that, in a fiduciary capacity, the amounts have to be paidback to the loanees, if the amounts are not credited to the saidCorporation. The assessing officer treated the amount as tradingreceipts and brought it to tax. In appeals, the assessee was successfuland the commission amount was deleted. The revenue appeals weredismissed by the Learned Income Tax Appellate Tribunal. Therevenue then moved an application before this Court seeking adirection to the Tribunal to refer three questions. This Court passedorders directing the reference. Pursuant thereto, the Learned Tribunalreferred the following questions to the High Court under Section 256(2)of the Income Tax Act. The questions in all the three cases areidentical and the questions in R.C.No.218 of 1996 read as under: “1. Whether, on the facts and in the circumstances of the case, the amounts receivedby the assessee from the loanee concerns towards credit guarantee commission aretrade receipts incidental to the business carried on by the assessee? 2. Whether, on the facts and in the circumstances of the case, the A.P. StateFinancial Corporation is acting in a fiduciary capacity in collecting the credit guaranteecommission on amounts from loanee concerns having regard to the agreementsentered into, if any, by the loanee concerns with the assessee – company? 3. Whether, on the facts and in the circumstances of the case, the receipts of creditguarantee commission collected from the loanee institutions are at all returnable bythe assessee-company to the said concerns, in case the assessee-company opts outof the credit guarantee scheme? 4. Whether, on the facts and in the circumstances of the case, the ITAT was correctin law in deleting the addition made by the Assessing Officer of Rs.1,20,80,309/-which represented the credit guarantee commission collections collected by theassessee from the loanee concerns?” This Court by an elaborate order, in R.C. No.139 of 1992 dated13.8.1998, came to the conclusion that there is no material as to themethod and manner adopted by the assessee for collecting theamounts from the SSI units or deducting the amounts on the loansadvanced to the SSI units and, therefore, in the absence of suchmaterial a finding cannot be arrived at. Accordingly, declining toanswer the questions referred to it, this Court remitted the matter to theLearned Tribunal for consideration in the light of the scheme framedunder Deposit Insurance & Credit Guarantee Corporation Act, 1961 inwhich the assessee joined with effect from 1.4.1981. Following the above order dated 13.8.1998, we also pass asimilar order declining to answer the questions. We remit the mattersto the Learned Tribunal for the purpose of examining the issue thatarise for consideration in the light of the Scheme and also modalities,methods and manner adopted by the assessee in deducting theamount from the SSI units and the method adopted for paying theamounts to the DICGC. The references accordingly stand disposed of. ______________ V.V.S.RAO, J Date: 29.09.2010 ____________________________ RAMESH RANGANATHAN,J asp