The Hindu Business Line : Southern Roadways liable for I-T on compensation received on takeover of fleet

Chennai, Nov. 7 The Southern Roadways, Madurai (TVS Group) has to pay income-tax on the compensation amount received from the Tamil Nadu Government following takeover of the company’s passenger transport undertakings in 1972, the Madurai Bench of the Madras High Court has held.

By virtue of enactment of the TN Fleet Operators Stage Carriages (Acquisition) Act, 1971, which came into force from 14-1-1972, the assets of the company came to be vested with the Government.

Mr Justice K. Chandru, who heard the petitioner company challenging the order of the Deputy Commissioner of I-T (Respondent), ruled that the impugned order dated 14-5-2004 as amended by the order dated 21-6-04, arriving at the tax demand of Rs 62.48 lakhs, did not suffer from any manifest illegality or irregularity. The bar of limitation raised by the petitioner did not stand in the scrutiny of law.

According to the petitioner, it filed return of income for the year ending 31-3-1972. It did not offer any amount under the head ‘capital gains’ as well as profits under Section 41(2) of the I-T Act, out of the compensation received from the TN Government. The petitioner opined that since it was a “compulsory acquisition and being a slump sale”, there was no transfer of assets, and therefore, no capital gains or profits under the Section.

The Commissioner of IT (Appeals IV) held that the company was liable to pay tax for the profits in the year 1973-74, and he directed the ITO to reopen the assessment for 1973-74 for taxing this amount.

In response to a letter dated 4-6-04 from the petitioner, the respondent in his order dated 21-6-04 modified the earlier order and brought down the quantum of tax payable to Rs 38.27 lakh. The petitioner challenged this order in the present writ petition. He contended that by virtue of Section 150(2), the notice issued by the respondent was barred by limitation.

The judge held that Section 153 was the complete answer to the issue on hand. He, therefore, dismissed the writ petition.

More Stories on : Roadways | Courts/Legal Issues | Taxation | Tamil Nadu

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Southern Roadways liable for I-T on compensation received on takeover of fleet