HIGH COURT OF MADRAS
Commissioner of Income-tax, Chennai
versus
C.S. Srivatsan
Tax Case (Appeal) Nos. 48 to 71 of 2007
FEBRUARY 1, 2013
JUDGMENT
S. Vimala, J.
These 24 Tax Case Appeals have been filed by the Revenue, aggrieved over the orders passed by the Income Tax Appellate Tribunal, covering the assessment years 1996-1997, 1997-1998, 1998-1999, 1999-2000, 2000-2001 and 2001-2002, assessment having been made against each of the Directors, namely, C.S. Narasimhan, C.S. Srivatsan, C.S. Seshadri and C.S. Varadhan, (who are brothers), raising the following common substantial questions of law:-
“(i) Whether on the facts and circumstances of the case, the Tribunal was right in holding that the amounts paid by the company towards personal expenses of the assessee cannot be taxed in its hands under Section 2 (24)(iv) as the amount was routed through the franchisee, which was the HUF of the assessee?
(ii) Whether on the facts and circumstances of the case, the Tribunal was right in remanding the matter back to the assessing officer on the issue of receipt of commission, when the entity which is supposed to have received the commission was formed only after the survey was conducted?”
1.1. The details of each of the appeals filed are as follows:-
Tax Case Appeal No.
@ssessment year
ITA order No.
Challenged
Appellant
Respondent
48/07
1996-97
2089/M/2005
Commissioner of Income Tax, Chennai
C.S. Srivatsan
49/07
1997-98
2090/M/2005
50/07
1998-99
2091/M/2005
51/07
1999-00
2092/M/2005
52/07
2000-01
2093/M/2005
53/08
2001-02
2094/M/2005
54/07
1996-97
2095/M/2005
Commissioner of Income Tax, Chennai
C.S. Seshadri
55/07
1997-98
2096/M/2005
56/07
1998-99
2097/M/2005
57/07
1999-00
2098/M/2005
58/07
2000-01
2099/M/2005
59/07
2001-02
2100/M/2005
60/07
1996-97
2101/M/2005
Commissioner of Income Tax, Chennai
C.S. Varadhan
61/07
1997-98
2102/M/2005
62/07
1998-99
2103/M/2005
63/07
1999-00
2104/M/2005
64/07
2000-01
2105/M/2005
65/07
2001-02
2106/M/2005
66/07
1996-97
2107/M/2005
Commissioner of Income Tax, Chennai
C.S. Narasimhan
67/07
1997-98
2108/M/2005
68/07
1998-99
2109/M/2005
69/07
1999-00
2110/M/2005
70/07
2000-01
2111/M/2005
71/07
2001-02
2112/M/2005
2. The assessees in each of the batch of six cases are, C.S. Narasimhan, C.S. Srivatsan, C.S. Seshadri and C.S. Varadhan, who are the Directors of the Company, named, ‘M/s. C.R.S. Sons & Co., Limited’. The company is engaged in the business of retail-selling of silk sarees and other textiles. The said company makes all purchases from M/s. Sri Sundaravalli Collections (SSVC), which is an entity of Hindu Undivided Family (HUF) of two of the Directors of the company. M/s. Sri Sundaravalli Collections pays guarantee commission to CRS holdings, an entity in which all the four brothers are partners, representing their minor HUFs.
2.1 The company ‘M/s. C.R.S. Sons & Co., Limited’ effects its sale through franchisees, which was owned by different HUFs. These are,
