ASHIM KUMAR BANERJEE, J. - (1.) THE appellant received substantial sums during the assessment years 1991 -92, 1992 -93, 1993 -94 and 1994 -95 in consideration of giving up their rights to carry on business of X -ray Medical Systems under a non -competition agreement. According to the appellant such receipts were capital receipts and as such not taxable. The Assessing Officer rejected such contention and assessed those amounts as revenue receipts. The Commissioner of Income -tax (Appeals) reversed the decision of the Assessing Officer and gave full exemption for the amounts involved in the said four assessment years to the appellants. The Revenue preferred an appeal before the Tribunal.
(2.) WHILE the appeal was pending before the Tribunal the Central Government came up with a scheme called 'Kar Vivad Samadhan Scheme, 1998' (hereinafter referred to as the 'said Scheme of 1998'). Under the said Scheme of 1998 where disputes remain pending as on the stipulated date where the assessee was litigating before the appropriate forum and because of pendency of such disputes tax was outstanding on that score the assessee was entitled to take benefit of the said scheme provided he applied for settlement of such disputes upon payment of tax for the disputed amount at the rate prescribed under the said Scheme of 1998. Upon such payment the Revenue authority was obliged to issue a settlement certificate upon verification of the amount and payment thereof. This was prevalent for a certain period. The scheme was challenged before the Delhi High Court by the All India Federation of Tax Practitioners on several grounds. One of the grounds was that the defaulting assessees were given benefit to settle the tax disputes whereas the assessees whose dispute was pending although there was no tax arrear, were deprived of such benefit. The Delhi High Court while deciding the issue observed that the pending dispute where the Revenue preferred appeal against the benefit so extended to the assessee those appeal could also be settled by applying the identical procedure. In the said decision in the case of All India Federation of Tax Practitioners v. Union of India : [1999]236ITR1(Delhi) , the Delhi High Court observed, inter alia, as follows (page 23): To sum up, our conclusions are : (1) The proviso to Section 92 is ultra vires Article 14 of the Constitution as it results in creating two artificial classes between the same class of assessees, i.e., the litigating assessees in arrears ; (2) the definition of 'tax arrears' in Clause (m) of Section 87 should be so read as to mean the amount of tax, penalty or interest determined by any competent authority on or before March 31, 1998, though such determination might have been set aside at a later stage, if such setting aside has not been accepted by the Department and continues to remain under challenge before a court or Tribunal ; (3) The rest of the Scheme is intra vires the Constitution.
(3.) THE parties accepted the decision of the Delhi High Court. The Revenue issued a circular dated December 12, 1998, appearing at page 129 of the paper book purportedly in terms of the judgment and order of the Delhi High Court. Clause 2(ii) of the said circular is set out below: (ii) For declaration relating to departmental appeals also the existing Form No. 1A can be used. In such cases, there are no outstanding taxes and hence the process of working out 'disputed income' from outstanding taxes is not involved. The entire income under dispute in various grounds of appeal may constitute 'disputed income' on which the sum payable can be determined. In respect of the departmental appeals, the declaration has to be for the entire income disputed in such appeals.;