N KRISHAN DECD Vs. SETTLEMENT COMMISSION

JUDGEMENT

(1.) In these four petitions presented by the same person praying for quashing the order passed by the Settlement Commission (Income-tax and Wealth-tax) constituted under the provisions of the Income-tax Act, 1961 ("the Act" for short), the following two questions of law arise for consideration :

(2.) The facts of the case, in brief, are as follows : The petitioner was a regular assessee being assessed to income-tax the provision of the Act. He was the managing director of Internation Instruments Limited, a public limited company, established under the technical collaboration with a German-based company VDO Tachometer Werke Gmbh ("VDO" for short). The petitioner was interested in acquiring a business for manufacturing hose clips, which was being run under the name and style "Noridex" by a German national by name Mr. Klug. In view of its superior quality and reputation, the petitioner desired to acquire the business. For that purpose, the petitioner negotiated a loan from VDO. This was approved by the Government of India, subject to the following conditions :

(3.) Subsequently, the precondition regarding existence of profits was withdrawn by the Government of India. Further, the petitioner had to establish a parallel unit for the manufacture of hose clips within a period of three years in India. According to the petitioner, he was constrained by certain conditions to raise a personal loan and to establish a private limited company to take over the business. No foreign exchange was to be released by the Government of India. If there was to be default in repayment and the Government were to release foreign exchange, the petitioner was to pay penalty in an equal amount. These conditions were incorporated in the order of the Government of India dated August 10, 1970 (annexure-A).