Madras High Court
Assistant Commissioner Of Income Tax vs Ambadi Enterprises (P) Ltd. on 30 March, 1998
Equivalent citations: (1998)62TTJ(MAD)432
ORDER
P.K. Bansal, A. M. This appeal of the revenue for the assessment year 1986-87 is directed against the order, dt. 20-6-1989 of the Commissioner (Appeals)-II, Madras. The assessee has filed Cross-Objections Nos. 186 (Mad) 1990 and 10 (Mad) 1991 in the above appeal. Cross-Objection No. 10 (Mad) 1991 is the duplicate of the Cross Objection No. 18 (Mad) 1990. Therefore, at the time of hearing the assessee's authorised representative has requested for the withdrawal of the Cross Objection No. 10 (Mad) 1991. The Departmental Representative also agreed with the assessee's authorised representative. In these circumstances we dismiss the Cross-Objection No. 10 (Mad) 1991.
2. Cross-Objection No. 18 (Mad) 1990 has been filed by the assessee late by 151 days. The assessee's authorised representative moved a petition for condonation of delay along with the affidavit of A. Venkatachalam, director of the assessee-company. The authorised representative stated that the delay has occurred due to the fact that the petitioner has not filed the cross-objection within the time as the issue involved would have been academic in nature and the income computed after giving effect to the order of the Commissioner (Appeals) was a negative figure. But due to the retrospective amendment by the Finance Act, 1990, the relief in respect of cash assistance has been withdrawn and, therefore, the total income will become positive taxable income. In these circumstances the deduction under section 80HHC and the disallowance of guest house expenses become important for the petitioner because otherwise there will be huge tax liability on the petitioner. The Departmental Representative has not disputed the cause for the delay and agreed that there was retrospective amendment by the Finance Act, 1990.
3. We have given our careful consideration to the rival contentions. The issue before us whether the Tribunal should condone the delay on the facts and in the circumstances of the case before the Tribunal. Section 253 of the Income Tax Act, 1961 provides for an appeal to the Tribunal against the various decisions of the Income Tax authorities referred to therein. Sub-section (3) of section 253 provides the limitation of 60 days from the communication of the order sought to be appealed. Though there is limitation of sixty days under sub-section (3), sub-section (5) of section 253 empowers the Tribunal to admit an appeal or memorandum of cross-objections after the specified period if it is satisfied that there was sufficient cause for not presenting it within that period. In the present case it is a fact that there was a retrospective amendment by the Finance Act, 1990, by which sections 28(iiib) and 28(iiic) has been inserted with effect from 1-4-1967, and 1-4-1972, respectively and which is the point involved in the grounds of appeal filed by the revenue. By this amendment the cash assistance received by the assessee has been made chargeable to income-tax under the head 'Profits and gains of business or profession'. The assessee cannot foresee beforehand about the amendment to be carried out by the makers of law. The Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC) has held as under about condonation of delay:
"The legislature has conferred power to condone delay by enacting section 5 of the Limitation Act, 1963, in order to enable the courts to do substantial justice to parties by disposing of matters on merits. The expression 'sufficient cause' in section 5 is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. A justifiably liberal approach has to be adopted on principle.
'Every day's delay must be explained' does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic manner.
The doctrine of equality before law demands that all litigants, including the State as a litigant, are accorded the same treatment and the law is administered in an even-handed manner. There is no warrant for according a step-motherly treatment when the State is the applicant praying for condonation of delay.
When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay."
Following the principles enunciated by the Honble Supreme Court in the judgment cited supra, we are inclined to condone the delay which has taken place in the case of the assessee in filing the cross-objections. Therefore, the cross-objections filed by the assessee are admitted.
4. We now deal with the appeal filed by the revenue being ITA No. 187 (Mad) 1990. The issue involved in this appeal is whether the cash incentive received by the assessee is taxable as revenue receipt or not. The learned Departmental Representative pointed out that there was retrospective amendment by the Finance Act, 1990, to section 28 of the Income Tax Act, by which sections 28(iiib) and 28(iiic), which read as under, have been added and the income by way of cash incentive received by the assessee was made chargeable to income-tax under the head 'Profits and gains of business or profession' with effect from 1-4- 1967, and 1-4-1972, respectively :
"28(iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India.
28(iiic) any duty of customs or excise repaid or repayable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971."
The learned Departmental Representative further pointed out that when the additional ground of appeal was taken by the assessee before the Commissioner (Appeals), the amendment was not there and in view of the amendment the finding of the learned Commissioner (Appeals) in para 7 of his order becomes against the law and, therefore, the sum of Rs. 5,79,589 being export cash assistance received by the assessee should be included in its income as it has become revenue receipt. The assessee's authorised representative disputed that the law should be taken as on the date of assessment and if there is an amendment the option available to the assessing officer was that he should have initiated action under section 147. The retrospective amendment cannot make a capital receipt to be a revenue receipt chargeable to tax.
5. We have considered the arguments advanced by both the parties and the materials on record. We have gone through the amendment made by the Finance Act, 1990, and we are inclined to agree with the view of the Departmental Representative that the sum of Rs. 5,79,589, being cash assistance received by the assessee, has become revenue receipt by way of the retrospective amendment in sections 28(iiib) and (iiic) of the Income Tax Act. We accordingly direct the assessing officer to include the said sum of Rs. 5,79,589 in the income of the assessee under the head 'Profits and gains of business or profession', in view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC), in which it was held as under :
"Under section 254 of the Income Tax Act, 1961, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item: There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal."
Thus the appeal of the department is allowed.
6. We shall now take up the assessee's Cross-Objections No. 186 (Mad) 1990. The assessee has taken mainly two grounds, the first one being against the rejection of the assessee's claim of Rs. 49,543 under section 80HHC on the ground that the assessee has not created any reserve as required in the second proviso to section 80HHC(1) and the second ground is against the disallowance of Rs. 20,362 incurred by the assessee towards guest house expenses. The assessee had made the payment to TIAM House Services Ltd. for the stay of its employees. The assessing officer disallowed the said expenditure treating it to be guest house expenses. The assessee appealed to the Commissioner (Appeals) against both the grounds, but the learned Commissioner (Appeals) upheld the order of the assessing officer in respect of both the disallowances.
7. The assessee's authorised representative has stated that before rejecting the claim of the assessee under section 80HHC the assessing officer should have given an opportunity to the assessee to create the reserve, which the assessing officer failed to do. He further argued that the assessee, no doubt, has not created a specific reserve for the purpose of section 80HHC, but the assessee has carried a sum of Rs. 1,10,178 being the balance in its Profit and Loss account to the balance sheet under the head 'reserves and surplus'. Copies of the audited Profit and Loss account and the balance sheet were placed on record. On the other hand, the learned Departmental Representative pointed out that deduction under section 80HHC is a relief available to the assessee and for providing such relief there are certain inbuilt conditions which are essentially required to be complied with by the assessee. He pointed out that the conditions attached to the deduction should be strictly complied with. If the assessee is interested in availing of the deduction, he is bound to fulfil the conditions for availing of the deduction, which the assessee failed to do. The balance in Profit and Loss account is always transferred and shown under the head 'reserves and surplus' in the balance sheet. Section 80HHC requires a specific reserve to be created for the purpose of deduction, which the assessee failed to create. Referring to the Profit and Loss account he pointed out that the assessee was having a sum of Rs. 38,762 to be the profit before taxation during the year and, therefore, he could have created the reserve. There is no provision under section 80HHC that the assessee should be given an opportunity for the purpose of creating the reserve. In this regard he placed reliance on the Madhya Pradesh High Court decision in the case of CIT v. Gupta & Sons (P) Ltd. (1984) 146 ITR 506 (MP).
8. We have gone through the rival contentions and we are of the considered opinion that the creation of the reserve for the allowance under section 80HHC was a prerequisite condition. The assessee failed to create the reserve. It cannot be given a further opportunity for claiming the deduction for which he has wilfully omitted to fulfil certain conditions. We do agree with the Departmental Representative that when the language of the statute is plain and unambiguous it should be interpreted in a manner with simple language and meaning. The Madhya Pradesh High Court in the case of Gupta & Sons (P) Ltd. (supra), has clearly held as under:
"An enactment being the will of the legislature, the paramount rule of interpretation is that a statute should be interpreted according to the intent of the persons who made it. If the legislature wilfully omits to incorporate something of an analogous law in a subsequent statute, or even if there is a casus omissus in a statute, the language of which is otherwise plain and unambiguous, the court is not competent to supply the omission by engrafting on it or introducing in it, under the guise of interpretation by analogy or implication, something that it thinks to be a general principle of justice and equity. "
Thus, following the aforesaid Madhya Pradesh High Court decision we are inclined to reject the ground of the assessee relating to deduction under section 80HHC.
9. As regards the claim of the assessee of guest house expenses amounting to Rs. 20,362, the authorised representative of the assessee relied on the decision of the B-Bench of this Tribunal in ITA No. 4422 (Mad) 1989 for the assessment year 1986-87 in the case of The Tube Investment of India Ltd. v. Asstt. CIT (Order dt. 27-8-1996). The Departmental Representative has drawn our attention to section 37(5) of the Income Tax Act and stated that the section includes for the purpose of disallowance not only guest house maintained by the assessee, but also the guest house taken on hire or otherwise by the assessee.
10. We have heard the rival submissions and perused the material on record. We find that the assessee has paid a sum of Rs. 20,362 to TIAM House Services Ltd. It was the contention of the assessee that the said sister-concern of the assessee was maintaining a transit house which was being used by the assessee's staff and towards the use of the transit house by the employees of the assessee, the assessee had paid the said sum of Rs. 20,362 by way of reimbursement of TIAM House Services Ltd. The said sum was not incurred for the purpose of maintaining guest house as contemplated in section 37(4). We have gone through the decision of the Tribunal in ITA No. 4422 (Mad) 1989, cited supra. We find that the Tribunal has already considered the provisions of section 37(4) as well as section 37(5) and held the expenses to be allowable. We are inclined to agree with the order of the Tribunal, cited supra and direct the assessing officer to delete the sum of Rs. 20,362 out of the income of the assessee as the same is not covered under the provisions of sections 37(4) and 37(5).
11. The cross-objections are allowed in part.