Kerala High Court
Kerala State Coir Corporation Ltd. vs Union Of India (Uoi) And Ors. on 4 April, 1994
Equivalent citations: [1994]210ITR121(KER)
JUDGMENT T.L. Viswanatha Iyer, J.
1. I shall state the facts in Original Petition No. 1907 of 1994.
2. The petitioner is an assessee to tax under the Income-tax Act, 1961 ("the Act"). For the assessment year 1990-91, the petitioner filed a return on December 31, 1990, declaring a total loss of Rs. 79,66,386, and an accumulated loss of Rs. 2,79,43,720 after adjusting the brought forward loss of earlier years. The third respondent, assessing authority, accepted the return by his proceedings, exhibit P-3, dated October 24, 1991, under Section 143(1)(a) of the Act. Thereafter he purported to rectify the order, exhibit P-3, on the ground that the petitioner had claimed depreciation at an amount much larger than that allowable and also on the ground of disallowance of another item. Accordingly, he held that a total amount of Rs. 44,05,251 had to be disallowed out of the accumulated loss of Rs. 2,79,43,720 and reduced the total loss for the year to Rs. 35,65,135 and the brought forward loss to Rs. 1,99,77,334. In doing so he also levied additional tax at 20 per cent. on the amount of Rs. 44,05,251 under Section 143(1A) and demanded the said amount from the petitioner. Being aggrieved by the rectification, the petitioner filed an appeal before the Commissioner of Income-tax (Appeals) which did not meet with success being dismissed by the order, exhibit P-5. The petitioner has filed second appeal before the Appellate Tribunal and that is pending.
3. The Commissioner of Income-tax in his order, exhibit P-5, relied on the retrospective amendment introduced to Section 143(1A) by the Finance Act of 1993, with retrospective effect from April 1, 1989, under which additional tax was made leviable even in cases where the net result was a loss after carrying out the adjustments. Perhaps because of this, the petitioner has come forward with the Original Petition No. 1907 of 1994 to declare the said amendment as beyond the legislative competence of the Union under entry 82 of List I to the Seventh Schedule to the Constitution and as ultra vires Articles 14 and 265 of the Constitution.
4. The other writ petition, Original Petition No. 2016 of 1994, is also filed in similar circumstances.
5. Both the writ petitions are replete with averments regarding the alleged incompetence of the Union Parliament to impose such an additional tax under entry 82 of the Union List. The contention is that entry 82 authorises imposition of tax only on income other than agricultural income. Income, counsel states, is something which connotes a thing that comes in and not a loss. But this contention need not detain me long for the reason that even if entry 82 is not wide enough to take in the impugned levy, the levy will be sustainable under the residuary entry 97, which authorises Parliament to legislate on any matter not enumerated in List II or List III including any tax not mentioned in either of those Lists. The petitioner has no case that the levy in question is one falling under List II or that the subject-matter thereof falls under List II or List III. Entry 97 authorises Parliament to legislate on any subject so long as it is not enumerated in List II or List III. It is now well-settled that levy of tax can also be justified under this entry as was done in the case of gift-tax (Second GTO v. D.H. Nazareth [1970] 76 ITR 713 ; AIR 1970 SC 999), wealth-tax (Union of India v. Harbhajan Singh Dhillon [1972] 83 ITR 582 (SC)), a tax on building contracts (Mithan Lal v. State of Delhi, AIR 1958 SC 682). This, I think, is sufficient to overrule the challenge made by the petitioner.
6. The other ground raised is one of violation of Articles 14 and 265 of the Constitution. But I do not find any averments in the writ petition as to how this challenge is sustained except the bald plea that the levy is violative of Articles 14 and 265 of the Constitution. It is not, therefore, necessary to deal with this point at all. Counsel for the petitioner, however, referred to the observation made by the Delhi High Court in Modi Cement Ltd. v. Union of India [1992] 193 ITR 91, where it was incidentally observed that if the interpretation sought to be put by the Department was correct, then there would be a lot of force in the contention of the assessee that such a provision to levy additional tax where the ultimate resultant figure was a loss, would be clearly arbitrary and may even have to be struck down. This is only obiter. Apart from that the object of Section 143(1A) is prevention of tax evasion. Its purpose is to see that the assessee makes a true and correct disclosure of his income and expenditure. A true picture of the loss has also to be made, inasmuch as the loss is liable to be carried forward to the succeeding years. The provision for additional tax is thus one intended to prevent evasion of tax, and such a legislation intended for purposes ancillary to the correct assessment of the income or the loss, and to prevent evasion of tax cannot be branded as arbitrary or struck down as such. The section is invoked only when the return filed does not accord with the realities. Therefore, and quite apart from the lack of pleadings in the case, I do not also find any merit in the contention that the impugned provision is violative of Articles 14 and 265 of the Constitution.
7. The petitioners have raised various other contentions in the writ petitions. But they are matters which could be agitated before the Departmental authorities. I leave those questions open for being agitated by the petitioner before the statutory authorities. I may also make it clear that nothing stated in the judgment will preclude the petitioners from raising their contentions before the statutory authorities in appropriate proceedings.
8. The original petitions are, therefore, dismissed in limine.