Income Tax Appellate Tribunal - Mumbai
Indo Aden Salt Mfg. And Trading Co. (P.) ... vs Income-Tax Officer on 18 February, 1992
Equivalent citations: [1992]41ITD486(MUM)
ORDER
N.R. Prabhu, Accountant Member
1. The principal grievance in this appeal is that the Commissioner (Appeals) was in error in not granting to the assessee relief under Section 32(1 )(iii) on the assets of the assessee taken over by the Government of Yemen and also deduction in respect of cash and bank balances aggregating to Rs. 3,73,405.
2. It may be necessary to set out the facts of the case in brief. The original assessment in this case was completed by the ITO on the basis of the return filed by the assessee on a total income of Rs. 3,53,020. The assessee was carrying on business in Aden, which was taken over by the Government of Yemen during the previous year relevant to the assessment year under consideration. The assessee, after the completion of the regular assessment, filed a revision petition before the Commissioner of Income-tax. In the revision petition it was claimed that since its entire business along with the stock-in-trade at Aden was nationalised by the Government, the assessee would be entitled to a deduction of the value of the stock and also deduction under Section 32(1)(vi) of the Income-tax Act in regard to the depreciable assets taken over by the Government. The Commissioner, after hearing the learned representative of the assessee, observed as under:
In view of the facts discussed above, I set aside the assessment for asst. year 1970-71 with a direction to the ITO to redo the same after giving the assessee an opportunity of being heard and in accordance with the provisions of law.
In the course of the proceedings to give effect to the order of the Commissioner, the assessee filed a revised return and in the said revised return, in addition to the claim for deduction of stock-in-trade and depreciation under Section 32(1)("0. a further claim was made for deduction of cash and bank balances taken over. The Income-tax Officer completed the assessment denying the assessee all these deductions. When the matter was carried in appeal, the Commissioner (Appeals) was of the view that the assessee had no legal right to file a return under Section 139(5) in the course of the proceedings initiated by the Income-tax Officer for giving effect to the Commissioner's order under Section 264. He thereafter proceeded to uphold the rejection of the claims made by the assessee before the Income-tax Officer. The assessee is aggrieved.
3. It is contended on behalf of the assessee by the learned counsel, Shri S.E. Dastur, that the order passed by the Commissioner (Appeals) requires to be reversed. The learned counsel admits that nothing turns on the findings of the Commissioner (Appeals) that the assessee has no right to file a return under Section 139(5) in the course of reassessment proceedings. A claim for a further deduction could be made by the assessee even by filing a letter before the Income-tax Officer. Though a ground was taken by the assessee before the Commissioner (Appeals) that the action of the Income-tax Officer in rejecting the return under Section 139(5) was bad in law, the same was not argued in a serious manner for the above reason. It is then submitted that the order of the Commissioner was an order setting aside the entire assessment order. It would, therefore, be open to the assessee to claim a deduction, which was not there in the revision petition filed by the assessee. It is submitted that in the revision petition filed the assessee had claimed that the total income assessed was excessive and this also would enable the assessee to raise an issue regarding the deduction of an additional sum, which in this case, is the aggregate cash and bank balances. It is then pointed out that the Inspecting Assistant Commissioner in the proceedings under Section 144B has impliedly accepted this position in paragraph 5 of his order. Then it is submitted that since the entire undertaking in Aden was taken over, the assessee would be entitled to a deduction under Section 32(1)("j) as claimed and a further deduction of cash and bank balances, which were also lost by the assessee in the takeover. Inviting our attention to the Explanation to Section 32(1 )(iii) of the Act it is submitted that 'sale' as contemplated under that sub-section would include transfer, exchange or a compulsory acquisition under any law for the time being in force. Since this was a case of compulsory acquisition, the claim cannot be denied.
4. The learned Departmental Representative, on the other hand, relies on the orders of the Income-tax Officer and the Commissioner (Appeals).
5. We have heard the parties to the dispute. In our opinion, it is not open to the assessee to claim before the Income-tax Officer in the course of proceedings to give effect to the Commissioner's order under Section 264 a deduction, which was not an issue in the revision petition filed by the assessee. As far as the original assessment was concerned, the same had become final. The order was sought to be resurrected by the assessee by filing petition under Section 264. The Commissioner set aside the order of the Income-tax Officer, in the penultimate paragraph of his order in view of the facts discussed in the preceding paragraphs. This does not give any carte blanche to the assessee to claim any deduction which was not there before the Income-tax Officer. The argument of the assessee that it had objected to the income assessed before the CIT and, therefore, it would be competent for it to claim a deduction, which was not there in the revision petition, in the set aside proceedings has merely to be stated to be rejected. The jurisdiction of the Commissioner under Section 264 is of a limited nature and not as wide as that conferred on the appellate authority under Section 251 of the Act Even where an order has been set aside by an appellate authority, there is a difference of opinion amongst the Courts regarding the scope of fresh assessment to be made by the Income-tax Officer in such a case. The view that once an assessment order is set aside it is open to the Income-tax Officer to consider the entire matter afresh notwithstanding the terms of the order of the Appellate authority is a view which has not been subscribed by all the courts of the country. When such is the position, to argue that as a result of the Commissioner's order setting aside the assessment order in this case the assessee could claim even the issues which were not agitated before the Commissioner under Section 264 would not be correct. We, in the circumstances, feel that the order passed by the Commissioner (Appeals) refusing to entertain the claim for deduction of cash and bank balances is in order and we, therefore, proceed to uphold the same. That leaves us for consideration whether the assessee would be entitled to deduction under Section 32(1)(iii) of the Income-tax Act in respect of the assets taken over by the Government of Yemen. The word "sold" has been defined under Section 32(1)(iii) of the Act to include, inter alia, compulsory acquisition under any law for the time being in force. We are not prepared to accept the argument advanced by the assessee that the expression 'any law for the time being in force' would include laws of a foreign country. The context in which this expression has been used can only refer to the domestic laws. This is because the same speaks of a compulsory acquisition under any law for the time being in force. The words "compulsory acquisition" wherever they have been used in the Act refers to compulsory acquisition under the Land Acquisition Act in force in the various States of the country. It does not refer to any compulsory take-over as a result of the nationalisation by a foreign country. Again the law has been understood in common parlance as to include customs and usages having the force of law. When such is the position, the law that is referred to, unless the context requires a different treatment, can only be the domestic laws of the country. Section 32(1)(iii) Creates a legal fiction and such provisions have to be construed in a strict manner. In normal course loss arising out of a sale of an asset can only be treated as a capital loss. It is only by virtue of the provisions of Section 32(1 )(iii) that the same could be regarded as a revenue loss. If the loss is to be brought under that sub-clause it is essential that all the ingredients of that sub-clause are properly satisfied. Since there has been no compulsory acquisition under any law for the time being in force, we are of the view that the claim for deduction under Section 32(1)(m) is not admissible. The loss arising to the assessee would be in the nature of capital loss and the same is entitled to be treated likewise.
6. In the result, the appeal is dismissed.