Madras High Court
Commissioner Of Income-Tax vs South India Corporation (Agencies) ... on 24 April, 1998
Equivalent citations: [2000]245ITR149(MAD)
JUDGMENT Janarthanam, J.
1. South India Corporation (Agencies) Limited, Madras, is the assessee. The assessment year is 1981-82 for which the accounting period ended March 31, 1981.
2. The assessee in the course of assessment proceedings placing implicit reliance on the decision of the Calcutta High Court in the case of Dtincaii Brothers and Co. Ltd. v. CIT [1981] 128 ITR 302 contended that the provisions for taxation amounting to Rs. 57,86,074 should be deducted from the cost of investments.
3. The Income-tax Officer rejected the claims so made entertaining the view that the decision of the Calcutta High Court relied on by the assessee had not reached the stage of finality, in the sense of the same having been agitated before the Supreme Court and pending there.
4. When the assessee took up the matter in appeal, the Commissioner of Income-tax (Appeals) directed the Income-tax Officer to allow the asses-see's claim for reduction of this amount by following the decision reported in Duncan Brothers and Co. Ltd. v. CIT .
5. The Department took up the matter on further appeal to the Tribunal and the Tribunal, in turn, dismissed the appeal as of no merit, since the decision of the Commissioner of Income-tax (Appeals) was based on the decision of the Calcutta High Court in Duncan Brothers and Co. Ltd. v. CIT [1981] 128 ITR 302.
6. It is on these facts, the Tribunal at the instance of the Revenue referred the common question as below under Section 256(1) of the Income-tax Act, 1961, read with Section 18 of the Companies (Profits) Surtax Act, 1964 : "Whether, on the facts and in the circumstances of the case, the provision for taxation amounting to Rs. 57,86,074 was a surplus fund and the assessee is entitled to deduction of the said amount from the cost of investments to be reduced from the capital base under rule 2 of the Second Schedule ?"
7. Arguments of Mr. R. Sivaraman, learned counsel, representing Mr. C. V. Rajan, learned junior standing counsel representing the applicant and of Mr. K. Vaitheeswaran, learned counsel, representing Subbaraya Aiyar, learned counsel appearing for the respondent were heard.
8. No doubt true it is, that an identical question arising for consideration in the instant case arose for consideration in the case of Duncan Brothers and Co. Ltd. v. CIT . It is equally true that the said question had been answered in favour of the assessee and against the Revenue by the Calcutta High Court, holding that the assessee was entitled to the deduction of the provision for taxation from its cost of investments in terms of Clause (ii) of Rule 2 of Schedule II. While so holding their Lordships of the Calcutta High Court followed an earlier decision of the said court in the case of the same assessee in Duncan Brothers and Co. Ltd. v. CIT [1978] 111 ITR 885. The case in Duncan Brothers and Co. Ltd. v. CIT , is relatable to the assessment year 1965-66. The decision in Duncan Brothers and Co. Ltd. v. CIT , was agitated before the apex court, as is seen from the decision reported in CIT v. Duncan Brothers and Co. Ltd. [1996] 219 ITR 121. The Supreme Court after elaborate consideration reversed the decision of the Calcutta High Court in Duncan Brothers and Co. Ltd. v. CIT[1978] 111 ITR 885, in the sense of answering the question raised against the assessee and in favour of the Revenue. Such being the position, it goes without saying that the Tribunal was rather wrong in deciding the issue in favour of the assessee, placing implicit reliance on the decision of the Calcutta High Court in Duncan Brothers and Co. Ltd. v. CIT[1981] 128 ITR 302, which followed the decision in Duncan Brothers and Co. Ltd. v. CIT . We, therefore, answer the common question that the provision for taxation amounting to Rs. 57,86,074 cannot at all be deducted from the cost of the investments to be reduced from the capital base under rule 2 of the Second Schedule. The question is answered accordingly.
9. These tax cases are thus disposed of. There shall, however, be no order as to costs, on the facts and in the circumstances of the cases.