Delhi High Court
Lakshmi Insurance Co. Ltd., New Delhi vs Commissioner Of Income-Tax, New Delhi on 17 October, 1967
Equivalent citations: ILR1968DELHI409, [1969]72ITR474(DELHI)
Author: Chief Justice
Bench: Chief Justice
JUDGMENT T.V.R. Tatachari, J.
(1) This is a reference under Section 66(1) of the Indian Income-tax Act, 1922, made by the Income-tax Appellate Tribunal, Delhi Bench 'C', referring two questions of law which are said to arise out of the Tribunal's consolidated order, dated 25-5-1960, in Income-tax Appeals Nos. 8133 and 8134 of 1956-57.
(2) The assessed, the Lakshmi Insurance Co. Ltd., New Delhi, is a public limited company which carried on life insurance business. The Income-tax Officer made assessments on 30-12-1954 for the years 1951-52 and 1952-53 or the basis of the last actuarial valuation made for the period ending 31-12-1950. The assessments were made for the said two years on ttoal income of Rs. 1,03,381 and Rs. 59,043 respectively. The assessments are said to have been made under Rule 2(b) of the Schedule to the Income-tax Act. in computing the taxable surplus, the Income-tax Officer excluded:
(i) a sum of Rs. 3,40,678 being dividends from the Industrial Finance Corporation of India: and
(ii) a sum of Rs. 3,40,065 as interest on securities issued by the Mysore Darbar (State securities) by reason of a Ntoification under Section 60 of the Indian Income-tax Act, 1922.
(3) Acting under Section 33-B of the Act, the Commissioner of Income-tax, Delhi, took the view in his consolidated order dated 29-12-1956, that the exclusion of the two amounts was contrary to the provisions of Rule 2(b) of the Schedule to the Income-tax Act, and therefore, directed that the said two amounts should be included in the taxable surplus.
(4) Against that order of the Commissioner, the assessed preferred an appeal to the Appellate Tribunal. The Tribunal, by its consolidated order dated 25-5-1960 held that the sum of Rs. 62,678 being dividends from the Industrial Finance Corporation of India, was exempt from income-tax, and should nto have, therefore, been included in the taxable surplus. But, as regards the sum of Rupees 3,40,065 being interest on securities issued by the Mysore Darbar (State securities), the Tribunal agreed with the view of the Commissioner and held that the same should be included in the taxable surplus. A third contention was raised by the assessed before the Tribunal that the order passed by the Commissioner of Income-tax under section 33B was barred by limitation. The Tribunal held that it was nto barred by limitation.
As regards the sum of Rs. 62,678 the Revenue did nto pursue the matter further, and the question about the same did nto, therefore, survive. But as regards the question about the sum of Rs. 3,40,065 and the question of limitation, the assessed moved the Tribunal to refer the question to this Court under Section 66 (1) of the Act, The Tribunal accordingly, by its order, dated 4-5-1962 referred the following two questions for the opinion of this Court:
"(1) Whether the interest of Rs. 3,40,065 received on the securities issued by the Mysore Darbar for btoh the years is exempt from taxation?
(2) Whether the order under S. 33-B passed by the Commissioner of Income-tax was barred by limitation?"
(5) The first question relates to the sum of Rs. 3,40,065 received by the assessed-company in each of the two years 1951-52 and 1952-53, as interest on securities issued by the Mysore Darbar (State Securities). The contention of the assessed before the Income-tax Authorities was that by virtue of a ntoification under Section 60, interest on Mysore Darbar Securities was exempt from tax, and that the said amounts should nto be included in the taxable surplus. The income-tax Officer accepted the said contention of the assessed and excluded the amounts in computing the taxable surplus. But, the Commissioner of Income-tax took the view that the said amounts should nto be so excluded. According to him, the Life Insurance business is a class by itself, the profits of which are to be computed in accordance with the procedure laid down in the Schedule tto he Income-tax Act, and only the adjustments enumerated in the said Schedule are to be carried out and no toher modification is to be made to the basis of computation of profits. His reasoning was that the income that is assessed in the case of life insurance business is neither the actual income nor the ttoal income of the previous year, that what is charged to tax under Section 10(7) and the Schedule to the Act is a ntoional or conventional income, that as actual income is nto to be brought under tax, the question of exclusion of the interest on the securities, of the Mysore Darbar does nto aries, that in cases where Rule 2(b) of the Schedule is applicable the Schedule provides a method of finding out the amount which is to be the subject of tax in respect of profits of insurance business, and that the exemption granted by ntoification under Section 60 of the Act is nto available in the case of assessable profits of insurance companies determined under Rule 2(b) of the Schedule. In support of his view, he relied upon the decisions in Inland Revenue Commissioners v. Australian Mutual Provident Society, (1947) 15 Itr (Supp) 71 (HL) at p. 77, Commissioner of Income-tax, Bombay v. Western India Life Insurance Co. Ltd., and Commissioner of Income-tax v. B. B. & C. I. Railway Co-operative Mutual Benefit Society, .
(6) the Income-tax Appellate Tribunal, as already stated, took the same view. The reasoning of the Appellate Tribunal was, that according to the Income-tax Act, profits and gains of any business of life insurance can be computed only in accordance with R. 2(b) of the Schedule to the Act and in no toher manner, that instead of computing the income of an Insurance Company as laid down in various Sections under Chapter Iii, it has to be computed in the manner laid down in the Schedule to the Act, that an Insurance Company, instead of making its return of income under the various heads as laid down in Section of the Income-tax Act, has gto to submit on unit of income, a sort of ntoional or artificial income as provided in the Schedule to the Act, that since the income of the assessed had to be worked out in accordance with Rule 2(b) of the Schedule, there is no scope for making any adjustments toher than those provided in the Schedule itself, and that the assessment in the instant case having been made on a ntoional income and nto on the actual receipts of the preceding year, there is no scope for excluding from assessment the income earned as interest on Mysore Darbar Securities. In support of their view, the Tribunal relied upon the decision in Commissioner of Income-tax, Bombay City Ii v. Crown Life Insurance Co., .
(7) Shri Bhagwat Dayal, the learned counsel for the assessed-company, contended that the view taken by the Appellate Tribunal and the Commissioner of Income-tax was erroneous and that the exemption granted by the ntoification under Section 60 is available to the assessed-company, and the amounts of interest received by the assessed-company on the Mysore Darbar Securities should be excluded in computing the taxable surplus. For a proper appreciation of the said contention it is necessary to refer to the provision in Sections 3, 4, 6, 10(7), and 60, the ntoification made under Section 60 and Rule 2(b) of the Schedule to the Income-tax, Act, 1922.
(8) Chapter I of the Indian Income-tax, 1922, which contains Sections 3, 4, 4A, and 4B. provides for "charge of Income-tax". Section 3, which is the charging section provides as under "3. Charge of Income-tax: Where any Central Act enacts that income-tax shall be charged of any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of this Act, in respect of the ttoal income of the previous year of every individual. Hindu undivided family, company and local authority, and of every firm and toher association of persons or the partners of the firm or the members of the association individually."
Section 4 deals with the application of the Act, and the part of the section which is relevant for the purpose of this reference runs as under:
"4. Application of Act (1) Subject to the provisions of this Act, the ttoal income of any previous year of any person includes all income, profits and gains from whatever source derived which- x x x x"
(9) Chapter Iii, which contains Sections 6 to 17, deals with "taxable income". Section 6 enumerates the heads of income chargeable to income-tax. The said section runs as under:
"6. Heads of income chargeable to income-tax-
Save as toherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to income-tax in the manner hereinafter apportioned, namely:
(I) Salaries;
(ii) Interest on securities;
(iii) Income from property;
(iv) Profits and gains of business, profession or vocation;
(v) Income from toher sources;
(vi) Capital gains."
The various heads of income mentioned in Section 6 are dealt with in Sections 7 to 12. Section 10 deals with "business". Sub-section (1) of Section 10 provides that- "the tax shall be payable by an assessed under the heads "profits and gains of business, profession or vocation" in respect of the profits or gains of any business profession or vocation carried on by him."
Sub-sections (2) to (6) deal with the computation of the profits or gains and the allowances which may be made in the computation. Sub-section (7), which is the material provision for the purposes of this reference, runs as under:
"(7) Ntowithstanding anything to the contrary contained in Sections 8, 9, 10, 12 or 18, the profits and gains of any business of insurance and the Tax payable thereon shall be computed in accordance with the rules contained in the Schedule to this Act."
(10) Chapter X of the Act contains miscellaneous provisions. Section 60 which occurs in this Chapter runs as under:
60. Power to make exemption, etc,--
(1) The Central Government may, by ntoification in the Official Gazette, make an exemption, reduction in rate or toher modification, in respect of income-tax in favor of any class of income, or in regard to the whole or any part of the income of any class of persons."
Sub-sections (2) and (3) thereof are nto material for the purpose of this case.
(11) The schedule to the Act contains the rules for the computation of the profits and gains of insurance business, as provided in Section 10 (7) of the Act. Rules (1) and (2), in so far as they are material for the purpose of this reference, are as follows:
"(1) In the case of any person who carries on or at any time in the preceding year carried on, life insurance business, the profits and gains of such person from that business shall be computed separately from his income profits or gains from any toher business.
(2) The profits and gains of life Insurance business shall be taken to be either-
(a) the gross external incomings of the preceding year from that business less the management expenses of that year, or
(b) the annual averge of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation made in accordance with the Insurance Act, 1938 (IV of 1938) in respect of the last inter-valuation period ending before the year for which the assessment is to be made, so as to exclude therein which was made in any earlier inter-valuation period and any expenditure toher than expenditure which may, under the provisions of Section 10 of this Act, be allowed for and in computing are profits and gains of a business, whichever is the greater."
The proviso and clauses (c) and (d) of Rule 2 and Rules 3 and 4 of the Schedule contain toher provisions as to deductions and adjustment of tax paid by deduction at source, in the matter of the computation of the profits and gains of life insurance business.
(12) The Ntoification issued under Section 60 of the Act and which is relied upon the assessed in so far as it is material, is as follows:
"Finance Department Ntoification No. 878-F Income-tax dated the 21st March, 1922, as amended or added to form time to time. The following classes of income shall be exempt from the tax payable under the said Act and they shall nto be taken into account in determining the ttoal income or salary of an assessed for the purposes of the said Act, exempt for the purpose of sub-section (4) of Section 48: (1) x x x x (2) to (26) x x x x (27)The interest on Mysore Darbar Securities. to (41) x x x".
(13) Thus under Section 3, where any Central Act enacts that income-tax shall be charged for any year rate or rates, income tax shall be charged at that rate or those rates for that year in accordance with and subject to the provisions of the Act in respect of the ttoal income of the previous year. Section 4 prescribes that, subject to the provisions of the Act, the ttoal income of any previous year includes all income, profits and gains form whatever source derived, and also provides that certain classes of income, profits or gains shall nto be included in the ttoal income. Section 6 enumerates the heads of income, profits and gains which shall be chargeable to income-tax in the manner prescribed in the subsequent Sections of the Act.
(14) One of the heads of income is "profits and gains of business, professions or vocation:, and the same is dealt with in section 10. In the case of profits and gains of any business of insurance, Section 10(7) provides that ntowithstanding anything to the contrary contained in Sections 8, 9, 10, 12 or 18, the profits and gains of any business of insurance and the tax payable thereon shall be computed in accordance with the rules contained in the Schedule to the Act.
(15) The profits and gains of any business of insurance might consist of income by way of "interest on securities" which is dealt with in Section 8, or "income from property" which is dealt with in Section 9, or "income from profits & gains of business" which is dealt with in Section 10, or "income from toher sources" which is dealt with in Section 12, or might consists of two or more of the said heads of income. Normally, the computation of the income and the tax payable thereon in respect of each of the said heads of income is to be made under the respective sections. But, in the case of the computation of the profits and gains of any business of insurance and the tax payable thereon, Section 10(7) prescribes that such computation shall be made in accordance with rules contained in the Schedule to the Act. A reference to Rule 2 of the Schedule shows that the computation of profits of life insurance business is to be made nto on the basis of the actual income or the ttoal income (as is the case under sections 8, 9, 10, and 12), but on the basis of a ntoional income mentioned in the said Rule. Rules 3 and 4 in the Schedule deal with deductions and adjustment of tax paid by deduction at source in the case of profits and gains of life insurance business.
(16) Thus, the scheme of the provisions referred to above shows that the chargeability of the ttoal income f an assessed to income-tax and the applicability of the Act to the ttoal are governed by the provisions in Sections 3, 4, 4A and 4B while the determination as to what is taxable income is governed by Sections 6 to 17 in Chapter Iii of the Act. Each of the Sections 7, 8, 9, 10 and 12 deals with the question as to whether a particular head of income is taxable or nto, and also with the question as to the computation of the taxable income. Section 10 deals with the question as to what is taxable income from business, and with the question as to the computation of such taxable income from business. So far as the computation of the income from the business of insurance is concerned Section 10(7) provides that the said computations should be made nto in the manner prescribed in Sections 7, 8, 9, 10 and 12, but should be made in the manner prescribed in the Rules contained in the Schedule to the Act. Rules 1 to 4 in the Schedule deal with the computation of the profits and gains of life insurance, business, while Rule 5 deals with the computation of profits and gains of toher insurance business and Rules 6 and 7 contain toher general provisions regarding the profits and gains of insurance business. It has to be ntoiced in particular that the provisions in Rule 2 in the Schedule deal with the computation of profits and gains of life insurance business, but nto with the chargeability of income-tax under the Act or the applicability of the Act.
(17) Now section 60(1) of the Act, which occurs among the miscellaneous provisions in Chapter X of the Act empowers the Central Government to make an exemption reduction in rate or toher modifications, in respect of income-tax in favor of any class of income or in regard to the whole or any part of the income of any class of persons, by Ntoification in the Official Gazette. The language of the section as well as the fact that it occurs among the miscellaneous provisions in section 60(1) is a general provision which governs all the toher provisions in the Act. It refers to the power to make an exemption, reduction in rate, etc. In respect of income-tax itself in favor of any class of income. When, by a Ntoification, the Central Government exempts any class of income from income-tax, the said income is nto chargeable at all with income-tax under the Act. In toher words, any class of income which would toherwise normally be chargeable with income-tax under any of the provisions of the Act, would nto be so chargeable with income-tax if the Central Government by Ntoification under Section 60 makes an exemption in respect of income-tax in favor of the said class of income. Of course, the nature and the extent of the exemption depends upon the actual provision in the Ntoification, and has to be gathered from the language used in the said Ntoification. The provisions in the Rules in the Schedule to the Act are also a part of the Act, and are in fact, ancilliary to the provisions in Section 10 of the Act. So, the said Rules in the Schedule, which might normally apply to class of income referred to in the said Rules, cannto apply to the said class of income, when the Central Government makes by Ntoification in the Official Gazette, an exemption in respect of income-tax in favor of the said class of income.
(18) In the present case, the amount in question[V1] is the interest of Rs. 3,40,065 received by the assessed on the securities issued by the Mysore Darbar in each of the accounting years, and such a class of income was exempted from the tax payable under the Income-tax Act 1922, by the Ntoification No. 878-F, dated 21-3-1922, made by the Central Government under Section 60(1) of the Act. The interest on Mysore Darbar Securities is item (27) in the classes of income set out in the aforesaid Ntoification, and the Ntoification expressly and clearly states that "the classes of income(set out in the Ntoification) shall be exempt from the tax payable under the said Act (Income-tax Act, 1922) and they shall nto be taken into account in determining the ttoal income or salary of an assessed for the purpose of the said Act." In our opinion the language o f Section 60 and the Ntoification clearly shows that the amount of interest on Mysore Darbar Securities received by the assessed was exempted from income-tax under the Act, and cannto be included in computing the taxable surplus.
a Ntoification was issued under Section 60 in that following terms:
"The following classes of income shall be exempt from the tax payable under the said Act, but shall be taken into account in determining the ttoal income of an assessed for the purposes of the said Act: 1. x x x x.
2. The profits of any Cooperative Society toher than the Sanikatta Salt owners' Society in the Bombay Presidency for the time being registered under the Cooperative Societies Act, 1912 (II of 1912) the Bombay Cooperative Societies Act 1925 (Bombay Act Vii of 1925), or the Madras Cooperative Societies Act, 1932 (Madras Act Vi of 1932) or the dividends or toher payments received by the members of any such Society out of such profits. Explanation:-x x x x". As pointed out in the head ntoe to the resport, the Ntoification applied btoh to cooperative societies which were nto doing insurance business as well as to cooperative societies which were doing insurance business. The assessed in that case was registered under the Bombay Co-operative Societies Act, 1925, and it was a mutual insurance association within the meaning of section 2(6C) of the Indian Income-tax Act, 1922. The Income-tax Officer computed the Society's income for the relevant years under Rule 2(a) of the Schedule to the Act as required by Rule 9 of the Schedule. The assessed-society claimed exemption from the income-tax on the strength of the Ntoification issued by the Central Government under section 60 of the Indian Income-tax Act or was toherwise exempted, was referred to the High Court Chagla, C. J. and Tendulkar, j., in dealing with the said question, explained the legal position in the following manner:
"Under Section 2(6C) of the Act, the profits of any business of insurance carried on by any mutual insurance association is income for the purpose of tax and Section 10(7) provides a special method of computing the profits and gains of any business of insurance and the manner in which tax is to be paid on those profits and gains. Section 10(7) further provides that in place of the provisions contained in Sections 8, 9, 10, 12 or 18 the Rules contained in the Schedule to the Act shall be substituted. Therefore, the result of this provision is that instead of computing the income of an insurance company as laid down in various sections in Chapter Iii, you compute them in the manner laid down in the Schedule to the Act, and the relevant provision of the Schedule to the Act is Rule 2 which provides that the profits and gains to be either what is stated in sub-clause (a) or sub-clause (b) and whichever is greater and it is nto disputed before us that in the case before us, sub-clause (a) would apply ................................................... x x x x."
Therefore, it will be ntoiced that instead of an insurance company making its return of income under the various heads as laid down in Section 6, it has nto to submit one unit of income, a sort of ntoional or artificial income as provided in the Schedule to the Act. Then under Section 60 of the Act, certain power is given to the Central Government to exempt classes of income on the whole or any part of the income of any class of persons in respect of income-tax, and this power can be exercised by the Central Government by a Ntoification in the Official Gazette."
Then, dealing with an argument on behalf of the Revenue that the Ntoification itself does nto apply to an insurance company, which argument was based upon the language in the Ntoification, viz.-
"the following classes of income-tax shall be exempt from the tax".
"It is argued that this Ntoification can only apply to those assesseds which have different classes of income, but if an assessed has only one class of income or only ore income, in terms the Ntoification cannto apply to such an assessed. In putting forward this construction Mr. Joshi (for the Revenue) is obviously reading into Section 60 and into the Ntoification the words of Section 6 of the Act, Mr. Joshi wants us to read "classes of income" as if it meant "heads of income" within the meaning of Section 6. Mr. Joshi would have been undoubtedly, right if Section 60 restricted the power of the Central Government only to exempt certain heads of income in the case of certain assesseds. Then, it could be said that such a Ntoification would only apply where an assessed had more than one head of income. But the Legislature, having Section 6 before it and being fully apprised of the language used in that section has obviously nto used the expression "heads of income" but has used the expression "classes of income". In my opinion, a class of income really means a category of income and it is much wider expression that a head of income. It is difficult to see why income derived by a co-operative society is nto a class or a category of income. In what wider sense, the Ntoification would certainly apply to the income derived by co-operative societies including insurance companies even though in the case of an insurance company, the income may be one and indivisible and may nto fall under the different heads enumerated in S 6 of the Act ......... Therefore according to me, the Ntoification applies to btoh to co-operative societies which are nto doing insurance business and it also applies to co-operative societies which are doing insurance business........................................... In the case of co-operative societies doing insurance business, the Central Government has given exemption to the whole of the income derived by such co-operative societies x x x x."
(20) In the present case also, the recital in the Ntoification was that "the following classes of income shall be exempt from the tax payable under the said Act." In section 60 also the words used were "in respect of income-tax in favor of any class of income, or in regard to the whole or any part of the income of any class of persons." As pointed out by the learned Judges of the Bombay High Court, it is difficult to see why the income derived by the assessed-company by way of interest of Mysore Darbar Securities is nto a class or a category of income. The said class of income was ttoally exempted by the Ntoification in question in the present case. Moreover, the Ntoification in the present case is wider that the one in the Bombay case as it was further stated in the Ntoification that the said class of income viz, the interest from Mysore Darbar Securities, "shall nto be taken into account in determining the ttoal income or salary of an assessed for the purposes of the said Act ..............................." It is clear from the above that the reasoning of the Bombay High Court supports the view taken by us in the present case.
(21) Shri A. N. Kirpal, the learned counsel for the Revenue, contended that insurance companies are assessed somewhat differently from toher business organisations, that the rules of assessment contained in Sections 8, 9, 10 and 12 of the Act, which normally apply to the assessment of business organisations do nto apply to the assessment of insurance companies, that by reason of Section 10(7), the profits and gains of any business of insurance and the tax payable thereon has to be computed in accordance with the Rules contained in the Schedule to the Act, that the valuation under the said Rules is a ntoional one and the assessment is on one unit and that the exemption contemplated by Section 60 was nto intended to apply to assessment governed by the Rules in the Schedule. It is true that so far as the business of insurance companies is concerned by virtue of Section 10(7) the computation of the profits and gains of any business of insurance and the tax payable thereon has to be computed in accordance with the Rules in the Schedule to the Act. We have already referred to this aspect and pointed out how and why in our opinion, the exemtion under Section 60 is an overall exemption, and governs all the toher provisions in the Act including the provisions in the Rules to the Schedule to the Act. The aforesaid contention of Shri Kirpal cannto, therefore, be accepted.
(22) Shri Kirpal next contended that there are various exemptions in Section 4(3) of the Act, that in particular, the exemption in Section 4(3) (xii) of the Act is on a par with the exemption by Ntoification under Section 60 that the decisions which dealt with cases under Section 4(3) (xii) would apply to the present case, and that it was held in those decisions that in the case of insurance business the exemption under Section 4(3) (xii) would nto apply on the ground that the computation of the profits and gains of the business of such companies is a ntoional one and is to be computed only in accordance with the provisions in the Rules in the Schedule to the Act. He relied on the decision in Vanguard Fire and General Insurance Co. Ltd. v. Commissioner of Income-tax, Madras which was confirmed by the Supreme Court in Vanguard Fire and General Insurance Co. v. Commissioner of Income-tax Madras, . In the later decision, the Supreme Court held that the provisions of Section 4(3) (xii) cannto apply to an assessment made under Section 10(7) of the Act read with paragraph 6 of the Schedule to the Act, that as far as general insurance business is concerned, there i. no income chargeable under the head "income from property". that the effect of Section 10(7) is to delete the heads "interest on securities", "income from property" and "income from toher sources" from Section 6 of the Act as far as general insurance business are concerned, and that accordingly the appellant-company in that case, which carried on fire and general insurance business, was nto entitled to the exemption under Section 4(3) (xii) in respect of a building owned by it. The question involved in the present case, namely the effect of the exemption by Ntoification under Section 60 of the Act, did nto arise in those decisions, and we do nto think that the said decision are of any assistance in the present case.
(23) Shri Kirpal also referred to the decisions in , Lakshmi Insurance Co. Ltd. v. Commr. of Income-tax, Punjab, Delhi, Nwfp , Commr. of Income-tax v. Asian Assurance Co. Ltd., . United India Life Insurance Co. v. Commr, of Income-tax, Madras , Life Insurance Corporation of India v. Commr. of Income-tax, Delhi and Rajasthan and Pandyan Insurance Company Ltd. v. Commissioner of Income-tax, Madras, . In none of the said cases, the question regarding the effect of an exemption by Ntoification under Section 60 of the Act arose and the said decisions are nto, therefore, of any assistant in the determination of the question involved in the present case. The said decisions do nto support the contention of Shri Kirpal that the exemption under section 4(3) (xii) is on a par with section 60, and that the said decisions would apply to the present case. Therefore, these contentions of Shri Kirpal have also to be rejected as untenable.
(24) Shri Kirpal next contended that the amount in question in the present case was included in the actuarial valuation, that in computing the profits and gains of an insurance business under clause (b) of R. 2 of the Schedule to the Income-tax Act, 1922, the Income-tax Officer has to accept the annual average of the surplus disclosed by the actuarial valuation made in accordance with the Insurance Act in respect of the last inter-valuation period ending before the commencement that he has no power to change the figures in the accounts of the assessed, that apart from the provisions in Rule 3 of the Schedule, there is no toher provision in the Schedule which authorises the Income-tax Officer to make adjustments in the actuarial valuation, that if the Income-tax Officer is to exclude the amount by reason of the Ntoification under Section 60, it would tantamount to an unauthoirsed alternation or making of adjustments in the actuarial valuation, and that, therefore, the exclusion of the amount in question by the Income-tax Officer from the taxable surplus, in the present case, was erroneous and illegal. We do nto think so. As already pointed out, the exemption under Section 60 is an overall exemption from the levy of the tax under the Act itself, and consequently the provisions in Rule 2(b) of the Schedule do nto come into operation at all. Therefore, in excluding the amount thus exempted under S. 60 from the surplus tax, the Income-tax Officer cannto be said to have in any manner altered or changed the actuarial valuation. He only excluded the amount which is exempted by the statute. This contention also advanced by Shri Kirpal on behalf of the Revenue, cannto, therefore, be accepted.
(25) For the above reasons, we hold that the interest on Rs. 3,40,065 received on the securities issued by the Mysore Darbar for btoh the years is exempt from taxation, and accordingly answer the first question in the affirmative in favor of the assessed.
(26) The second question referred to us is as to whether the order under Section 33B passed by the Commissioner of Income-tax was barred by limitation. To appreciate this connection, a few dates will have to be stated. The order of assessment was passed by the income-tax Officer, on 30-12-1954. The order of the Commissioner of Income-tax under Section 33B was passed on 29-12-1956, and was communicated to the assessed on 31-12-1956. According to sub-section (2) (b) of Section 33B, no order can be made under sub-section (1) by the Commissioner in the revision after the expiry of two years from the date of the order of the Income-tax Officer sought to be revised. From the date set out above, it is clear that the order of the Commissioner was passed on 29-12-1956 i.e. within two years form 30-12-1954, the date of the order of the Income-tax Officer, and, therefore, the order of the Commissioner was passed within the period of limitation. The contention of Shri Bhagwat Dayal the learned counsel for the assessed is that the order of the Commissioner should be deemed to have been passed only on 31-12-1956, the date on which it was communicated to the assessed, and that, therefore, the order should be deemed to have been passed more than two years from the date of the order of the Income-tax Officer. This contention is clearly untenable. The words used in Section 33B (2) (b) are:-- "after the expiry of two years from the date of the order sought to be revised."
The provision clearly contemplates the computation of two years from "the date of the order sought to be revised", and the mere fact that the order was communicated to or received by the assessed on a later date does nto and cannto alter the date from which the period of limitation is to be reckoned. Shri Bhagawat Dayal relied upon the observation of the Supreme Court in Bachhittar Singh v. State of Punjab, , which runs as under:-- "Thus it is of the essence that the order has to be communicated to the person who would be affected by that order before the State and that person affected but it, it would be open to the Council of Ministers to consider the matter over and over again and, therefore, till its communication cannto be regarded as anything more than provisional in character."
In that case, the appellant, Bachhittar Singh, was an Assistant Consolidation Office. On receiving certain complaints against him, an enquiry was held by the Revenue Secretary of the Pepsu Government, and as a result of that enquiry the Revenue Secretary dismissed him by an order, dated 30-8-1956. Against the order, he preferred an appeal to the Revenue Minister of Pepsu. The Revenue Minister called for the records of the case and wrtoe on the file that the charges against the appellant were proved. He also observed that the appellant was a refugee and had a large family to support, and that, therefore, instead of dismissing him outright, he should be reverted to his original post of Kanungo. On the next day, the State of Pepsu merged in the State of Punjab. The contention of the appellant was that the aforesaid observations of the Revenue Minister amounted to an order of the State Government even though they were never communicated officially to the appellant. Dealing with that contention, the Supreme Court observed that before something amounts to an order of the State Government, two things were necessary, that the order has to be expressed in the name of the Governor as required by clause (1) of Article 166 of the Constitution, and that it has to be communicated. It was in that context that the Supreme Court further observed that the business of the State is a complicated one and has necessarily to be conducted through the agency of a larger number of officials and authorities, that the Constitution, therefore, requires that action must be taken by the authority concerned in the name of the Rajapramukh that a Minister is no more than an adviser and the head of the State, the Governor or Rajapramukh, is to act with the aid and advice of his Council of Ministers, that the advise of the Council of ministers in regard to a particular matter does nto become the action of the State until the advice is accepted or deemed to be accepted by the head of the State, and that to make the opinion amount to a decision of the Government, it must be communicated to the person concerned. The Supreme Court referred to an earlier decision of it in State of Punjab v. Sodhi Sukhdev Singh, and then made the observation extracted above. It is quite obvious that in that case the Supreme Court pointed out that what was merely an advice of the Ministers would become the order of the State on its communication to the person concerned. The context in which the said observation was made is entirely different from the situation under Section 33B of the Income-tax Act. Here, there was a definite order of the Income-tax Act Officer passed on a particular date, and Section 33B(2) (b) provides that the said order may be revised within two years from the date of the said order. There is thus no scope at all for importing the idea that the order of the income-tax Officer would take effect for the purposes of Section 33B(2) (b) only when it was communicated to or received by the assessed. The language of the provision is clear and definite, and does nto permit of any such interpretation.
(27) We, therefore, hold that the order under Section 33B passed by the Commissioner of Income-tax was nto barred by limitation, and answer the second question accordingly. The assessed is entitled to his costs in this reference which are fixed at Rs. 250.