Income Tax Appellate Tribunal - Bangalore
Income-Tax Officer vs Sandur Manganese And Iron Ores Ltd. on 20 February, 1986
Equivalent citations: [1986]18ITD9(BANG)
ORDER
B.V. Venkataramaiah, Accountant Member
1. The appeal is by the revenue. In the original assessment for the year 1976-77, the ITO had determined the income of the assessee at a positive figure and allowed deduction under Section 80G of the Income-tax Act, 1961 ('the Act'). There was an appeal against that order and the Tribunal held that the assessee was entitled to carry forward and set off of unabsorbed development rebate and relief under Section 80J of the Act for the years 1969-70 to 1974-75. The ITO gave effect to the order of the Tribunal which reduced the taxable income to nil. Since the gross income was nil, the ITO did not give any deduction under Section 80G. There was an appeal against this order contending that the deduction under Section 80G should be given priority over the carry forward and set off of unabsorbed losses, etc., of earlier years. For other years, i.e., for 1977-78 onwards there was a claim that the sums paid to Sandur Education Society and Sandur Residential School were deductible as welfare expenditure under Section 37(1) of the Act and alternatively there was a claim for deduction under Section 80G. The Commissioner (Appeals) entered into some correspondence with the assessee. He was originally of the opinion that the assessee should stick to one stand and there cannot be any alternative claim. He was of the view that Sections 37 and 80G operate in different fields and a claim under Section 80G would militate against the claim under Section 37, for, the very act of donation is a voluntary act of charity and has no relation to the business expenditure. The assessee, however, replied that this view was not correct. But, however, the final stand taken by the assessee before the Commissioner (Appeals), according to him [Commissioner (Appeals)] was that the expenditure was for business purposes. In paragraphs 2 and 3 of his order, he observed as follows :
2. At the time of hearing, the appellant's authorised representative, Shri G. Sarangan, stated that in passing the order, the ITO ignored the priorities of set off as among depreciation, development rebate, business losses, Section 80J relief, Section 80G deduction, etc. According to him, Section 80G relief takes priority over the other reliefs. Subsequently, I addressed a letter to the appellant to state in clear terms whether the company incurred expenditure under Section 80G or under Section 37. I wanted that the appellant should give a categorical reply after consulting its books of account, statements, etc. and the board of directors. To this query, the appellant's chartered accountants D.V. Sarovar & Co. submitted a letter dated 1-9-1984. It was stated:
'We would like to clarify that payments to the said institutions were claimed as donations up to and including for the assessment year 1976-77. Even for the assessment year 1976-77 there is no alternative claim under Section 37.
For the assessment years 1977-78 to 1979-80, these payments have been claimed as business expenditure under Section 37. The alternative claim under Section 80G was made in the event that our claim for deduction under Section 37 is rejected.' In their letter dated 11-9-1984 after being asked to make the matter more explicit, the learned chartered accountants declared :
'It is no doubt true that the company claimed such payments as donation up to and including the assessment year 1976-77. This was purely a mistake. It is from the year 1977-78 the company is claiming such payments as business expenditure and rightly so because the motive in starting the society and making the initial and subsequent contribution was to benefit the employees by way of providing educational facilities to their children and thereby ensure smooth working of the company's business.
Therefore, we submit that the company restricts the claim for such payments as a business expenditure for all the years in appeal and the alternative claim for relief under Section 80G may be treated as withdrawn.'
3. In view of this categorical declaration, the whole complex of the association changes. The observation of the ITO that deduction under Section 80G is not considered since the gross income is nil loses its meaning and relevance. I want to emphasise here that the assessee has not changed its opinion regarding the nature of the payment, it only revealed the true nature of the expenditure made and confession that the expenditure was never made as donation or gift but is made as business expenditure under Section 37 of the Income-tax Act, 1961. In the light of this confession, the order under Section 154 has to be reconsidered by the ITO. There is no longer any claim under Section 80G; there is only a claim under Section 37. The ITO has to consider the merits of this claim and modify his order under Section 154 after considering the merits of such a claim.
The revenue is in appeal.
2. The learned departmental representative initially submitted that the Commissioner (Appeals) travelled beyond his jurisdiction. In the original assessment it had claimed deduction under Section 80G. It was not open to the assessee to change its stand at the time of implementing the Tribunal's order in appeal against the original assessment. Alternatively, it was submitted that Sections 80G and 37 operate in different fields. What was essentially a donation could not be allowed under Section 37 and what is claimed as a business expenditure has to be allowed or not to be allowed, but there is no scope for bringing the same under some other section, like Section 80G. In other words, the very claim of deduction under business expenditure will negative the claim of the assessee under Section 80G. Reliance was placed on the doctrine of generalia specialibus non derogant.
3. The learned counsel for the assessee submitted that the assessee was not barred from claiming deduction under Section 37 when the ITO implemented the Tribunal's order. It was only because of the relief given by the Tribunal the gross total income was reduced to zero and the assessee had every right to renew its claim for deduction under any other section. It is well known that if the relief could not be obtained under one section, it is the duty of the Courts to allow relief under some other section, if it were permissible.
4. We have heard both sides. As held by the Calcutta High Court in the case of Kooka Sidhwa and Co. v. CIT [1964] 54 ITR 54, if a higher appellate authority such as the AAC or the Tribunal directs or orders an ITO to do something again with regard to an assessment by way of revision or amendment, the ITO must be held to be still under Section 23 of the Indian Income-tax Act, 1922 on the process of assessing the total income of the assessee and determining the sum payable on the basis of the return already filed by him. The statutory right of appeal cannot be wiped out by procedural formalities which the appellant has to observe. It follows, therefore, that at the time of implementing an appellate order, the assessment becomes open and it would be permissible for the assessee to make a claim at that stage which he could not have made or which he thought was unnecessary to make at the time of the original assessment. It is noted that there was already a claim for deduction of the two sums under Section 80G. All that the assessee has done is to claim the deduction under a different head. It cannot be said that there was a new claim for deduction but only an alternative mode of claiming relief for the same item. The Commissioner (Appeals) was, therefore, right in asking the ITO to go into the nature of the payments and decide whether such payments constituted business expenditure or not.
5. The argument of the revenue that when once a claim is made under Section 80G, an alternative claim under Section 37 is not permissible, is not correct. The entire scheme of the Act bristles with such opportunities. What is claimed as business expenditure but not allowed, could alternatively be claimed as a loss incidental to business. Unless there is a specific provision that expenditure could be claimed under one single Sub-section and not under any other, the assessee's right to claim relief under alternative provisions is not taken away. Such a specific prohibition can be recognised under Section 40A(7) of the Act. The present claim of the assessee does not suffer from any such restriction.
Regarding the doctrine of generalia specialibus non derogant, it is not of universal application. The learned author Sampath Iyengar in his book Law of Income-tax, Seventh edn., Vol.1, has stated as follows :
The general maxim is generalia specialibus non derogant, that is, general things will not derogate from special things. It is true that the maxim is invoked to determine the scope of a general enactment with reference to a specific enactment which proceeds it. But its applicability need not be confined to decide the operational sphere of two enactments, one specific and the other general. It can be resorted to for deciding the competing claims of two provisions in the same enactment, a general and a special provision with some overlapping between the two. The requisite conditions to attract this principle are : Firstly, both the general enactment and the particular enactment must be simultaneously operative, the general enactment covering larger field and the particular enactment covering a limited field out of a larger field covered by the general enactment and, secondly, there must be nothing contained in the general provisions indicating the legislative intent to overrule or set aside the particular provisions.
The rule is, that whenever there is a particular enactment and a general enactment in the same statute and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment must be operative and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply. But this rule of construction is not of universal application. It is subject to the condition that there is nothing in the general provision, expressed or implied, indicating an intention to the contrary.(p.37)
6. We, therefore, do not see any merit in the appeal filed by the revenue.
7. The appeal is dismissed.