Supreme Court - Daily Orders
M/S. Vijay Industries vs Commissioner Of Income Tax on 5 November, 2014
Bench: Ranjan Gogoi, Rohinton Fali Nariman
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 1581-1582 OF 2005
M/S. VIJAY INDUSTRIES ...APPELLANT(S)
VERSUS
COMMISSIONER OF INCOME TAX ...RESPONDENT(S)
O R D E R
R.F. NARIMAN,J.
1. We are concerned in these cases with Assessment Year 1979-1980 and Assessment Year 1980-1981. The High Court of Rajasthan by the impugned judgment dated 17th May, 2004 construed Section 80-HH of the Income Tax Act, 1961 following a judgment of this Court in Motilal Pesticides(I) Pvt. Ltd. Vs. Commissioner of Income Tax, Delhi-II (2000) 9 SCC 63. The High Court noticed an argument made before it to the following effect:
Signature Not VerifiedDigitally signed by Madhu Bala
“It is most humbly submitted that the Date: 2014.11.13 15:18:23 IST Reason: concept 'profits and gains' is a wider concept than the concept of 'income'. The profits and gains/loss are arrived at after making actual expenses incurred 2 from the figure of sales by the assessee. It does not include any depreciation and investment allowance, as admittedly these are not the expenses actually incurred by the assessee.
However, the term 'income' does take into consideration the deductions on account of depreciation and investment allowance. Therefore, the term profits and gains are not synonymous with the term 'income'.
However, the High Court correctly felt that it was bound by the judgment of this Court.
2. Motilal Pesticides(I) Pvt. Limited (Supra) is a Judgment of this Court which affirmed the Judgment of the Delhi High Court concerning the interpretation of the very same Section 80-HH of the Income Tax Act. The assessment years also happened to be the same assessment years as involved in these appeals.
3. The question of law set out by this Court is, whether, on the facts and circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to deduction under Section 80-HH of the Income Tax Act, 1961 on the gross profit of Rs.34,30,035 (Liquid Section) but on the net income 3 therefrom for Assessment Year 1979-80?
4. Thereafter, this Court set out Section 80-HH in para 2 and Section 80-M in para 3 of the Judgment. It will be noticed that whereas Section 80-HH uses the expression “any profits and gains derived from”, Section 80-M uses the expression “any income”. Section 80-M was held, in the Cloth Traders (P) Ltd. Vs. CIT (1979) 3 SCC 538, to mean that for the purpose of that Section, deduction is to be allowed on the gross total income and not on net income. This was over-ruled in Distributors (Baroda) Pvt. Ltd. Vs. Union of India (1986) 1 SCC 43.
5. Bhagwati,J. who was party to the earlier decision in the Cloth Traders' case delivered a judgment in the Distributors( Baroda) case holding that the Cloth traders' case was obviously incorrectly decided because the words “any income” cannot possibly refer to gross total income but referred only to “net income”. Further, Distributors (Baroda) case followed the judgment of this Court in Cambay Electric Supply Industrial Co. Ltd. Vs. The Commissioner of Income Tax, Gujarat-II, Ahmedabad (1978) 2 SCC 644 which decision concerned itself with Section 80-E of the Income Tax Act. Section 80 E reads as follows:-
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80E – Deduction in respect of profits and gains from specified industries in the case of certain companies- (1) In the case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent, thereof, in computing the total income of the company.
(2) This section applies to
(a) an Indian Company; or
(b) any other company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India.
But does not apply to any Indian Company referred to in Clause (1), or to any other company referred to in clause (b), if such Indian or other company is a company referred to in Section 108 of its total income as computed before applying the provisions of sub-section (1) does not exceed twenty-five thousand rupees”.
6. It will be noticed that in marked contrast to the Section under consideration in this appeal i.e. 80-HH, Section 80-E uses the expression “total income [as 5 computed in accordance with the provisions of this Act]” and goes on to speak of any profits and gains, so computed, for the purpose of deduction under Section 80-E. It will be seen in the present case the said words are conspicuous by their absence in Section 80-HH even though the expression “profits and gains” is the same expression used in section 80-E.
7. The finding in paragraph 4 in Motilal Pesticides (supra) that the language of Section 80-HH and Section 80-M is the same is, with respect, prima facie, incorrect. Conceptually, “any income” and “profits and gains” are different under the Income Tax Act.
(See Section 80-M read with Sections 80-AA & AB, Section 80-T which speak of “any income” and Section 28 which speaks of “income from profits and gains” showing thereby that conceptually the two expressions are understood as distinct in law).
8. In paragraph 5 of the judgment in Motilal Pesticides(Supra), Shri Ramamurthi, learned senior counsel appearing for the appellant submitted that both Cloth Traders and Distributors (Baroda) were cases which pertained to Section 80-M only and this Court had no occasion to consider the application of Section 80-AB with 6 reference to Section 80-HH of the Act. The Court in repelling this contention referred to another decision in H.H. Sir Rama Varma V.CIT (1994) Supp(1) SCC 473, which judgment dealt with the then newly enacted Section 80-AA and 80-AB. Both these sections again are relatable to deductions made under Section 80-M; and Section 80-T with which that judgment was concerned also uses the expression “ any income” as opposed to “profits and gains”. It will be clear, therefore, that prima facie Varma's case again has very little to do with the concept of “profits and gains” with which we are concerned here. For these reasons, the matters be placed before the Hon'ble Chief Justice of India to constitute an appropriate Bench to consider the correctness of the judgment in Motilal Pesticides (supra).
......................J. [RANJAN GOGOI] NEW DELHI ......................J. 5TH NOVEMBER, 2014 [ROHINTON FALI NARIMAN] 7 ITEM NO.104 COURT NO.9 SECTION IIIA S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS Civil Appeal No(s). 1581-1582/2005 M/S. VIJAY INDUSTRIES Appellant(s) VERSUS COMMNR. OF INCOME TAX Respondent(s) (With office report) WITH SLP(C) No. 18429/2008 (With Interim Relief and Office Report) SLP(C) No. 19633-19635/2008 (With Office Report) SLP(C) No. 27735/2009 (With Office Report) Date : 05/11/2014 These appeals were called on for hearing today. CORAM :
HON'BLE MR. JUSTICE RANJAN GOGOI HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN For Appellant(s) Mr. S.K. Bagaria,Sr.Adv.
Mr. K. Ajit Singh,Adv.
Mr. Srinivas Vijay Kumar,Adv. Mr. Vishal Chaudhary,Adv. Mr. Rahul Gupta,Adv.
Mr. Bhargava V. Desai,Adv. Mr. Vishal Chaudhary,Adv.
Mr. S. Ganesh,Adv.
Mr. Amar Dave,Adv.
Mr. Mahesh Agarwal,Adv.
Mr. Rishi Agrawala,Adv.
Mr. E. C. Agrawala,Adv.
Mr. Amar Dave, Adv.
Mr. P. S. Sudheer,Adv.
Mr. Rishi Maheshwari,Adv. Ms. Anne Mathew,Adv.
Mr. Raj Kumar Kaushik,Adv.8
For Respondent(s) Mr. R.P. Bhatt,Sr.Adv.
Mr. Rahul Kaushik,Adv.
Mrs. Gargi Khanna,Adv.
Mr. B. V. Balaram Das,Adv.
UPON hearing the counsel the Court made the following O R D E R In Civil Appeal Nos. 1581-1582 of 2005 The matters be placed before the Hon'ble the Chief Justice of India to constitute an appropriate bench to consider the correctness of the judgment in Motilal Pesticides.
SLP(C)No. 18429 of 2008, SLP(C)Nos.19633-19635 of 2008 and SLP(C)NO. 27735 of 2009 List after two weeks.
(MADHU BALA) (ASHA SONI)
COURT MASTER COURT MASTER
(Signed order is placed on the file in C.A. Nos. 1581-1582 of 2005)