Jharkhand High Court
Assistant Commissioner Of Income Tax vs Mecon Limited on 8 August, 2024
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Tax Appeal No.11 of 2023
Assistant Commissioner of Income Tax, Circle-1, Ranchi,
having its office 5A, Main Road, P.O. & P.S. Chutia, District Ranchi,
Jharkhand
.......... Appellant/Respondent in ITAT
Versus
Mecon Limited, having its office at Doranda, P.O. & P.S.
Doranda, Ranchi, Jharkhand.
..... Respondent/Appellant in ITAT
---------
CORAM: HON'BLE THE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE ARUN KUMAR RAI
---------
For the Appellant: Mr. Kumar Vaibhav, Sr. S.C. Mr. Om Prakash, Advocate Mr. Durgesh Agarwal, Advocate For the Respondent: Mr. Mahendra Kumar Choudhary, Advocate
---------
04/Dated: 08.08.2024 Per Sujit Narayan Prasad, A.C.J.
1) The appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 is directed against the order dated 22.02.2023 passed by the Income Tax Appellate Tribunal, Kolkata, Ranchi Bench, in I.T.A. No.232/RAN/2017 for the Assessment Year 2013-14, corresponding to Financial Year 2012-13 by which the order dated 15.06.2017 passed by the CIT(Appeal) Ranchi has been set aside. Factul Matrix
2) It would be evident from the factual aspects that the assessee, MECON Limited, is a Company engaged in the business of providing engineering and consultancy services. The return was filed by assessee company on 26.09.2013 declaring a total income as Rs.171,87,59,570/-. The case was processed under Section 143(1) of the Income Tax Act, 1961.
3) The case was subsequently selected for scrutiny through CASS. Accordingly, notice under Section 143(2) of the Act was issued
-1 of 10- on 03.09.2014. The further notice was issued under Section 142(1) of the Act on 21.05.2015 along with questionnaire. The assessee has responded to the said notice.
4) Thereafter, the Assessing Officer has passed an assessment order assessing the total income of the assessee-company to be Rs.175,41,23,570/- by deleted the CSR expenses claimed under Section 37(1) of the Income Tax Act, 1961 holding that as to how the expenses like building classrooms or toilets in U.P. or installing LED lights or planting trees in MECON Colony is incidental to the business of the assessee-company, i.e., rendering engineering/architectural consultancy services, has not been proved by the assessee-company.
5) The said order was carried to appeal. The Appellate Authority partly allowed the appeal and thereby the matter travelled to the Tribunal.
6) The Tribunal, however, has reversed the finding recorded by the Appellate Authority by putting reliance upon the order dated 23.06.2016 passed by the ITAT, Raipur in the case of ACIT Vs. Jindal Power Limited, (I.T.A. No.99/BLPR/2012, Assessment Year 2008-09). The Tribunal, on consideration of the said judgment, has come to the conclusion that the factual aspect involved in the present case is squarely covered with the factual aspect governing the case of ACIT Vs. Jindal Power Limited, (I.T.A. No.99/BLPR/2012).
7) Being aggrieved, the Revenue has approached this Court by filing the present appeal.
Submission of the learned counsel for the Revenue
8) The ground has been taken that the Tribunal, on wrong consideration with respect to the applicability of Section 135 of the
-2 of 10- Companies Act, 2013, without assessing the applicability on the basis of the facts of the present case, has reversed the order passed by the Assessing Officer as also the Appellate Authority.
9) Further, submission has been made that in the present case, Section 135 of the Companies Act, 2013 was brought into effect on the basis of the assent of the President on 29th August, 2013. The financial year of the present case is since 2012-13, which ended on 31st March, 2013, as such, after the assent of the President having been granted by the President on 29th August, 2013, the applicability of Section 135 of the Companies Act will not have any impact as has been taken into consideration by the Tribunal. Submission of the learned counsel for the assessee/company
10) Mr. Mahendra Kumar Choudhary, learned counsel appearing for the Assessee, has submitted that there is no error in the order passed by the Tribunal in view of the fact that Section 135 of the Act has not been properly appreciated either by the Assessing Officer or by the Appellate Authority. The Tribunal has properly appreciated the applicability of Section 135 of the Companies Act where the issue regarding the Corporate Social Responsibility (CSR) has been taken note and in that view of the matter, it would not be correct on the part of the learned counsel for the Revenue to submit that the order passed by the Tribunal suffers from error.
Analysis
11) We have heard the learned counsel appearing for the parties and gone across the findings recorded by the authorities including the Tribunal.
-3 of 10-
12) This Court after going through the records and on appreciation of the argument is of the view that the following question needs consideration:-
"Whether Section 135 of the Companies Act, which has come into effect on 29th August, 2013, will have any implication on the financial year which has ended prior to coming into force of the said enactment by way of insertion in the Statute"
13) The law in this regard is well settled that any legislation can have its retrospective application, if the same has specifically been referred in the statute provision. Such requirement is mandatory, reason being that when any legislation is being given effect to, the same is after the full discussion in the Houses of the Parliament and thereafter, with due concurrence of the President and thereafter only, the Bill takes the shape of enactment.
14) The further settled position of law is that if any statute has been enacted, there cannot be insertion of any word beyond the contents of the statute and the statute is to be followed as it is and there cannot be any deviation. The same is based upon the principle that a thing is to be done strictly in accordance with the statutory provision and there cannot be any deviation from the statutory command.
15) Reference in this regard may be made to the judgment passed by the Hon'ble Apex Court in the case of State of Uttar Pradesh vs. Singhara Singh and Ors., reported in AIR (1964) SC 358, wherein it has been held at paragraph 8 as under:
"....its result is that if a statute has conferred a power to do an act and has laid down the method in which that power has to
-4 of 10- be exercised, it necessarily prohibits the doing of the act in any other manner than that which has been prescribed. The principle behind the rule is that if this were not so, the statutory provision might as well not have been enacted...."
16) Reference has also made to the judgment rendered by the Hon'ble Apex Court in the case of Babu Verghese and Ors. vs. Bar Council of Kerala and Ors., reported in (1999) 3 SCC 422, wherein it has been at paragraphs 31 & 32 as under:
"31. It is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all. The origin of this rule is traceable to the decision in Taylor v. Taylor which was followed by Lord Roche in Nazir Ahmad v. King Emperor who stated as under: "[W]here a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all."
32. This rule has since been approved by this Court in Rao Shiv Bahadur Singh v. State of V.P. and again in Deep Chand v. State of Rajasthan. These cases were considered by a three-judge bench of this Court in State of U.P. v. Singhara Singh and the rule laid down in Nazir Ahmad case was again upheld. This rule has since been applied to the exercise of jurisdiction by courts and has also been recognized as a statutory principle of administrative law."
17) Reference to the judgment rendered by the Hon'ble Apex Court also needs to be made in the case of Commissioner of Income Tax,
-5 of 10- Mumbai vs. Anjum M.H. Ghaswala & Ors., reported in (2002) 1 SCC 633, wherein it has been held at paragraph 27 as under:
"..... it is a normal rule of consideration that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself...."
18) Reference has also made to the judgment rendered by the Hon'ble Apex Court in the case of State of Jharkhand & Ors. vs. Ambay Cements & Anr., reported in (2005) 1 SCC 368, wherein it has been held at paragraph 26 as under:
"....it is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed....."
19) Reference has also made to the judgment rendered by the Hon'ble Apex Court in the case of Zuari Cement Ltd. vs. Regional Director ESIC Hyderabad & Ors. (in Civil Appeals Nos.5138- 40/2007), reported in (2015) 7 SCC 690, wherein it has been held at paragraph 14 as under:
"14. As per the scheme of the Act, the appropriate Government alone could grant or refuse exemption. When the statute prescribed the procedure for grant or refusal of exemption from the operation of the Act, it is to be done in that manner and not in any other manner. In State of Jharkhand v. Ambay Cements, it was held that: (SCC p. 378, para 26) 26.... it is the cardinal rule of interpretation that where a statute provides that a particular
-6 of 10- thing should be done, it should be done in the manner prescribed and not in any other way."
20) Thus, it is evident from the aforesaid position of law that a thing is required to be done strictly in pursuance to the provisions of law, if any deviation, then ultimately the provision as contained under the statute will have no effect.
21) So far as the issue of retrospectivity and prospectivity is concerned, the legislation, if enacted, can have its retrospective application if inserted with specific reference to that effect, but in absence thereof, the statute will always be applicable prospectively. Reference in this regard may be made to the judgment passed by the Hon'ble Apex Court in the case of P. Mahendran & Ors. v. State of Karnataka & Ors., [(1990) 1 SCC 411], wherein the Hon'ble Supreme Court held as under:
"5. It is well settled rule of construction that every statute or statutory rule is prospective unless it is expressly or by necessary implication made to have retrospective effect. Unless there are words in the statute or in the Rules showing the intention to affect existing rights the rule must be held to be prospective. If a rule is expressed in language which is fairly capable of either interpretation it ought to be construed as prospective only. In the absence of any express provision or necessary intendment the rule cannot be given retrospective effect except in matter of procedure. The amending Rules of 1987 do not contain any express provision giving the amendment retrospective effect nor there is anything therein showing the necessary intendment for enforcing the rule with retrospective effect. Since the amending
-7 of 10- Rules were not retrospective, it could not adversely affect the right of those candidates who were qualified for selection and appointment on the date they applied for the post, moreover as the process of selection had already commenced when the amending Rules came into force, the amended Rules could not affect the existing rights of those candidates who were being considered for selection as they possessed the requisite qualifications prescribed by the Rules before its amendment moreover construction of amending Rules should be made in a reasonable manner to avoid unnecessary hardship to those who have no control over the subject matter."
22) In another judgment rendered by Hon'ble Apex Court in K.S. Paripoornan v. State of Kerala & Ors., (1994) 5 SCC 593, it has been held which reads as hereunder:
"92. A substantive law is held to be prospective as a matter of legal policy since it is founded on public policy that no right be so created as to work to the disadvantage for whom it is created as it if be so, "it would be betrayal of what the law stands for."
23) The Hon'ble Supreme Court in Kusumam Hotels Private Limited v. Kerala State Electricity Board & Ors., (2008) 13 SCC 213 has held that the State is entitled to change its policy decision, however, all administrative orders ordinarily are to be considered prospective in nature. For giving it a retrospective effect, it must be stated so expressly or by necessary implication.
24) This Court after having referred to the aforesaid judgments regarding the settled principle of law and adverting to the factual aspect wherein the assessment year is of 2013-14. It cannot be
-8 of 10- disputed that the financial year ends on 31st March of the financial year which is previous to the assessment year, meaning thereby, if the ITR is being submitted for the assessment year, for example, in the present case, for the year 2013-14, the financial year will be 2012-
13. In the present case, the financial year will be said to have concluded on 31st March, 2013.
25) The admitted fact herein is that Section 135 of the Companies Act has been assented by the President on 29th August, 2013 dealing with the issue of Corporate Social Responsibility (CSR). Section 135, therefore, will have prospective application, since, there is no insertion of the word that Section 135 will have its retrospective application. For ready reference, Section 135(1) of the Companies Act, 2013 is being referred hereinbelow: -
"135. Corporate Social Responsibility. -- (1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director."
Conclusion
26) The aforesaid aspect has been considered by the Assessing Officer as well as the Commissioner of Income Tax (Appeals), but the Tribunal by putting reliance on the judgment passed by the ITAT, Raipur in the case of ACIT Vs. Jindal Power Limited, (I.T.A. No.99/BLPR/2012) has reversed the findings without considering the applicability of Section 135 of the Companies Act and without making
-9 of 10- any assessment regarding its applicability based upon the financial year, in the present case, which has ended on 31st March, 2013.
27) This Court, therefore, is of the view that the reference which has been considered by the Tribunal is required to be answered in favour of the Revenue. The aforesaid reference having been answered, the consequence would be that the order passed by the Tribunal is held to be bad in the eyes of law.
28) Accordingly, the order dated 22.02.2023 passed by the Income Tax Appellate Tribunal, Kolkata, Ranchi Bench, in I.T.A. No.232/RAN/2017 is quashed and set aside and the matter is remitted to the Tribunal for passing a fresh order in the case after giving opportunity of hearing to the parties.
29) With the aforesaid observations and directions, this Tax Appeal stand disposed of.
(Sujit Narayan Prasad, A.C.J.) (Arun Kumar Rai, J.) A.F.R. Manoj/Cp.2
-10 of 10-