1990 (12) TMI 55 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 155(3) of the Income-tax Act, 1961 regarding rectification of income-tax assessment orders.
2. Applicability of section 155(3) in a case where excess profits tax liability was allowed as a deduction but later quashed by the court.
3. Understanding the term "payable" versus "liable" in the context of income-tax proceedings.
4. Interpretation of the term "modified" in section 155(3) concerning changes in excess profits tax liability.
5. Whether a writ proceeding falls under the category of "any other proceeding" as mentioned in section 155(3).

Detailed Analysis:
1. The judgment by the High Court of Allahabad dealt with the interpretation of section 155(3) of the Income-tax Act, 1961, which allows for the rectification of income-tax assessment orders in specific situations.
2. In this case, the issue was whether section 155(3) applied when excess profits tax liability, initially allowed as a deduction, was later challenged and quashed by the court.
3. The court analyzed the difference between "payable" and "liable" in the context of tax proceedings, emphasizing that the word "payable" in section 155(3) referred to the actual amount due for payment, not just the existence of a liability.
4. Regarding the term "modified" in section 155(3), the court rejected the argument that it only encompassed variations in tax liability, stating that total withdrawal or cancellation of tax liability also fell under the definition of "modified."
5. The court also addressed the inclusion of writ proceedings as "any other proceeding" under section 155(3), concluding that a writ proceeding did fall within the scope of the phrase.

In conclusion, the High Court ruled in favor of the Revenue, holding that section 155(3) did not apply in the case where excess profits tax liability was quashed, as the tax became not payable. The court emphasized the need for a reasonable interpretation of the provision based on its underlying objective and language, rather than strict construction in a taxing statute.