9911796707
TMI Blog1967 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... vely. 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. 62,678 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 notification under section 60 of the Indian Income-tax Act, 1922. Acting under section 33B of the Act, the Commissioner of Income-tax, Delhi, took the view in his consolidated order dated December 29, 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. Against that order of the Commissioner, the assessee preferred an appeal to the Appellate Tribunal. The Tribunal, by its consolidated order dated May 25, 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 not have, therefore, been included in the taxable surplus. But, as regards the sum of Rs. 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule to the Act is a notional or conventional income, that as actual income is not to be brought under tax, the question of exclusion of the interest on the securities of the Mysore Darbar does not arise, 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 notification under section 60 of the Act is not 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 , Commissioner of Income-tax v. Western India Life Insurance Co. Ltd. and Commissioner of Income-tax v. B. B. C. I. Railway Co-operative Mutual Death Benefit Society. 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 rule 2(b) of the Schedule to the Act and in no other manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 total income of any previous year of any person includes all income, profits and gains from whatever source derived which-- ........" 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 otherwise provided by this Act, the following heads of income, profits and gains shall be chargeable to income-tax in the manner hereinafter appearing, namely: (i) Salaries. (ii) Interest on securities. (iii) Income from property. (iv) Profits and gains of business, profession or vocation, (v) Income from other 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 assessee under the head ' Profits and gains of business, profession or vocation ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is the greater : ....." The proviso and clauses (c) and (d) of rule 2 and, rules 3 and 4 of the Schedule contain other 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. The notification issued under section 60 of the Act, and which is relied upon by the assessee, in so far as it is material, is as follows: " (Finance Department Notification No. 878-F Income-tax, dated the 21st March, 1922, as amended or added to from time to time). The following classes of income shall be exempt from the tax payable under the said Act and they shall not be taken into account in determining the total income or salary of an assessee for the purposes of the said Act, except for the purposes of sub-section (4) of section 48:- (27) The interest on Mysore Durbar Securities. . ." Thus, under, section 3, where any Central Act enacts that income-tax shall be charged for any year at any 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 total income of the previous year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not, 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 computation should be made not 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 other insurance business, and rules 6 and 7 contain other general provisions regarding the profits and gains of insurance business. It has to be noticed in particular that the provisions in rule 2 in the Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 notification, and the notification expressly and clearly states that " the classes of income (set out in the notification) shall be exempt from the tax payable under the said Act (Income-tax Act, 1922) and they shall not be taken into account in determining the total income or salary of an assessee for the purposes of the said Act ". In our opinion, the language of section 60 and the notification clearly shows that the amount of interest on Mysore Darbar Securities received by the assessee was exempted from income-tax under the Act, and cannot be included in computing the taxable surplus. In Commissioner of Income-tax v. B. B. C. I. Railzcay Co-operative Mutual Death Benefit Society for Indian Staff Ltd. , a notification was issued under section 60 in the 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 total income of an assessee for the purposes of the said Act: ...... 2. The profits of any co-operative society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profits and gains of life insurance business shall be taken to be either what is stated in sub-clause (a) or sub-clause (b) and whichever is greater, and it is not disputed before us that in the case before us, sub-clause (a) would apply ...... Therefore, it will be noticed that instead of an insurance company making its return of income under the various heads as laid down in section 6, it has got to submit one unit of income, a sort of notional 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 or 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 notification in the Official Gazette." Then, dealing with an argument on behalf of the revenue that the notification itself does not apply to an insurance company, which argument was based upon the language in the notification, viz., " the following classes of income shall be exempt from the tax ", the learned judges observed as follows: It is argued that this notification can only apply to those assessees which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities is not a class or a category of income. The said class of income was totally exempted by the notification in question in the present case. Moreover, the notification in the present case is wider than the one in the Bombay case as it was further stated in the notification that the said class of income, viz., the interest from Mysore Darbar Securities, " shall not be taken into account in determining the total income or salary of an assessee 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. Shri A. N. Kirpal, the learned counsel for the revenue, contended that insurance companies are assessed somewhat differently from other 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 not 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 notification under section 60 of the Act, did not arise in those decisions, and we do not think that the said decisions are of any assistance in the present case. Shri Kirpal also referred to the decisions in Commissioner of Income-tax v. Western India Life Insurance Company Ltd., Lakshmi Insurance Company Ltd. v. Commissioner of Income-tax, Commissioner of Income-tax v. Asian Assurance Company Ltd., United India Life Insurance Company v. Commissioner of Income-tax , Life Insurance Corporation of India v. Commissioner of Income-tax and Pandyan Insurance Company Ltd. v. Commissioner of Income-tax. In none of the said cases, the question regarding the effect of an exemption by notification under section 60 of the Act arose and the said decisions are not, therefore, of any assistance in the determination of the question involved in the present case. The said decisions do not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 33B was passed on December 29, 1956, and was communicated to the assessee on December 31, 1956. According to sub-section (2)(b) of section 33B, no order can be made under sub-section (1) by the Commissioner in revision after the expiry of two years from the date of the order of the Income-tax Officer sought to be revised. From the dates set out above, it is clear that the order of the Commissioner was passed on December 29, 1956, i e., within two years from December 30, 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 assessee, is that the order of the Commissioner should be deemed to have been passed only on December 31, 1956, the date on which it was communicated to the assessee, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, requires that action must be taken by the authority concerned in the name of the Rajpramukh, that a Minister is no more than an adviser, and the head of the State, the Governor or Rajpramukh is to act with the aid and advice of his council of ministers, that the advice of the council of ministers in regard to a particular matter does not 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 Officer passed on a particular date, and section 33B(2)(b) provides that the said order may be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
