9911796707
TMI Blog1969 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... particular assessment year depends on whether its income in India exceeds or is less than its income outside India. For the assessment year 1956-57, the First Additional Income-tax Officer, Companies Direct I, Calcutta, on the 28th March, 1957, completed the assessment of the petitioner in the status of a non-resident in respect of its dividend income in India only and determined the total income at Rs. 53,11,958. The assessment for the immediate preceding year 1955-56 was made by the said Income-tax Officer, on the 16th July, 1957, and for this year, as the income in India exceeded the income outside India. the petitioner's status was taken as resident and ordinarily resident and after deducting the net loss computed from the petitioner's business in the United Kingdom at Rs. 65,61,147 from its Indian dividend income of Rs 34,27,500, the net loss for this year was determined at Rs. 31,33,647. The assessment for the subsequent year 1957-58 was again made in the status of a non-resident some time in November, 1957, only on the total dividend income in India of Rs. 51,85,837. As the assessment for 1956-57 was made before the assessment for 1955-56, the petitioner claimed to set off i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal and which were necessary for drawing up a statement of the case contained the following words, viz. : " The assessee is a sterling company with its head office in London carrying on business in tea in the United Kingdom. It also carries on the business of investing moneys in shares of companies in other parts of the world which carry on the business of growing, manufacturing and selling tea exclusively. The assessee's income from dividend, though treated by the assessee as income from business, is taken for the assessee's assessment under the Indian Income-tax Act as income from other sources. " It would be seen that this is a repetition of the recital contained at the beginning of the Tribunal's aforesaid order and this fact would be material as much was sought to be made out of this statement by Mr. Ray. The aforesaid application was dismissed by the Tribunal on the 1st December, 1966. On the 5th December, 1966, the respondent, Commissioner, passed a consolidated order on the said two applications under section 33A(2) made on the 12th February, 1958. He allowed the first application and directed the Income-tax Officer to determine the loss to be carried forward in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court allowed the appeal, set aside the order refusing the rule and directed the issue of a rule nisi as prayed for ; the cost of the appeal was to abide by the result of the rule nisi. The rule has come up for hearing before this court. In the affidavit-in opposition by Sudbir Ranjan Ray, the Income-tax Officer, B-Ward, Companies District II, Calcutta, it is stated that the dividend from the Indian company has never been treated by the petitioner as income from business and in the returns filed for all the relevant years the said dividend income has been shown under " others sources " and has been assessed as such. Before I deal with the arguments of the learned counsel, it would be convenient to set out the relevant provisions of the Indian Income-tax Act, 1922, which was the Act applicable to the assessment years covered by the impugned order of the Commissioner. Section 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of the proceeding in which such order was passed, and on receipt of the record may make such inquiry or cause such inquiry to be made, and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit : Provided that the Commissioner shall not revise any order under this sub-section if - (a) where an appeal against the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal but has not been made, the time within which such appeal may be made has not expired, or, in the case of an appeal to the Appellate Tribunal, the assessee has not waived his right of appeal, or (b) where an appeal against the order has been made to the Appellate Assistant Commissioner, the appeal is pending before the Appellate Assistant Commissioner, or (c) the order has been made the subject of an appeal to the Appellate Tribunal : Provided further that an order by the Commissioner declining to interfere shall be deemed not to be an order prejudicial to the assessee. " Mr. Ray, the learned counsel for the petitioner, argued his case as if it was an appeal from the order of Commissioner under section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A(2). The learned counsel contended that the finding of the Tribunal in its appellate order and the statement made by the Commissioner in its application under section 66(1) conclude the case against the department as it is admitted in the said application that the assessee not only carried on the business of growing, manufacturing and selling tea exclusively but also that of investment in shares of tea companies. Mr. Ray further submitted that the averments made in the application under section 33A(2) are also uncontroverted. These are parts of the record before the Commissioner on which the Commissioner had to parts his order and if he had any doubts he could call for fresh evidence or make such other enquiries as he thought necessary. If it is conceded that the assessee treats the dividend from the shares in the tea companies as part of its business income nothing else remains and the petitioner is entitled to the relief claimed in the application under section 33A. Undoubtedly, the petitioner showed the income from the dividend as income under section 12 as it was bound to do but that does not affect its right to claim a set off of business loss from such income if the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed by the Income-tax Act for computation. In that case the Supreme Court held that the interest on securities was the assessee's business income for the purpose of section 25(3). In the third case that of the Radhaswami Bank, which was a case under section 24(2) of the Act, the head-note of the reports fairly represents a summary of the decision. In that case it was held that the assessee was entitled to set off the loss brought forward from the earlier assessment year against its entire income including the interest on securities in the succeeding years. Under section 24(2) of the Indian Income-tax Act, 1922, the income from securities, which formed part of the assessee's trading assets, was part of its income from business and, therefore, the loss incurred in the business in the earlier years could be set off against the income from securities also in the succeeding years. It was further held that the scheme of the Income-tax Act is that income-tax is one tax. Section 6 of the Act classified the taxable income under different heads for the purpose of computation of the net income of the assessee. Though, for the purpose of computation of the income, interest on securities is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y pointed out that the petition under section 33A was submitted in February 1958, but the Commissioner took no action till the 19th October, 1966. This long delay of eight years is attributed by Mr. Ray to the fact that by its order dated 1st July, 1966, in appeal for the assessment years 1957-58 the Tribunal had directed that the claim for set off of business loss could not be defeated on the ground that it was not set off against the immediately succeeding year and directed the Appellate Assistant Commissioner to decide the appeal afresh. Mr. Ray alleged that the proceedings under section 33A were resumed with the object of preventing the Appellate Assistant Commissioner from deciding the appeal on the lines as directed by the Tribunal. In its application under section 33A the petitioner made an alternative claim, namely, that in any event even if the loss from business for the earlier year could not be allowed as a deduction from the dividend income of the current year, at least that part of the loss consisting of the unabsorbed depreciation brought forward should be allowed and the decision of the Supreme Court in Jaipuria China Clay Mines (P.) Ltd. was relied on in support t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner's trading activities or from any of its trading assets. It was for the petitioner to establish that the Indian income arises from its trading assets and not for the Commissioner to make enquiries and satisfy himself that such income arose from the trading assets of the petitioner's business. The impugned order shows that the Commissioner had considered the three decisions of the Supreme Court relied on by the petitioner before him and was conscious of the ratio laid down in these decisions. Therefore, there is no error of law or of any proposition of law in the order. He may be wrong in his interpretation of the Supreme Court's decisions. The only question, therefore, is whether his conclusion that the holding of the shares of the petitioner in the Indian company was not incidental to its business and as such the dividend income therefrom could not be business income was properly arrived at on a consideration of all materials available. Supporting materials for the petitioner's claim, according to Mr. Ray, were : (1) the assertion made in the petition under section 33A ; (2) similar allegations in paragraph 2 of the writ petition and no specific denial thereof in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from by the subsequent decisions of that court. Mr. Gupta finally submitted that even if the dividend income is held to be income from business it would only be an item in such income and no set off could be allowed against a part of the income from business. To allow such a set off the Income-Officer must find out the petitioner's income from all its business for that year. In the peculiar facts of this case, section 24(2)(ii) was not attracted. The learned counsel also submitted that the alternative argument that in any event the unabsorbed depreciation of the earlier year should have been allowed is equally untenable. Section 10 is the computing section for the head " business." There the deductions allowable are enumerated in sub-section (2) of that section. Section 10(2)(vi), proviso (b), provides that unabsorbed depreciation brought forward shall be added to the allowance for depreciation for the following year and deemed to be a part of that allowance. So, it would appear that unabsorbed depreciation of any year becomes part of the depreciation for the subsequent years. If in the subsequent year no income under the head " business " is chargeable to tax then there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the inferior court or Tribunal is based on an obvious misinterpretation of a statutory provision or ignorance of it or disregard of it or for reasons erroaeous in law. I do not think that any case has been made out of any misinterpretation of the provisions of section 33A by the Commissioner or any disregard by him of any provision of law. The only question, is whether the reasons given by him in his order are erroneous in law. I agree with Mr. Gupta that apart from the assertions made in the petition before the Commissioner and in the appeal before the Income-tax Appellate Tribunal that these shares were part of its trading assets no other material was placed before the Commissioner to come to the conclusion that the dividend income was the petitioner's income from business. Being a non-resident in the assessment years 1936-57 and 1957-58 the petitioner's business income in the U. K. did not come into the computation in its Indian assessment. Therefore, it could not be ascertained whether any business loss of 1935-56 was not set off against its business income in the U. K. in any of these two years. After all it is for the petitioner to satisfy the Commissioner that the share ..... X X X X Extracts X X X X X X X X Extracts X X X X
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