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TMI Blog2004 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... t was delivered by TIRATH S. THAKUR J. - These appeals arise out of two different orders passed by a single Bench of this court whereby W.P.No. 11258 of 1998 and W.Ps. Nos. 10415-17 of 1999 have been dismissed. The appellant-Shankaranarayana Construction Company is a partnership concern. It owns a coffee estate in Chickmagalur and carries on business of growing and selling of plantation crops such as coffee and pepper. In terms of a show cause notice dated February 26, 1998, the Joint Commissioner of Income-tax (AIT and CV), Bangalore, called upon the appellant-firm to show cause why assessment order dated April 19, 1996, for the assessment year 1995-96 be not set aside and the Deputy Commissioner of Agricultural Income-tax, Chickmagalur, directed to re-do the assessment on the lines set out in the show cause notice. The notice set out the relevant facts which were to the extent relevant for the present as under: "For the years 1990-91 to 1993-94 assessment was concluded and the income of the firm was determined as loss. Shares of each of the partners was also determined separately which was also a loss and ordered to be carried forward for set off in subsequent years. With ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectness of the said order. In so far as W.As. Nos. 5860-62 of 1999 are concerned, the same arise out of the dismissal of W.Ps. Nos. 10415-17 of 1999 by an order dated July 1, 1999, passed by the very same Bench following the order passed in the earlier writ petition. In the said petitions, apart from challenging the constitutional validity of the amended provisions of the Karnataka Taxation Laws (Amendment) Act, 1994, the petitioners had sought a declaration that the firm is entitled to set off the unabsorbed losses allocated to its partners during the preceding years for purposes of computing its assessable income. The writ petitions also assail the validity of the orders passed by the assessing authority in so far as the same denied to the petitioners the benefit of set off against the accumulated unabsorbed losses to the extent of Rs. 1,18,56,221. Appearing for the appellants Mr. Naganand, learned senior counsel, argued that the Karnataka Taxation Laws (Amendment) Act, 1994, had omitted sections 19A, 19B, 19C and subjected registered firms to a uniform tax rate of 40 per cent, on their total agricultural income. While doing so, the Legislature had according to learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciples governing interpretation of statutes was well settled by a string of decisions of the Supreme Court. Section 19A of the Karnataka Agricultural Income-tax Act, 1957, that held the field till March 31, 1994, envisaged determination of agricultural income-tax payable by registered firms and allocation of the share of each partner in such income to be included in his total income for assessment to tax separately. Sub-section (2) to section 19A stipulated that if such share of the partner is a loss, it shall be set off against other income and carried forward and set off in accordance with the provisions of section 15. The provisions of section 19A were however deleted together with those of sections 19B and 19C dealing with the assessment of unregistered firms and method of computing partner's share in the income of the firm by the Karnataka Taxation Laws (Amendment) Act, 1994. Consequently, registered partnership firms became liable to tax in terms of section 19 of the Act read with Part II of the Schedule as amended at 40 per cent, of the total agricultural income earned by them. The amendments incorporated by the Karnataka Act No. 18 of 1994 left free the share of profit al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Minister had declared on the floor of the House and the consequential steps that were taken in that direction. The Budget Speech however did not envisage nor did it otherwise refer to the supposed intention of the Government to provide for set off against unabsorbed losses in the hands of the partners. The argument that since the State law had to be brought in conformity with the Central Income-tax Act, therefore the intention must be taken to be to bring the two laws in conformity with each other in every possible detail has not commended itself to us. The budget proposals contained in the speech of the Finance Minister cannot be said to be legally enforceable promises sufficient to support an action in a court of law. The proposals in the speech are only in the nature of proposals and may or may not culminate in amendment to statutory provisions. Even where amendments are proposed, the broad proposal initially made may undergo a change and may be passed only in a modified form. In the circumstances, the absence of a provision by which unabsorbed losses in the hands of the partners would revert to the firm for being set off against its future income cannot be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cases where section 16(3) of the Act operates, the profit or loss from the business of a wife or minor child included in the total income of the assessee should be treated as profit or loss from the business carried on by him/her for the purpose of carrying forward and set off under section 24(2) of the Act. It was in the above background that their Lordships indicated the correct approach to be adopted by the court in cases where the legislative intent was not evident from the provisions or where inequitable results were bound to follow in case the provision was not given an imaginative interpretation. The following observations made by their Lordships are in this regard apposite: "Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the court might modify the language used by the Legislature so as to achieve the intention of the Legislature and produce a rational construction. The task of interpretation of a statutory provision is an attempt to discover the intention of the Legislature from the language used. It is necessary to remember that language is at best an imperfect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e well established cannons of interpretation of statutes." In CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 (SC), the court held that the principle of liberal interpretation cannot be carried to the extent of doing violence to the plain and simple language used in the enactment. It would not be reasonable or permissible for the court to rewrite the section or substitute words of its own for the actual words employed by the Legislature. The new scheme of taxation applicable to registered firms is clear and unambiguous. It provides for a flat rate of 40 per cent, towards tax without any provision for reversion of unabsorbed losses allocated to the partners for the previous assessment years. The absence of any such provision does not however make the scheme unworkable or anomalous. Even the appellants do not find the new scheme of taxation to be unworkable in its present form. All that was argued was that the absence of a provision for reversion of the unabsorbed losses to the firm in setting of the same against future income makes the scheme inequitable and onerous. We do not think that the remedy for any such flaw or deficiency lies in judicial heroics. The appeal against any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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