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TMI Blog1985 (7) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment years 1976-77 and 1977-78 relevant to the accounting years ending on March 31, 1976, and March 31, 1977, respectively, the petitioner earned a sum of Rs. 27,344 and Rs. 45,369 as interest on the short-term deposits made by it from out of the amounts borrowed, though it did not make profits in its business operations but sustained losses for those years. In the returns filed under the Act for the said years before the ITO, Company Circle-IV, Bangalore (ITO), the petitioner disclosed the said receipts on which the ITO by his assessment orders dated July 12, 1977, and January 10, 1978, for the assessment years 1976-77 and 1977-78 (exhibits C and C1), respectively, allowing a deduction of 10 per cent. as expenditure has brought the said amounts to tax under the Act. Without challenging those assessments in appeals, the petitioner moved the Commissioner of Income-tax, Karnataka, Bangalore (Commissioner), under s. 264 of the Act in Revision Petitions Nos. 139 and 140 of 1978, for relief, who on February 24, 1979 (exhibit-E), has dismissed them. In these petitions under article 226 of the Constitution, the petitioner has challenged the order of the Commissioner. The respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d waived its right to challenge the same either before the Commissioner or this court. On that view only, the Commissioner rightly dealt with the revision petition on merits. In my view, the said conduct of the petitioner cannot and does not disentitle it to challenge the order of the Commissioner with which we are primarily concerned. On the above discussion, I hold that there is no merit in the preliminary objections raised by Sri Srinivasan and I reject them. In this view, it is necessary to examine the merits which I now proceed to do. As noticed earlier, the petitioner approached the Commissioner in revision under s. 264 of the Act and that authority has rejected them. But, the Commissioner somewhat regretfully had not independently examined the contentions urged by the petitioner and has been content to reject them concurring with the reasons given by the ITO in his assessment order made on December 24, 1975 (exhibit-F), for the assessment year 1973-74, which was the basis on which he completed his assessments for the disputed assessment years. Hence, it is necessary to notice and examine the reasons on which the ITO rejected the claim of the petitioner for the year 1973-74 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expounded according to the intent of them that made it. If the words of the statute are in themselves precise and unambiguous no more is necessary than to expound those words in their natural and ordinary sense, the words themselves in such case best declaring the intention of the Legislature." In CED v. Alladi Kuppuswamy [1977] 108 ITR 439, the Supreme Court has explained the principle to be applied where the language is plain and unambiguous in these words (p. 451),: " The last plank of the argument of the respondent was that the Estate Duty Act being a fiscal statute should be construed strictly so as to give every benefit of doubt to the subject. There can be no quarrel with this proposition but when the phraseology of a particular section of the statute takes within its sweep the transaction which is taxable, it is not for the court to strain and stress the language of the section so as to enable the taxpayer to escape the tax." In the oft-quoted classical statement or principle in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, referred to with approval by the Supreme Court and this court in more than one case, Rowlatt J. expressed thus (p. 71): "In a taxing Act one has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Eastern Investments Limited v. CIT [1951] 20 ITR 1 (SC) that interpreted s. 12(2) of the 1922 Act, which is the leading case on the point and around which a volume of case law has grown and which were all relied on by Sri Sarangan, the facts in brief were these: Eastern Investments Limited, an investment company under an arrangement with one of its major shareholders reduced its share capital and issued him debentures with the approval of the High Court under the Companies Act, paid out interest to that shareholder and claimed that as deduction under s. 12(2) of the 1922 Act as paid out wholly and exclusively for earning its income which was negatived by the I.T. authorities and the High Court of Calcutta. But, the Supreme Court in reversing the decision of the Calcutta High Court and accepting the case of the assessee expressed thus (p. 7): " This being an investment company, if it borrowed money and utilised the same for its investments on which it earned income, the interest paid by it on the loans will clearly be a permissible deduction under section 12(2) of the Income-tax Act. Whether the loan is taken on an overdraft, or on a fixed deposit or on a debenture makes no di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Division Bench of the Kerala High Court was dealing with a case of receipts or interest paid on share deposits and the deductions claimed by the assessee on them under s. 57(iii) of the Act. The Division Bench speaking through Issac J. rejected the same in these words (p. 506) : "A reading of the above provision is sufficient to repudiate the contention that the expenditure incurred by, the company during the accounting year was incurred for the purpose of making or earning the interest received by the company on the deposit of the share capital. Office and establishment expenses unconnected with the earning of the company or keeping the company alive are not permissible deductions under section 57 of the Act vide the decision of the Calcutta High Court in Commissioner of Income-tax v. Bihar Spinning & Weaving Mills Ltd. [1953] 24 ITR 108. " With great respect to their Lordships, I am in complete agreement with these views. On the application of these principles also, the claim of the petitioner for deduction under s. 57(iii) of the Act cannot be allowed. On the above discussion, it follows that the order of the Commissioner refusing to interfere with the assessments made by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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