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TMI Blog1977 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... re referred in T.C. Nos. 179, 240 and 180 of 1974, respectively, are as follows : T.C. No. 179 of 1974 : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the relief under section 15C granted in the assessment for 1960-61 cannot be withdrawn by the Income-tax Officer under the provisions of section 35/154 of the Income-tax Act ? Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the rectification order passed by the Income-tax Officer under section 154 should be taken as one having been under section 35(1) of the Indian Income-tax Act, 1922, and since no appeal against such an order is provided under the 1922 Act, the appeal to the Tribunal is incompetent and without jurisdiction ? " T.C. No. 240 of 1974 : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that there was no splitting up or reconstruction of the business within the meaning of section 84(2) of the Income-tax Act, 1961, and there was no scope for refusing to grant the relief under section 84 for the assessment year 1962-63 ? " T.C. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in law in holding that the assessee was entitled to the claim of development rebate for the assessment year 1965-66 ? Before we proceed to deal with the various questions, it is necessary to state a few facts. The assessee was originally a firm, which was constituted on November 7, 1956, called Dalmia Magnesite Corporation, Salem, a partnership firm with three partners, namely, (1) M/s. Orissa Cement Ltd.--1/3rd share, (2) M/s. Dalmia Cement Ltd.--1/3rd share and (3) M/s. Magnesite Corporation of India Ltd.--1/3rd share. The firm was established as an industrial undertaking for prospecting of magnesite ores and manufacture of dead burnt magnesite. Production commenced on January 1, 1959. The previous year for the assessment year 1960-61 was the period from July 1, 1958, to June 30, 1959. Before the close of that period, on June 16, 1959, there has been a change in the constitution of the firm. Partners 1 and 2 of the firm retired and M/s. Dalmia Cement (Bharat) Ltd. became a partner. In the reconstituted firm, the shares were held by M/s. Magnesite Corporation of India Ltd.--1/3rd share, and M/s. Dalmia Cement (Bharat) Ltd.--2/3rd share. Again on January 1, 1963, certain change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no apparent error which would justify a correction under s. 35 of the 1922 Act. The Tribunal further came to the conclusion that the appeal before the Tribunal was unsustainable and accordingly dismissed the appeal. The questions that we have already extracted arising from T.C. No. 179 of 1974 are those arising from the views that have been taken by the Tribunal which we have stated above. The first question relates to the ambit of jurisdiction of the ITO under s. 35 of the 1922 Act. The tax relief granted under s. 15C was sought to be withdrawn on the ground that there has been a reconstruction of the firm. Section 15C(2)(i) of the Act indicates that the section will not apply to an undertaking which was formed by the splitting up or the reconstruction of business already in existence. In view of the changes in the constitution of the firm to which we have already referred, the ITO took the view that there has been a reconstruction of the undertaking and, therefore, the relief under section 15C was wrongly granted in the first instance. He also took the view that s. 154 of the I. T. Act, 1961, deals with the rectification of mistakes apparent on the record. Apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Hazari Mal Kuthiala v. ITO [1961] 41 ITR 12 applied the principle that when an act is purported to be done under a provision of law which could not be applied and that would make the act without jurisdiction, if the act done could be supported by another provision of law under which it could be validly done, the courts would have to take it that the power exercised was rightly exercised under the appropriate provision of law. The question that arose therein was whether an order of the CIT passed under ss. 5(5) and 5(7A) of the Indian I. T. Act, 1922, was ultra vires and incompetent for the reason that the correct provision to be invoked for the assessment in question was s. 5(5) of the Patiala I. T. Act. The Supreme Court upheld the order treating the same as one passed under s. 5(5) of the Patiala 1. T. Act. The Supreme Court observed as follows : " The exercise of a power would be referable to a jurisdiction which conferred validity upon it and not to a jurisdiction under which it would be nugatory. " The Supreme Court referred with approval to the decision of the Bombay High Court in Pitamber Vajirshet v. Dhondu Navlapa [1887] ILR 12 Bom 486. In the judgment, the Bombay Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appealable to the Tribunal and, therefore, the appeal taken by the revenue before the Tribunal is competent. The Tribunal has erred in holding that the appeal before the Tribunal was not competent. We, therefore, answer that part of the second question in T.C. No. 179 of 1974 by stating that the view taken by the Tribunal is unsustainable. Counsel for the assessee had invited our attention to the decision of this court in Lakshmanan Chettiar v. Commissioner of Corporation of Madras [1927] ILR 50 Mad 130; AIR 1927 Mad 130 [FB], and also the decision of the Supreme Court in Pannalal Binjraj v. Union of India [1957] 31 ITR 565, in support of his submission that the view taken by the Tribunal is correct. This court in the decision referred to took the view that if a person had not taken objection to the jurisdiction of an authority before that authority, the High Court will not entertain a writ petition under art. 226 on the ground taken for the first time that the authority had no jurisdiction to pass the order. The principle has been stated thus : When a person who took the chance before the appellate authority without challenging the jurisdiction of that authority, having fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment rebate on December 23, 1967, and that, therefore, the order passed by the ITO rectifying the tax relief under s. 15C could be taken to be an order rectifying an order passed under the 1961 Act and, therefore, the appeals were maintainable. We are unable to accept this contention either. The original assessment order in relation to the relief under s. 15C remained unaltered and unaffected by virtue of the rectification made under s. 155(5) by the order dated December 23, 1967, by which the development rebate had been withdrawn. We must take it, therefore, that the order sought to be rectified by the exercise of the power to rectify apparent mistakes on the record was one passed under the 1922 Act and not one passed under the 1961 Act. Now, we will turn to the second question in T.C. No. 240 of 1974. The question is whether there was any splitting up or the reconstruction of the business within the meaning of s. 84(2) of the 1961 Act. s. 84(2)(i) insists that an industrial undertaking in order that it may become a newly established undertaking should not be one that is formed by the splitting up or the reconstruction of a business already in existence. Clause (i) of sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thdrawn or the assessment order rectified. Accordingly, we answer question No. 2 in T.C. No. 240 of 1974 by stating that the conclusion of the Tribunal that there was no ground to withdraw the relief under s. 84(2) of the 1961 Act is the correct one though we have supported the conclusion on other grounds. The question in T.C. No. 180 of 1974 is the same as the one which we have answered now in T.C. No. 240 of 1974. For the reasons stated therein, we answer this question also in favour of the assessee and state that the conclusion arrived at by the Tribunal is correct and that there is no basis for withdrawing the relief granted under s. 84(2) of the 1961 Act. The cases relating to the development rebate have to be dealt with under two groups, those for the years 1960-61 and 1961-62, covered by T.C. No. 147 of 1974 separately from that of the years 1962-63 to 1965-66, falling under T.C. Nos. 240, 146 and 171 of 1974. As regards the questions referred in T.C. Nos. 147 of 1974 it has to be stated here that the relief under s. 84(2) had been granted in the first instance and thereafter the relief was sought to be withdrawn by acting under s. 155(5) of the 1961 Act. The two questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey was so utilised. " From cl. (i) of sub-s. (5) of s. 155 of the 1961 Act, it is clear that in order that the clause may be attracted there must be a sale, or a transfer otherwise, of the plant installed by the assessee. What was contended was that having regard to the changes that took place in the constitution of the firm originally and finally by the order passed by this court in the scheme proceedings, the assets of the firm including the plant and machinery got vested in Dalmia Cement (Bharat) Ltd., and this constituted a transfer to attract cl. (i) of sub-s. (5) of s. 155. It is not enough if there is a transfer in order that the clause may be attracted. There must be a transfer by the assessee. Counsel on behalf of the assessee emphasised that even assuming that there was a transfer by operation of law by virtue of the order passed by this court in the company petition to which we have already adverted of the assets of the firm in favour of one of the partners of the firm, namely, the said Dalmia Cement (Bharat) Ltd., this was not a transfer by the assessee, namely, the firm, and, therefore, by applying the wording of the clause, it is impossible to hold that the clause h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second question in T.C. No. 147 of 1974, the answer has to be in the affirmative too. When there is a specific provision made in s. 155(5) for rectification of assessment orders, it is only the special provision and not the general provision in s. 154 that would apply. In view of the principle which we have already adverted to, we have to trace the authority under which the ITO acted and that authority we find only in sub-s. (5) of s. 155 of the 1961 Act, and, therefore, the appeal taken from that order is competent and maintainable. We, therefore, answer question No. 2 in T.C. No. 147 of 1974, also in favour of the assessee and against the revenue. The first question in T.C. No. 240 of 1974 and the questions in T.C. Nos. 146 and 171 of 1974, raise a common dispute as to whether the assessee had violated s. 34(3)(a) of the 1961 Act. We shall now extract this section : Section 34(3)(a) : " The deduction referred to in section 33 shall not be allowed unless an amount equal to seventy-five per cent. of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstrue the words " by the assessee " as " by any assessee ". We cannot say that the argument is not appealing. But we are afraid that when the wording of the section is clear and unambiguous a court will have no right to change the wording of the section in order to carry out what the court imagines to be the purport and intention of the legislature. In cases of ambiguity, there must be a search for the intention of the legislature, and the ambiguity, if it results in anomalies, could be rectified by the court interpreting an ambiguous provision in a manner that would avoid the anomaly. But where the wording of the section is clear, the court cannot, on grounds of unreasonableness, change the wording of the section. Perhaps, in cases where the wording of the section led to absurdity, the court can say that the legislature could never have meant that absurdity should result. We are not able to postulate that by giving such a literal meaning to s. 34(3)(a) of the 1961 Act, there would be any absurdity. After all, what has been granted is a concession to the assessee, a concession bound by conditions which formed part and parcel of the concession. If, therefore, there was non-compli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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