9911796707
TMI Blog1986 (3) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(a) of the Income-tax Act, 1961 ('the Act') for the assessment year 1974-75 was not sustained by the Tribunal keeping in view the facts of the case, which was not the case of an ordinary assessee and the official liquidator has been appointed to wind up the company concerned and naturally official liquidator was not personally interested in looking after these affairs in the same manner in which any other assessee could be. It was also noted that the official liquidator had no efficient stag who could assist the preparation of accounts, etc., for filing of the return. On the basis of the reasons recorded by it, the Tribunal cancelled the penalty order on the ground that the delay was due to reasonable cause in the peculiar circumstance of such case. 3. We have looked into different aspects of the matter. The present case before us is that the company under caption was directed to be wound up by the order of the Hon'ble Calcutta High Court dated 10-12-1962 and the official liquidator became the liquidator of the company by virtue of section 449 of the Companies Act, 1956. Having regard to the peculiar facts and circumstances of the case before us and the similarity of these fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial liquidator would not be placed on the same footing with any other ordinary assessee carrying on the business. It was urged, therefore, that the expenses incurred by the official liquidator to discharge the statutory functions should be allowed. Such expenses were the minimum requirements as claimed. 7. The Commissioner (Appeals) considered the submissions made before him. He was of the view that it may be correct that the expenses were in connection with discharging of statutory debts, but it cannot be said that the entire expenditure was attributable to the earning of the income. The Commissioner (Appeals) further noted that it cannot be denied that the income earned by the assessee was taxable under the head 'Income from other sources' and hence, deduction of the expenses would be governed by section 57 of the Act. According to the Commissioner (Appeals), the expenses for liquidation proceedings could not be allowed as admissible deduction. In respect of Rs. 17,679 referred to earlier, the Commissioner (Appeals) was of the view that the assessee would be free to claim for deduction in the year in which the payment was made. 8. In respect of the quantum of the expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to be the income of the recipients and be taxed accordingly in the year of receipt, if such income, would have been included in the total income of the person who carried on business at such some point received before such discontinuance (sic.). It is urged, therefore, that in the case of the assessee, the business of money-lending and investing was discontinued and, in fact, the income received during the year should have been assessed as income of the investor or money- lender and would accordingly be assessable as the income from business and not from other source and as a corollary, the expenses incurred on the facts of the case should all be treated as business expenditure. It is also urged that the nexus between the expenditure and earning of such income need not be direct, relying on the decision of the Hon'ble Bombay High Court in the case of CIT v. Elphinstone Spg. Wvg. Mills Co. Ltd. [1975] 100 ITR 139. It is also stated by the assessee's learned counsel that his point was approved by the Hon'ble Supreme Court in the case of Seth R. Dalmia v. CIT [1977] 110 ITR 644 with emphasis at page 652. It is also submitted that in a similar situation the Hon'ble Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance could be given to the entire expenditure. It is submitted that in a similar situation in the case of South Arcot Electricity Distribution Co. Ltd. v. CIT [1974] 94 ITR 469, the Hon'ble Madras High Court has sustained part disallowance as made by the Tribunal as it was found that during the assessment year concerned the assessee did not derive any income at all from its business of supplying electricity, as the business was taken over by the State and as such the interest income received by the assessee from fixed deposit, etc., would be assessable as income under the head 'Income from other sources'. It is also pointed out in that Madras High Court case, that portion of the expenditure was estimated and allowed as deduction which was ultimately sustained. It is submitted, therefore, that in the case before us also the part disallowance allowed by the ITO is quite sufficient and no further relief is necessary. It is also urged that in the present case and on the facts available there was no nexus between the expenses incurred by the assessee and the income from fixed deposit and the rent received by the assessee. It is also stressed by the learned departmental representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly. There is no indication or basis for us to say that the income as shown by the assessee in the return for the year 1980-81 was the income of the assessee from 'business'. In fact, on behalf of the assessee before the Commissioner (Appeals) it was urged that the official liquidator has stepped into the shoes of the ex-management devoid of any personal interest and his function to conduct the liquidation proceedings under the direction of the Hon'ble High Court and that the main functions were confined to the realisation of debts, salt of assets and to distribute the available funds amongst the creditors and contributors. It was also urged before the Commissioner (Appeals) that the official liquidator should not be placed on the same parity with an ordinary assessee carrying on business, particularly when the expenses incurred by the official liquidator were only to discharge his statutory functions. In the circum stances, apart from the fact that the claim of the assessee that the income should be assessed as income from business, cannot be considered to have arisen out of the order of the Commissioner (Appeals) impugned before us, even on facts and on merits, the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions and other provisions of the Companies Act. In fact, different expenditure would hive to be statutorily incurred by the liquidator. 19. The contention of the assessee on the facts of the case is that different expenditure on account of establishment charges, sundry contingent, rent, law charges, telephone charges, insurance premium and the Central Government fees have been incurred entirely by the assessee as required by circumstances. Section 57(iii) would permit deduction in respect of expenses laid out wholly and exclusively for the purpose of making or earning such income, if such expenditure was not capital in nature. The Hon'ble Allahabad High Court in the case of Rampur Timber Turnery Co. Ltd. has expressed the view that expenses on account of travelling, salary and legal expenses would be expenditure incurred wholly and exclusively for the purpose of making or earning income, although the company discontinued the business, the expenditure was incurred for retaining the status of the company. We are of the opinion that the expenditure incurred by the assessee in the case before us was for maintaining the status of the company in liquidation and also for profita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 67 days in filing this appeal after excluding the time taken in obtaining the certified copy of the order of the Commissioner (Appeals). No application for condonation of delay was filed with the memo of appeal. This defect when pointed out by the office of the Tribunal to the official liquidator, he filed additional ground of appeal under the signature of Deputy Director (Accounts) Ex-officio, Deputy Official Liquidator, High Court, Calcutta and therein mentioned in ground No. 7 "that the delay, if any, in filing the appeal may kindly be condoned in view of the fact that the official liquidator functions under severe constraints and it is not the case of 'an ordinary assessee'." 3. I could not follow as to what the official liquidator meant by the phrase 'an ordinary assessee' used in additional ground No. 7. The Act defines 'assessee' but does not make categories of the assessees like 'an ordinary assessee' and perhaps 'a special assessee'. All the assessees require uniform treatment according to the provisions of the law applicable to them and there cannot be different treatment to any particular assessee not envisaged by the Act. 4. Point for consideration is as to whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l on the last day of limitation prescribed. That may inevitably mean that the party will have to show sufficient cause not only for not filing the appeal on the last day but to explain the delay made thereafter day by day. In other words, in showing sufficient cause for condoning the delay the party may be called upon to explain for the whole of the delay covered by the period between the last day prescribed for filing the appeal and the day on which the appeal is filed. To hold that the expression 'within such period' means during such period would, in our opinion, be repugnant in the context..." In the case of State of West Bengal v. Howrah Municipality AIR 1972 SC 749, the Hon'ble Justice Vaidialingam observed as under : "Mr. D. Mukherjee, the learned counsel for the first respondent, is certainly well-founded in his contention that the expression 'sufficient cause' cannot be construed too liberally, merely because the party in default is the Government. It is no doubt true that whether it is a Government or a private party, the provisions of law applicable are the same, unless the statute itself makes any distinction. But it cannot also be gainsaid that the same considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, dismiss the appeal as barred by limitation. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 Since we differ in opinion on the following point, the case be placed before the President for appropriate orders under section 255(4) of the Act : "Whether, under the facts and circumstances of the case, there was sufficient cause for filing the appeal 67 days after expiry of the period of limitation ?" THIRD MEMBER ORDER Per Shri Y. Upadhyay, Vice President - The following question under section 255(4) had been assigned by the President : "Whether, under the facts and circumstances of the case there was sufficient cause for filing the appeal 67 days after expiry of period of limitation ?" 2. The assessee is a company and it was doing banking business in India. It was wound up by the order of the Hon'ble High Court, Calcutta, dated 10-12-1962 and the official liquidator attached to the said Hon'ble High Court became the liquidator of the company. On the appointment of the official liquidator, the official liquidator stepped into the shoes of the ex-management. The assessment for the assessment year 1980-81 was passed by the ITO on 27-7-1981. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was amended and the amended Form No. 36 was filed which must be in the file in which against column 9 the date was given as 23-4-1982. He referred to the order of the Commissioner (Appeals) and indicated that the assessee wrongly against column 9 gave the date when the order of the Commissioner (Appeals) was passed on 4-2-1982. The assessee filed the photostat copies of the sectional register and central register. The sectional register was filed for the period from 16-4-1982 to 24-4-1982 whereas central register was filed for 23-4-1982. The counsel explained that whatever the papers are receipted by the office, first they are entered in the central register. There- after, the papers relating to the various sections are distributed and they are entered in the sectional register. The counsel stated that the order of the Commissioner (Appeals) was received by the central department on 23-4-1982 and it was received by the sectional department on 24-4-1982. The counsel of the assessee produced the original two registers and the same were examined and equal opportunity was allowed to Shri S.K. Jha, the senior departmental representative. The counsel urged that this fact is on the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice. The assessee has produced two registers known as sectional register and central register. The assessee has also explained the system which is followed in its office for entering dak in these registers. All letters and documents received by the assessee are first entered in the central register. Thereafter, the letters and documents are distributed to the sections concerned. The entry in the central register had been made on 23-4-1982 regarding the receipt of some documents from the ITO with enclosure. However, on 24-4-1982 in the sectional register a clear entry has been made indicating the receipt of the demand notice under section 156 of the Act, with appeal order under section 143(3)/139 of the Act from the Commissioner (Appeals). The original registers had been perused and it was found that the entries were original and even the sectional register mentioned the entry No. 865/1. The registers were open for examination as well as inspection by the Member and the senior departmental representative, Shri Jha. After examination of the entries made in the central and sectional registers of the assessee and Form No. 36 in duplicate which are on the record, it is clear that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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