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National Textile Corporation (M.P.) Ltd. Vs. Income-tax Officer, 'E' Ward, Circle-i, (24.09.1983 - MPHC) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Petition No. 413 of 1982
Judge
Reported in[1985]151ITR228(MP)
ActsIncome Tax Act, 1961 - Sections 240; Constitution of India - Article 226; Sick Textile Undertakings (Nationalisation) Act, 1974
AppellantNational Textile Corporation (M.P.) Ltd.
Respondentincome-tax Officer, 'E' Ward, Circle-i, ;Commissioner of Income-tax and Kalyanmal Mills Limited
Appellant AdvocateG.M. Chaphekar and ;Samvatsar, Advs.
Respondent AdvocateBhatta, ;Bhagidia and ;R.C. Mukati, Advs.
Excerpt:
- - it was urged that when the department found that the amount of refund was claimed both by the petitioner as well as by respondent no......indian i.t. act, 1922. the income-tax department, however, proceeded to assess the income of the firm, kalyanmal mills tent factory, on the ground that the price for the supply of tents was payable and was actually paid in the taxable territory. the ito, accordingly, assessed the kalyanmal mills tent factory for the assessment years 1942-43 to 1947-48, and levied income-tax on the assessee-firm. the company, a partner of the assessee-firm, paid the amount of tax totalling to a sum of rs. 4,78,260.30, but the matter was taken up in appeal before the aac, who dismissed the appeal. on further appeal, before the appellate tribunal, the tribunal by its order dated november 25, 1971, upheld the contention of the assessee-firm that as no part of the profits and gains of the assessee-firm had.....
Judgment:

Sohani, J.

1. This is a petition under Article 226 of the Constitution of India.

2. The material facts giving rise to this petition briefly are as follows :

(i) The petitioner-Corporation is a subsidiary of the National Textile Corporation Limited, New Delhi, a company incorporated and registered under the Companies Act, 1956. Under the provisions of the Sick Textile Undertakings (Nationalisation) Act, 1974, all the sick textile undertakings specified in the First Schedule of that Act vested in the Central Government and immediately thereafter in the National Textile Corporation Limited on and from the appointed date, namely, April 1, 1974. One of the sick textile undertakings specified in the First Schedule is the Kalyanmal Mills at Indore which before the aforesaid appointed date was owned by respondent No. 3, the Kalyanmal Mills Limited, Indore. Under Section 6 of the Sick Textile Undertakings (Nationalisation) Act, 1974, the National Textile Corporation Limited, New Delhi, is authorised to form a subsidiary corporation and to transfer any sick textile undertaking vestedin it to such subsidiary corporation. Accordingly, the National Textile Corporation Limited, New Delhi, formed the petitioner-Corporation as its subsidiary corporation and by an order in writing dated November 23, 1974, transferred all the sick textile undertakings in Madhya Pradesh vesting in it under the aforesaid Act to the petitioner-Corporation. The petitioner contends that the undertaking 'Kalyanmal Mills' has thus vested in the petitioner-Corporation.

(ii) In the year 1940, when the Kalyanmal Mills was an undertaking belonging to respondent No. 3-company, that company entered into a partnership agreement with Walia Brothers of Indore. Under the terms of that agreement, a firm by the name of 'Kalyanmal Mills Tent Factory' was constituted for the purpose of manufacture and supply of tents to the Government of India. As regards the liability of the aforesaid firm to pay income-tax under the provisions of the Indian I.T. Act, 1922, the contention of the firm was that as the manufacture and the sale of manufactured tents took place at Indore which formed part of the erstwhile Holkar State which was a non-taxable territory for the purpose of the Indian I.T. Act, 1922, in force at the material time, the income profits and gains of the Kalyanmal Mills Tent Factory were not liable to payment of income-tax under the Indian I.T. Act, 1922. The Income-tax Department, however, proceeded to assess the income of the firm, Kalyanmal Mills Tent Factory, on the ground that the price for the supply of tents was payable and was actually paid in the taxable territory. The ITO, accordingly, assessed the Kalyanmal Mills Tent Factory for the assessment years 1942-43 to 1947-48, and levied income-tax on the assessee-firm. The company, a partner of the assessee-firm, paid the amount of tax totalling to a sum of Rs. 4,78,260.30, but the matter was taken up in appeal before the AAC, who dismissed the appeal. On further appeal, before the Appellate Tribunal, the Tribunal by its order dated November 25, 1971, upheld the contention of the assessee-firm that as no part of the profits and gains of the assessee-firm had arisen in the taxable territory the income from the supply of tents was not liable to be taxed under the provisions of the Indian I.T. Act, 1922. The Department sought a reference before the High Court and, at the instance of the Department, a reference was made to this court, but it was answered against the Department. The assessee-firm thus became entitled to the refund of tax paid by it.

(iii) While the proceeding for reference were pending, the Sick Textile Undertakings (Nationalisation) Act, 1974, was passed and, as already observed, the undertaking 'Kalyanmal Mills' which was owned by respondent No. 3-company came to be vested in the National- Textile Corporation Limited, New Delhi, and thereafter in the petitioner-Corporation. The petitioner contends that the Kalyanmal Mills Tent Factory was a part and parcel of the undertaking known as 'Kalyanmal Mills' and thus the petitioner became entitled to the refund of the tax due to the assessee-firm, which was a part of the sick textile undertaking 'Kalyanmal Mills'. The petitioner further contends that the petitioner-Corporation has a statutory right to receive the amount of refund from the Income-tax Department, but in spite of persistent demands, respondent No. 1, the ITO, under the directions of respondent No. 2, the Commissioner of Income-tax, has made some payment to the aforesaid firm. The petitioner has, therefore, prayed for the issuance of a writ of mandamus directing respondents Nos. 1 and 2 to refund the amount of Rs. 4,78,000 to the petitioner.

3. In the return filed on behalf of respondents Nos. 1 and 2, it is contended that as the assessee was the firm 'Kalyanmal Mills Tent factory', that that assessee alone had a right to receive a refund of the amount of tax and that the petitioner could not claim that amount. On behalf of respondent No. 3, the company, it was averred that the Kalyanmal Mills Tent Factory was not a part and parcel of the undertaking known as 'the Kalyanmal Mills' and the right to receive a refund of the amount of tax vested in the respondent-company which had made the payment on behalf of the assessee-firm.

4. Shri Chaphekar, the learned counsel for the petitioner, contended that 'Kalyanmal Mills Tent Factory' was a part and parcel of the undertaking known as 'The Kalyanmal Mills' owned by respondent No. 3, and as the undertaking 'The Kalyanmal Mills' was vested in the petitioner-Corporation under the provisions of the Sick Textile, Undertakings (Nationalisation) Act, 1974, the rights of the undertaking devolved on the petitioner and the petitioner alone was entitled to receive the amount of refund from the Income-tax Department. It was urged that when the Department found that the amount of refund was claimed both by the petitioner as well as by respondent No. 3-company, the Department should have directed the parties to establish their right before making refund. It was contended that the Department kept the petitioner-Corporation in dark and illegally refunded a part of the amount of tax recovered from the assessee-firm to respondent No. 3-company. The learned counsel contended that the Department should, therefore, be directed to refund the entire amount of tax recovered from the assessee-firm to the petitioner-Corporation.

5. Having heard the learned counsel for the petitioner, we have come to the conclusion that this petition deserves to be dismissed. Under the provisions of Section 240 of the I.T. Act, 1961, where as a result of any order passed in appeal or other proceeding under the Act refund of any amount becomes due to the assessee, the ITO is required to refund the amount to theassessee. It was not disputed before us that the assessee, in the instant case, was the 'Kalyanmal Mills Tent Factory', a partnership firm of which respondent No. 3 was a partner. What has vested in the petitioner is the undertaking 'The Kalyanmal Mills' owned by respondent No. 3. Therefore, only the property of the aforesaid undertaking and not the entire property of respondent No. 3, has become vested in the petitioner. Now, whether the firm, ' The Kalyanmal Mills Tent Factory ', was or was not a part of the undertaking ' The Kalyanmal Mills' is a disputed question of fact and we refrain from expressing any opinion on that question. That question would be decided in the appropriate proceedings by a court on the basis of the material produced before it. The short question for consideration before us is whether we can direct the Income-tax Department to refund the amount of tax paid by the assessee-firm, ' The Kalyanmal Mills Tent Factory ', to the petitioner. As already observed, the only obligation imposed by Section 240 of the I.T. Act, 1961, on the Income-tax Department is to refund the amount of tax to the assessee who had paid the tax but from whom tax is not found to be due as a result of an order passed in appeal. If the petitioner has become entitled to the property of the assessee-firm on the ground that the said firm was a part of the undertaking ' The Kalyanmal Mills ', then the remedy of the petitioner is to take appropriate steps for recovery of that property from the persons in possession of that property after establishing that the said firm was a part and parcel of the undertaking ' The Kalyanmal Mills ' vesting in the petitioner. Section 32 of the Sick Textile Undertakings (Nationalisation) Act, 1974, makes it punishable if a person having in his possession, custody or control any property forming part of an undertaking vesting in the petitioner wrongfully withholds such property from the petitioner. The petitioner is at liberty to institute such proceedings and against such persons as the petitioner may be advised in this behalf. But no relief can be granted to the petitioner under Article 226 of the Constitution because the only statutory duty cast on the Income-tax Department is to refund the amount of tax to the assessee who had paid the tax. No provision of law was brought to our notice which casts a duty on the Income-tax Department to refund the amount to the petitioner as soon as a claim was put forward by the petitioner to the property of the assessee, to whom refund was due. The petitioner is, therefore, not entitled to any relief. This petition under Article 226 of the Constitution is thus misconceived.

6. The petition, therefore, fails and is, accordingly, dismissed. In the circumstances of the case, parties shall bear their own costs of this petition. The amount of security deposit, if any, may be refunded to the petitioner.


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