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Commissioner of Income-tax Vs. Kerala State Industrial Development Corporation Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 112 of 1978
Judge
Reported in[1981]128ITR742(Ker)
ActsIncome Tax Act, 1961 - Sections 147
AppellantCommissioner of Income-tax
RespondentKerala State Industrial Development Corporation Ltd.
Appellant Advocate P.K. Ravindranatha Menon, Adv.
Respondent Advocate K.P. Radhakrishna Menon and; K.K. Ravindranath, Advs.
Excerpt:
- - the assessee contended, inter alia, before the ito that there was no omission or failure on its part to disclose all the information and that the initiation of proceedings undersection 147(b) was not valid......on the facts and in the circumstances of the case, the reopening of the assessment for the assessment year 1968-69 under section 147(b) of the income-tax act, 1961, was not valid ?'2. the assessee is a public limited company--the kerala state industrial development corporation ltd.--incorporated with the object of supplying information to entrepreneurs about the possibilities of starting industries in kerala state, financing the same by share participation, underwriting of shares, guaranteeing and advancing of loans, etc. it gets remuneration for the services rendered by it.3. for the assessment year 1968-69, the assessee filed a return disclosing an income of rs. 9,20,800. in so doing it had claimed deduction of rs. 32,978, being the share of grant given by it to the labour and.....
Judgment:

Balakrishna Eradi, C.J.

1. The Income-tax Appellate Tribunal, Cochin Bench (hereinafter called 'the Tribunal'), has referred to this court under Section 256(1) of the I.T. Act, 1961, for short, the Act, the following question of law as arising out of its order dated 26th April, 1977, in I.T.A. No. 355/Coch/1974-75:

'Whether, on the facts and in the circumstances of the case, the reopening of the assessment for the assessment year 1968-69 under Section 147(b) of the Income-tax Act, 1961, was not valid ?'

2. The assessee is a public limited company--the Kerala State Industrial Development Corporation Ltd.--incorporated with the object of supplying information to entrepreneurs about the possibilities of starting industries in Kerala State, financing the same by share participation, underwriting of shares, guaranteeing and advancing of loans, etc. It gets remuneration for the services rendered by it.

3. For the assessment year 1968-69, the assessee filed a return disclosing an income of Rs. 9,20,800. In so doing it had claimed deduction of Rs. 32,978, being the share of grant given by it to the Labour and Industrial Bureau. The ITO allowed the said deduction and completed the assessment on September 24, 1968. Subsequently, he came to know that the AAC, while dealing with an appeal arising out of the assessment made on the assessee-company for the assessment year 1970-71, had held that such grant made to the Labour and Industrial Bureau could not be considered as allowable deduction. In view of this, the ITO initiated proceedings for reopening the assessment under Section 147(b) of the Act, and issued a notice to the assessee on March 9, 1972, requiring it to file a return of its income for the assessment year in question. The assessee contended, inter alia, before the ITO that there was no omission or failure on its part to disclose all the information and that the initiation of proceedings underSection 147(b) was not valid. The ITO overruled the objection. He had already reopened the assessment for the assessment year 1967-68 on the identical ground and had completed the revised assessment for that assessment year by his order dated March 15, 1973. Likewise he completed the revised assessment for the assessment year 1968-69 by his order dated February 16, 1974, by adding back the amount of Rs. 32,978, as the sum representing the grant made by the assessee, to the Labour and Industrial Bureau in respect of which a deduction had been originally allowed. The assessee took up the matter in appeal before the AAC who confirmed the revised assessment made by the ITO. On a second appeal being filed by the assessee before the Tribunal, the Tribunal took the view that the decision of the AAC for the assessment year 1970-71 holding that no deduction could be allowed in respect of the grant made by the assessee to the Labour and Industrial Bureau could not constitute 'information' on the basis of which proceedings under Section 147(b) could be validly initiated by the ITO especially because the said decision of the AAC had not become final at the relevant time. In this view, the Tribunal considered it unnecessary to go into the further question raised before it on behalf of the assessee that the reassessment was barred by time.

4. An identical question as to whether the decision of the AAC rendered in relation to the assessment year 1970-71 holding that no deduction could be allowed in respect of the grant made by the assessee to the Labour and Industrial Bureau would constitute information in the possession of the ITO for the purposes of Section 147(b) came up before this court in ITR No. 20 of 1977 which arose out of the decision rendered by the Tribunal with respect to the same assessee for the assessment year 1967-68. The judgment of this court in that case is reported in CIT v. Kerala State Industrial Development Corporation Ltd. : [1979]116ITR158(Ker) . Therein this court held that the order of the AAC holding that no deduction could be allowed in respect of the amount given by the assessee by way of grant to the Labour and Industrial Bureau would constitute information within the meaning of Section 147 on the basis of which the ITO could validly initiate the proceedings under Section 147(b). In the light of the said decision we have no hesitation to hold that the contrary view taken by the Tribunal is incorrect and unsustainable. We hold that the reopening of the assessment for the assessment year 1968-69 under Section 147(b) was valid. The question is accordingly answered in the affirmative, that is, against the assessee and in favour of the department. There will be no direction regarding costs.

5. A copy of this judgment, under the seal of the court and the signature of the Registrar, will be forwarded to the Tribunal, as required by law.


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