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Gopal Industrial Estate and ors. Vs. Income-tax Officer, Ward e (Revenue), Bhavnagar and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application No. 582 of 1978
Judge
Reported in(1980)16CTR(Guj)332; [1980]123ITR727(Guj)
ActsIncome Tax Act, 1961 - Sections 230A, 230A(1) and 281B
AppellantGopal Industrial Estate and ors.
Respondentincome-tax Officer, Ward "e" (Revenue), Bhavnagar and ors.
Appellant Advocate K.H. Kaji, Adv.
Respondent Advocate N.U. Raval, Adv.
Cases ReferredUnion of India v. Raman Iron Foundry
Excerpt:
.....under any of the taxation acts referred to in clause (a) of sub-s. it is a well-settled canon of construction that the same words occurring in different clauses of the same section must bear the same meaning and applying that well-known canon of construction to the words 'existing liability' occurring in clause (a) of sub-s. under these circumstances it is obvious that the refusal of the ito concerned was bad and illegal, and, therefore, the order dated october 8, 1975, must be quashed and set aside......the ito as indicated in s. 230a(1). the crucial words in the light of the facts before us are the words 'existing liabilities'. mr. raval, appearing for respondents nos. 1 and 2, has drawn our attention to the decision of the supreme court in kesoram industries and cotton mills ltd. v. cwt : [1966]59itr767(sc) of the report, k. subba rao j., as he then was, has quoted the following passage from the earlier decision of the supreme court in kalwa devadattam v. union of india : [1963]49itr165(sc) . in that earlier decision, shah j., as he then was, stated thus : 'under the income-tax act liability to pay income-tax arises on the accrual of the income and not from the computation made by the taxing authorities in the course of assessment proceedings; it arises at a point of time not later.....
Judgment:

B.J. Divan, C.J.

1. The petitioners herein have prayed for a declaration that the order of the first respondent dated October 8, 1975, refusing to grant the certificate under s. 230A of the I. T. Act, 1961, was without authority of law and they have prayed for a writ of mandamus or any other appropriate writ, order or direction directing the 1st respondent to issue a certificate under s. 230A of the I.T. Act, 1961, on an application made by the transferor on August 28, 1975. The petitioners have also prayed for a writ of certiorari or any other appropriate writ, order or direction quashing and/or setting aside the order dated October 9, 1975, passed by the 1st respondent ordering provisional attachment of the plots in question.

2. The short facts leading to this litigation are as follows :

Petitioners Nos. 1 to 3 are different partnership firms duly registered society registered under the provisions of the Gujarat Co-operative Societies Act, 1961. The 3rd respondent is a private limited company and this company was the owner of plots Nos. 85/1, 85/5 and 85/6-7, in the town planning scheme No. 10 at Rakhial on the outskirts of Ahmedabad City. The 3rd respondent-company executed an agreement of sale dated January 18, 1975, in favour of the 1st petitioner-firm agreeing to sell these plots of land at prices varying from Rs. 65 to Rs. 81 per square yard. The total price agreed to be paid for the said plots of land was Rs. 5,61,750. The 1st petitioner-firm decided to keep final plot No. 85/1 for itself and to sell the other plots of land for which the agreement for sale was entered into with 3rd respondent-company. The other plots of land, i.e., the plots other than final plot No. 85/1, were agreed to be sold to the other three petitioners herein and sale deeds were executed in favour of the respective petitioners by the 3rd respondent-company on August 12, 1975, and August 14, 1975. Thereafter, on the respective dates on which the sale deeds were executed, they were presented for registration under the provisions of the Indian Registration Act. On August 28, 1975, the 3rd respondent-company applied for certificate under s. 230A of the I.T. Act. It is the contention of the petitioners that on the date on which this application was made no demands in respect of any direct taxes, namely, wealth-tax, gift-tax, income-tax, estate duty, etc., were pending or outstanding against respondent No. 3-company, though assessment proceedings in respect of different assessment years under the I.T. Act were pending. On October 8, 1975, an order was passed by the ITO concerned, respondent No. 1 herein, refusing to issue the certificate under s. 230A of the I.T. Act. On October 9, 1975, a petition for winding up of the 3rd respondent-company was presented in this court and on October 21, 1975, the court appointed provisional liquidator and on January 27, 1976, winding-up order was passed in respect of the 3rd respondent-company. On November 24, 1977, this special civil application was filed.

3. It may incidentally be mentioned that on October 1, 1975, by was amendment to the I.T. Act, 1961, s. 281B was inserted in the I.T. Act and as a result of this amendment provisional attachment to protect revenue in certain cases could be made. On October 9, 1975, the ITO passed provisional orders of attachment but these orders which had an initial life of six months were not renewed and they stand lapsed by the very provision of s. 281B of the I.T. Act.

4. Under s. 230A of the I.T. Act provision is made for a certificate of the ITO concerned when registration of transfers of immovable property is sought for. Under sub-s. (1) of s. 230A notwithstanding anything contained in any other law for the time being force, where any document required to be registered under the provisions of clause (a) to clause (e) of sub-s. (1) of s. 17 of the Indian Registration Act, 1908, purports to transfer, assign, limit or extinguish the right, title or interest of any person to or in any property valued at more than fifty thousand rupees, no registering officer appointed under that Act shall register any such document, unless the ITO certifies either under clause (a) or clause (b) of s. 230A(1) and the application for certificate has to be made by the person referred to in that sub-section and shall be in such form and shall contain such particulars as may be prescribed. Sub-section (3) of s. 230A is not material for the purpose of this judgment.

5. It is clear that s. 230A occurs in the group of sections, from s. 220 to s. 232 (both inclusive) and this group of sections deals with the collection and recovery of taxes. And it is a part of the machinery for recovery of taxes under the various direct taxation statutes that s. 230A has been brought on the statute book. The certificate to be issued by the ITO is to the effect that such person has either paid the different direct taxes or made satisfactory provision for payment of all existing liabilities under those Acts, or the registration of the document will not prejudicially affect the recovery of any existing liability under any of those Act. Even in the case of payment or making satisfactory provision, it is provided that payment should be of all the existing liabilities or the satisfactory provision for payment of all the existing liabilities should be made and then only the Income-tax Officer concerned can issue the certificate as contemplated by s. 230A(1)(a) of the I.T. Act.

6. Under r. 44A of the I.T. Rules, 1962, an application under sub-s. (2) of s. 230A for a certificate under sub-s. (1) of that section shall be made in duplicate in Form No. 34A to the ITO. Form No. 34A requires the necessary particulars to be furnished. Under column 4, in case any assessment has been made on the applicant under the Indian I.T. Act, 1922, I.T. Act, 1961, W.T. Act, 1957, Expenditure-tax Act, 1957, and G.T. Act, 1958, particulars regarding the name of the income-tax circle/ward/district in which such assessment in respect of the latest year was made have to be furnished. Under col. 6, particulars of existing tax liability as on the date of the application have to be furnished indicating against different Acts, the assessment year and the amount of the existing liability. Below col. 6 it has been indicated that 'if there is no existing liability against the applicant on the date of the application under any one of the aforesaid Acts, the should be indicated by writing 'NIL' against the name of the relevant Act'. In the form of the certificate, which the ITO has to issue (this form of the certificate is part of Form No. 34A), the ITO concerned has to certify to the Registrar/Sub-Registrar that the assessee has no liabilities outstanding or that the assessee has made satisfactory provision for payment of taxes due under the I.T. Act, 1961, Indian I.T. Act, 1922, Excess Profits Tax Act, 1940, Business Profits Tax Act, 1947, W. T. Act, 1957, Expenditure-tax Act, 1957, and G.T. Act, 1958, or that the registration of the document mentioned against item No. 7(i) of the application will not prejudicially affect the recovery of any of the taxes due under the aforesaid Acts. Therefore, the certificate is on the line of satisfaction of the ITO as indicated in s. 230A(1). The crucial words in the light of the facts before us are the words 'existing liabilities'. Mr. Raval, appearing for respondents Nos. 1 and 2, has drawn our attention to the decision of the Supreme Court in Kesoram Industries and Cotton Mills Ltd. v. CWT : [1966]59ITR767(SC) of the report, K. Subba Rao J., as he then was, has quoted the following passage from the earlier decision of the Supreme Court in Kalwa Devadattam v. Union of India : [1963]49ITR165(SC) . In that earlier decision, Shah J., as he then was, stated thus :

'Under the Income-tax Act liability to pay income-tax arises on the accrual of the income and not from the computation made by the taxing authorities in the course of assessment proceedings; it arises at a point of time not later than the close of the year of account.'

and summarising the legal position, Subba Rao J. stated (p. 784 :

'A liability to pay income-tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data. There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability.'

7. Relying on these two passages from the decision in Kesoram Industries' case : [1966]59ITR767(SC) Mr. Raval contended that the words 'existing liability' occurring in s. 230A(1) must be interpreted to mean liability to pay income-tax as explained in Kesoram Industries' case without any reference to the order of assessment that may be passed subsequently in regular assessment proceedings.

8. We are unable to accept this contention of Mr. Raval. It is well settled law that the words have to be interpreted in the perspective in which the Legislature has enacted the particular provision of law and the words take colour from the context in which they occur. The Supreme Court has pointed out in Union of India v. Raman Iron Foundry : [1974]3SCR556 , in para. 6, at p. 1270, that while interpreting the words the context and collocation of particular expression have to be considered and the context in which the words occur have an important role in the meaning to be attributed to the particular words occurring in a particular statute. In the case before us, we find that s. 230A has been enacted as a part of the machinery for collection and recovery of the income-tax and other taxes. Secondly, it is aid to the recovery of taxes when they become due, in the sense of assessment orders having been passed and the exact amount of tax due from particular assessee in respect of a particular year having been determined. It is only after the tax liability has thus been determined that the recovery proceedings under the I.T. Act can be started. It is to assist the machinery for recovery of tax dues that s. 230A has been enacted and the object of the Legislature in enacting s. 230A is to see that the immovable properties, which would be otherwise available for attachment and ultimate realization of the tax dues of the person concerned, are not transferred away leaving the tax authorities without any recourse to such immovable properties. Under clause (b) of sub-s. (2) of s. 230A it has been clearly provided that the ITO concerned can, inter alia, certify that the recovery of any existing liability under any of the taxation Acts referred to in clause (a) of sub-s. (1) of s. 230A will not be prejudicially affected by the registration of the document in question. Now, recovery of any existing liability as set out in s. 230A(1)(b) can only refer to recovery of a tax which has already been assessed under the assessment machinery functioning under the respective taxation statutes. Unless the tax liability has been finally determined by an assessment order order there cannot be recovery of any existing liability. Under these circumstances, it is obvious that s. 230A(1)(b) refers to recovery of an existing liability arising from an order of assessment passed under the respective taxation statutes being one of the statutes set out s. 230A(1)(a). Thus, the words 'existing liability'. At least in s. 230A(1)(b), would mean existing liability to pay tax under an order of assessment already passed under the relevant taxation statute. Under clause (a) of sub-s.(1) of s. 230A similar words 'existing liability' are used by the Legislature. It is a well-settled canon of construction that the same words occurring in different clauses of the same section must bear the same meaning and applying that well-known canon of construction to the words 'existing liability' occurring in clause (a) of sub-s. (1) of s. 230A, it must be held that even under clause (a) the words 'existing liability' refer to the liability in respect of tax assessed under the respective taxation statutes. Unless and until there is a tax amount due and outstanding under an order of assessment already passed, there cannot be an 'existing liability' under clause (a) of sub-s. (1) of s. 230A also. This interpretation that we put on the words 'existing liability' gets support from the fact that s. 230A is one of the sections in the group of sections dealing with the collection and recovery of income-tax and other taxes and further the form in which the application for certificate under s. 230A has to be made and the form in which the certificate has to be issued by the ITO support our conclusion as to the meaning of the words 'existing liability' which we have derived from the words of cls. (a) and (b) of sub-s. (1) of s. 230A. Moreover, it is difficult to envisage any payment of an existing liability or provision being made for the payment of the 'existing liability' unless the existing liability has become crystallised by virtue of an order of assessment passed by the concerned officer functioning under one of the taxation statutes mentioned in clause (a) of sub-s. (1) of s. 230A of the Act.

9. Therefore, it is not open to the ITO concerned to take into consideration any factor other then the circumstances whether any liability in respect of payment of taxes under an order of assessment already passed is outstanding or not. It is not open to him to say that because assessment proceedings are outstanding and have not been completed, the certificate will not be issued by him. It is peculiar that in the order dated October 8, 1975, passed by the ITO refusing to issue certificate under s. 230A(1) the only factor which weighed with the ITO for refusing the certificate was that 'since several assessment were pending in the case, the assessee was required to extend co-operation in furnishment of the information and attendance. At one stage it was also informed, vide this office letter dated September 26, 1975, that the application filed under section 230A would not be considered because of lack of co-operation in completion of the assessments. For the above reasons and as the registration of the documents is likely to affect the recovery of the taxes, I refuse to grant certificate'. Lack of co-operation in completion of the assessment is not a ground germane to s. 230A(1) and it is obvious that the ITO has allowed lack of such co-operation to weigh with him in refusing to grant the certificate under s. 230A(1) of the Act. Since there were no taxes outstanding in the sense of the taxes already assessed, there was no question of registration of document being likely to affect the recovery of taxes. In the light of the interpretation that we have put on the words 'existing liability' occurring in cls. (a) and (b) of sub-s. (1) of s. 230A it is obvious that since there were no taxes under any order of assessment yet unpaid, the question of recovery of such taxes being likely to be affected, could never arise.

10. The ITO concerned passed the order dated October 8, 1975, refusing to grant the certificate under s. 230A of the Act on two grounds, one of which was not germane to the section under which he was functioning and the second ground was based on a wrong interpretation of the provisions of sub-s. (1) of s. 230A. Under these circumstances it is obvious that the refusal of the ITO concerned was bad and illegal, and, therefore, the order dated October 8, 1975, must be quashed and set aside.

11. We, therefore, allow this special civil application and quash and set aside the order dated October 8, 1975, passed by the first respondent herein. We also direct that a writ of mandamus be issued against the first respondent directing him to issue certificate within two weeks from to-day under s. 230A(1) of the Act in respect of the four transfer deeds in respect of which application under s. 230A was made to him. The certificate will have to be issued in the light of the facts and circumstances which prevailed at the time when the application for certificate was made on October 8, 1975.

12. We must make it clear that nothing that we have stated in the course of this judgment will affect the course of the winding-up proceedings before the learned company judge of this court and nothing that we have stated in this judgment will affect the rights and liabilities inter se the transferee or transferor or the creditors, if there are any such, in the winding-up proceedings. We are only concerned with the provisions of s. 230A of the I.T. Act in the present proceedings.

13. In the result, this special civil application is allowed. Rule is made absolute accordingly. Respondents Nos. 1 and 2 will pay the costs of this petition to the petitioners.


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