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Additional Commissioner of Income-tax Vs. Dalmia Magnesite Corporation - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 146, 147, 171, 179, 180 and 240 of 1974 (Reference Nos. 39, 40, 47, 55, 56 and 116 of
Judge
Reported in[1979]117ITR930(Mad)
ActsIncome Tax Act, 1922 - Sections 15C and 35; Income Tax Act, 1961 - Sections 84, 84(2), 84(7), 154, 155(5) and 297; Companies Act, 1956 - Sections 394
AppellantAdditional Commissioner of Income-tax
RespondentDalmia Magnesite Corporation
Appellant AdvocateNalini Chidambaram, Adv.
Respondent AdvocateV.K.T. Chari, Adv. assisted by ;S.V. Subramaniam, Adv. for ;L.V. Krishnaswami Iyer and ;L.K. Sankaran, Advs.
Cases ReferredAnjayya v. Gundarayudu
Excerpt:
- - this is a well known principle and the supreme court in hazari mal kuthiala v. ' 9. these pronouncements of the supreme court and of the bombay high court approved by the supreme court clearly establish that the tribunal was right in attributing the power under which the order was passed by the ito to section 35 of the indian i. it is a well-established principle that if an intermediary appellate authority purported to deal with a matter in appeal as if that intermediary authority had jurisdiction to deal with that appeal though in fact that authority had no jurisdiction to deal with the appeal, the order of that appellate authority would become appealable to a higher appellate authority. the principle has been stated thus :when a person who took the chance before the appellate.....govindan nair, c.j. 1. these income-tax references arise from the orders of the income-tax appellate tribunal, madras bench, in relation to the assessment years 1960-61 to 1965-66. these references can be grouped under two heads--t.c. no. 179 of 1974, relating to the assessment years 1960-61 and 1961-62, t.c. no. 240 of 1974, relating to the assessment year 1962-63, in so far as the second question therein is concerned and t.c. no. 180 of 1974, relating to the assessment years 1963-64 and 1964-65.2. they deal with the question whether the relief under section 15c of the indian i.t. act, 1922 (hereinafter referred to as 'the 1922 act'), corresponding to section 84(2) of the i.t. act, 1961 (hereinafter referred to as 'the 1961 act'), is available to the assessee. the questions that are.....
Judgment:

Govindan Nair, C.J.

1. These income-tax references arise from the orders of the Income-tax Appellate Tribunal, Madras Bench, in relation to the assessment years 1960-61 to 1965-66. These references can be grouped under two heads--T.C. No. 179 of 1974, relating to the assessment years 1960-61 and 1961-62, T.C. No. 240 of 1974, relating to the assessment year 1962-63, in so far as the second question therein is concerned and T.C. No. 180 of 1974, relating to the assessment years 1963-64 and 1964-65.

2. They deal with the question whether the relief under Section 15C of the Indian I.T. Act, 1922 (hereinafter referred to as 'the 1922 Act'), corresponding to Section 84(2) of the I.T. Act, 1961 (hereinafter referred to as 'the 1961 Act'), is available to the assessee. The questions that are 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. 180 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 years 1963-64 and 1964-65 ?'

T.C. No. 147 of 1974 relates to the assessment years 1960-61 and 1961-62. T.C. No. of 240 of 1974 relates to the assessment year 1962-63 (first question therein) and T.C. No. 146 of 1974 relates to the assessment years 1963-64 and 1964-65. T.C. No. 171 of 1974 relates to the assessment year 1965-66 and these references raise the question of development rebate for the various years and the questions which are relevant those in T.C. No. 147 of 1974, the first question in T.C. No. 240 of 1974, and the question in T.C. No. 146 of 1974, and that in T.C. No. 171 of 174. We shall extract these questions.

T.C. No. 147 of 1974 :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that there was no mistake apparent from the record in the grant of development rebate and that the Income-tax Officer had no jurisdiction to pass a rectification order under Section 155(5) of the Income-tax Act, 1961, to withdraw the development rebate allowed therein ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the Income-tax Officer's rectification order was really one under Section 155(5) of the Income-tax Act, 1961, and that, therefore, the assesee's appeal against such order was competent and maintainable in law ?'

T.C. No. 240 of 1974 (first question) :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee was entitled to the claim of development rebate for the assessment year 1962-63 for any of the reasons mentioned by the Tribunal ?'

T.C. No. 146 of 1974 :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee was entitled to the claim of development rebate for the assessment years 1963-64 and 1964-65 ?'

T.C. No. 171 of 1974:

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee was entitled to the claim of development rebate for the assessment year 1965-66

3. 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 changes took place in the shareholding of the firm by a scheme framed by the High Court in C.P. No. 46 of 1962. By that scheme, the assets of the Magnesite Corporation of India Ltd. came to be vested in M/s. Dalmia Cement (Bharat) Ltd. and the Magnesite Corporation of India Ltd. became a wholly owned subsidiary of M/s. Dalmia Cement (Bharat) Ltd. The share-holding was changed into Magnesite Corporation of India Ltd.--1/10th share and M/s. Dalmia Cement (Bharat) Ltd.--9/10th share. Under a further scheme dated January 1, 1964, which was approved by this court under Section 394 of the Companies Act in C.P. No. 27 of 1964, the assets and liabilities of Magnesite Corporation of India Ltd. were taken over by M/s. Dalmia Cement (Bharat) Ltd.

4. From the above facts it is clear that on January 1, 1964, the firm ceased to exist by virtue of the fact that one of the two partners of the firm got extinguished and there remained thereafter only the other erstwhile partner. The position in law would thus be that on January 1, 1964, the firm came to an end and the assets and liabilities of the firm vested in the Dalmia Cement (Bharat) Ltd.

5. In the years of assessment 1960-61 and 1961-62 tax relief had been given under Section 15C of the 1922 Act. Purporting to act under Section 35 of the 1922 Act, relief granted under Section 15C was withdrawn by the ITO. An appeal was taken by the assessee from that order under Section 154 of the 1961 Act before the AAC and the AAC allowed the appeal and set aside the rectification order passed under Section 154 of the 1961 Act. Thereafter, an appeal was taken before the Tribunal challenging the order of the AAC. It was contended before the Appellate Tribunal that the view taken by the AAC that there was no reconstitution and that there was no error apparent on the face of the record that could be corrected either under Section 35 of the 1922 Act or Section 154 of the 1961 Act, was incorrect. The assessee contended that the appeal before the Tribunal was not maintainable if the order of the ITO is taken to be one under Section 35 of the 1922 Act as the appeal before the AAC itself would be incompetent. The Income-tax Appellate Tribunal held that though the order of the ITO is styled to be one under Section 154, it must be taken to be one passed under the powers vested in the ITO under Section 35 of the 1922 Act since that was the Act that was applicable to the case. The Tribunal further held that there was no apparent error which would justify a correction under Section 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.

6. The first question relates to the ambit of jurisdiction of the ITO under Section 35 of the 1922 Act. The tax relief granted under Section 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 Section 154 of the I. T. Act, 1961, deals with the rectification of mistakes apparent on the record. Apart from the question whether the changes in the partners of the firm would result in a reconstruction of the industrial undertaking, a further question would arise whether the assessment proceedings contained an apparent mistake in its records. If there was no mistake apparent on the record, Section 154 and/or Section 35 will have no application and the ITO will have no jurisdiction to amend or alter the assessment order and withdraw a benefit that had already been given. We have no doubt whatever that the question whether there has been a reconstruction of the firm or not by the changes that have been effected in the constitution of the firm and finally in the firm itself ceasing to exist, the Dalmia Cement (Bharat) Ltd. having become the sole owner of all the assets of the firm, is not a simple question which could be decided without advertence to the various facts and questions of law. This being so, it is not possible to conclude that there has been any mistake apparent on the records of the assessment proceedings. Rectification, therefore, would be uncalled for and the ITO invoked a section, whether it be Section 35 or Section 154, which would not apply. The order of the ITO is, therefore, erroneous and unsustainable. In this view, the first question in T.C. No. 179 of 1974 that has been referred to us has to be answered in the affirmative agreeing with the view taken by the Tribunal in this matter. We, accordingly, answer question No. 1 in that case in the affirmative.

7. Now, turning to question No. 2 in that case, namely, T.C. No. 179 of 1974, the view taken by the Tribunal that though the order of the ITO purports to be one under Section 154 of the 1961 Act, it must be taken to be really an order passed under Section 35 of the 1922 Act, is the correct view. In view of the provision in Section 297(2) of the 1961 Act, in relation to an assessment year for which a return had been filed before the 1961 Act came into force on April 1, 1962, the provisions of the Indian I. T. Act, 1922, will apply as if the 1961 Act had not been passed. Therefore, Section 154 of the 1961 Act, will have no application to such a case. The order purporting to be one under Section 154 will, therefore, be one normally without jurisdiction. But in such cases, the courts will certainly search for a source of authority, if there is any, under which the order could be sustained. This is a well known principle and the Supreme Court in Hazari Mal Kuthiala v. ITO : [1961]41ITR12(SC) 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 Sections 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 Section 5(5) of the Patiala I. T. Act. The Supreme Court upheld the order treating the same as one passed under Section 5(5) of the Patiala I. 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.'

8. The Supreme Court referred with approval to the decision of the Bombay High Court in Pitamber Vajirshet v. Dhondu Navlapa ILR [1887] Bom 486. In the judgment, the Bombay High Court observed as follows:

'We must ascribe his (subordinate judge's) acts to an actual existing authority under which they would have validity rather than to one under which they would be void.'

9. These pronouncements of the Supreme Court and of the Bombay High Court approved by the Supreme Court clearly establish that the Tribunal was right in attributing the power under which the order was passed by the ITO to Section 35 of the Indian I. T. Act, 1922. We have, accordingly, to hold, in answer to the first part of the second question in T.C. No. 179 of 1974, that the order must be taken to have been passed under Section 35 of the 1922 Act and we, accordingly, answer that part of the question by stating that the view taken by the Tribunal is correct.

10. The only other matter that remains to be dealt with in T.C. No. 179 of 1974 is whether the Tribunal was right in holding that the appeal to the Tribunal was incompetent. From what we have stated earlier, it is clear that the order of the ITO must be taken to be one under Section 35(1) of the 1922 Act. It is not disputed before us that from such an order, there was no appeal to the AAC. It is, therefore, clear that the appeal before the AAC was incompetent. But no one questioned the competency of the appeal, and the appeal had been allowed. This necessitated the further appeal before the Tribunal. The question is whether the appeal before the Tribunal would be competent. The Tribunal has taken the view that the appeal is not competent because the appeal taken by the assessee before the AAC was not competent. However, we consider that the Tribunal has committed a mistake. It is a well-established principle that if an intermediary appellate authority purported to deal with a matter in appeal as if that intermediary authority had jurisdiction to deal with that appeal though in fact that authority had no jurisdiction to deal with the appeal, the order of that appellate authority would become appealable to a higher appellate authority. To state this principle with reference to the fact in T.C. No. 179 of 1974 we will have to repeat that even if the appeal taken before the AAC against the order under Section 35 of the 1922 Act was not maintainable in law, in so far as the AAC purported to exercise the jurisdiction of the appellate authority and having allowed the appeal assuming a wrong jurisdiction, the order of the AAC would be 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.

11. Counsel for the assessee had invited our attention to the decision of this court in Lakshmanan Chettiar v. Commissioner of Corporation of Madras ILR [1927] Mad 130 ; AIR 1927 Mad 130 , and also the decision of the Supreme Court in Pannalal Binjraj v. Union of India : [1957]31ITR565(SC) , 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 Article 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 failed before that authority, turns round and questions the jurisdiction of the authority in proceedings under Article 226 of the Constitution, the High Court in exercise of the discretion vested under that article cannot deal with that petition on merits. The same is the view taken by the Supreme Court in relation to the power of the Supreme Court under Article 32 of the Constitution. This is a peculiar principle that the courts have evolved in the matter of imposing self-restraint in the matter of exercising jurisdiction under the extraordinary power vested in the High Court under Article 226 or under the equally extraordinary power vested in the Supreme Court under Article 32 of the Constitution. This is not a general principle that can be applied to all the cases and we do not, therefore, think that these decisions relied on by the learned counsel will help us in any way.

12. Counsel also deferred to a decision in Anjayya v. Gundarayudu : AIR1943Mad381 . The question that arose in that decision was whether a decree-holder who contended before the executing court that the persons who obstructed the delivery of possession of the property were persons claiming under the defendant in the suit and, therefore, bound by the decree, can turn round when the appeal had been taken from an order of the execution court negativing the case of the obstructionists and state before the appellate court that the obstructionists were strangers and the order was one under rule 98, Order 21 and, therefore, not appealable. The court held that on the basis of the findings reached by the execution court on the plea raised by the decree-holder before that court that the obstructionists were representatives of the judgment-debtor, the matter fell under Section 47 of the Code of Civil Procedure and having created such a situation, it was not open to the decree-holder to challenge the appeal taken by the obstructionists treating the order as one under Section 47 of the C.P.C. by contending that the matter would not fall under Section 47 of the C.P.C., but would fall under Order 21, Rule 90, C.P.C. This case also has no application.

13. One other contention that has been raised by the counsel for the assessee which we should notice is that based on the fact that there has been a rectification of the original assessment order by the ITO purporting to act under Section 155(5) of the 1961 Act with regard to development rebate on December 23, 1967, and that, therefore, the order passed by the ITO rectifying the tax relief under Section 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 Section 15C remained unaltered and unaffected by virtue of the rectification made under Section 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.

14. 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 Section 84(2) of the 1961 Act. Section 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-section (2) of Section 84 can have application only in cases where as a result of the splitting up or the reconstruction of the business already existing it has been contended that there has come into being a newly established industrial undertaking. If a contention like that is raised by the assessee that contention would not be accepted since the section is in categorical terms that the newly established undertaking must not be one formed by the splitting up or the reconstruction of a business already in existence. But if a business already in existence is itself a newly established industrial undertaking, a further splitting up of the business need not be relied on to claim that the industrial undertaking is a newly established one. But if the industrial undertaking was already a newly established undertaking it will remain so for the duration for which tax relief is provided under Sub-section (7) of Section 84. If some period had elapsed, the relief will be applicable only for the remaining period. But whatever that be, in cases where the splitting up is of a newly established undertaking, there will be no violation of the rule in Section 84 for we understand the section as only precluding a claim based on the reconstruction or the splitting up of a business already in existence. If the undertaking already established was a new undertaking, even assuming that there has been any splitting up or the reconstruction of that undertaking, the benefit under Section 84 could not be deprived to the assessee because by such splitting up or such reconstruction a new industrial undertaking had not come into being and had not been claimed to have come into being. The assessee had not raised any such contention. Its contention was only that (a) there was no splitting up or reconstruction and (b) even if there has been a splitting up or reconstruction, the relief is claimed with regard to the newly established industrial undertaking which had been reconstructed as a newly established industrial undertaking and the splitting up or the reconstruction, if any, was only in relation to that newly established concern. We think that this submission is correct and in this view it is unnecessary for us to proceed further and find out whether as a matter of fact there has been any reconstruction or splitting up of the industrial undertaking. Even if there has been one, the benefit under Section 84(2) cannot be withdrawn 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 Section 84(2) of the 1961 Act is the correct one though we have supported the conclusion on other grounds.

15. 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 Section 84(2) of the 1961 Act.

16. 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 Section 155(5) had been granted in the first instance and thereafter the relief was sought to be withdrawn by acting under Section 155(5) of the 1961 Act. The two questions that have been referred to in T.C. No. 147 of 1974 are (1) whether the Tribunal was right in holding that the ITO had not jurisdiction to pass a rectification order under Section 155(5) of the 1961 Act, and (2) whether the Tribunal was right in holding that the ITO's rectification order was really one under Section 155(5) of the LT. Act, 1961, and that, therefore, the assessee's appeal against such an order was competent and maintainable in law. We shall now extract Section 155(5) of the I.T. Act, 1961, as under :

Section 155(5):

'Where an allowance by way of development rebate has been made wholly or partly to an assessee in respect of a ship, machinery or plant installed after the 31st day of December, 1957, in any assessment year under Section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), and subsequently-

(i) at any time before the expiry of eight years from the end of the previous year in which the ship was acquired or the machinery or plant was installed, the ship, machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government company as denned in Section 617 of the Companies Act, 1956 (1 of 1956), or in connection with any amalgamation or succession referred to in Sub-section (3) or Sub-section (4) of Section 33 ; or

(ii) at any time before the expiry of the eight years referred to in Sub-section (3) of Section 34, the assessee utilises the amount credited to the reserve account under Clause (a) of that Sub-section-

(a) for distribution by way of dividends or profits; or

(b) for remittance outside India as profits or for the creation of any asset outside India; or

(c) for any other purpose which is not a purpose of the business of the undertaking,

the development rebate originally allowed shall be deemed to have been wrongly allowed, and the Income-tax Officer may, notwithstanding anything contained in this Act, recompute the total income of the assessee for the relevant previous year and make the necessary amendment; and the provisions of Section 154 shall, so far as may be, apply thereto, the period of four years specified in Sub-section (7) of that section being reckoned from the end of the previous year in which the sale or transfer took place or the money was so utilised.'

17. From Clause (i) of Sub-section (5) of Section 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 Clause (i) of Sub-section (5) of Section 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 had been attracted. We agree with the submission of the counsel. We are not able to posit that there has been a transfer by the assessee of the plant or machinery and that any change in the ownership of the assets had been effectuated by an order which vested the rights of one of the partners in the assets in the other partners. This can by no stretch of imagination be stated as a transfer by the assessee of the plant and machinery. In view of this Clause (i) of Sub-section (5) of Section 155 would not be attracted.

18. It was then contended that Sub-clause (c) of Clause (ii) of Sub-section (5) of Section 155would be attracted and, therefore, the rectification order was justified. Thissub-clause also would be applicable only in cases where the assessee hadutilised the amount credited to the reserve account under Clause (a) of Sub-section (3)of Section 34 for any other purpose which is not a purpose of the business of theundertaking. From what has transpired, it is not possible for us to saythat the assessee, namely, the firm as it originally existed before January1, 1964, had utilised the reserves for any purpose other than the businessof the undertaking. We say so for the reason that the firm as such is adifferent entity, a different legal entity, for the purpose of the I.T. Act,defined under Section 2(15) of the I.T. Act, 1961, as a person. The scheme vestedthe reserves also with Dalmia Cement (Bharat) Ltd. We have said thatthis is not a transfer by the assessee. So this vesting had nothing to dowith the transfer as such. The utilisation of the reserves will be for the purpose of the undertaking, the undertaking being the business undertakingwhich had vested with the Dalmia Cement (Bharat) Ltd. If Dalmia Cement(Bharat) Ltd. utilises the reserve funds for any purpose other than thepurpose of the business undertaking, what would happen we need not consider because that question had not come up before us. The question iswhether the firm, that is, the assessee, had utilised the amounts credited tothe reserve for any purpose other than the business of the undertaking.We are not able to say so. In view of this, the order passed by the ITOrectifying the original assessment order purporting to act under Section 155(5) isnot sustainable. Accordingly, we answer the first question in T.C. No. 147of 1974, in the affirmative, that is in favour of the assessee and against therevenue.

20. Now, turning to the second question in T.C. No. 147 of 1974, the answer has to be in the affirmative too. When there is a specific provisionmade in Section 155(5) for rectification of assessment orders, it is only the special provision and not the general provision in Section 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-section (5) of Section 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.

21. 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 Section 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 assessee during a period of eight years next following for the purposes of the business of the undertaking, other than-

(i) for distribution by way of dividends or profits; or

(ii) for remittance outside India as profits or for the creation of any asset outside India:......'

22. It was contended by the revenue that it is not enough to debit the profit and loss account of the relevant previous year with an amount equal to seventy five per cent. of the development rebate to be actually allowed and credit the same to a reserve account, but it must also be necessary that the amount credited must be for the purpose of utilisation by the assessee during a period of eight years next following in the business of the undertaking. Counsel emphasised that it is not enough if the amount so credited had been utilised for the business of the undertaking, but that by the wording of the section, the utilisation must be by the assessee. It was urged that after January 1, 1964, the assessee which was the firm ceased to exist and that since the firm had ceased to exist, it had become impossible for the firm to utilise the sums credited to the reserve account for the purpose of the business undertaking. On a literal and grammatical reading of the section, we have to agree with counsel for the revenue that the sum credited to the reserve account has to be utilised by the firm for the purpose of the business undertaking. It was urged on behalf of the assessee that such an interpretation could not have been meant by the legislature, for, the development rebate is granted for the purpose of encouraging the investment of money in plant or machinery, and all that is insisted on is that if it had a continued existence as also the plant and machinery without anysale or transfer and they are available for the purpose of the business, for utilisation for the purpose of earning profits which are liable to tax and that as long as the industrial undertaking remained intact, notwithstanding the reconstruction of the firm and notwithstanding the scheme by which it vested the assets in Dalmia Cements (Bharat) Ltd. as long as the plant and machinery remained, the substance of the conditions imposed by the section for the grant of development rebate existed, and we should not, therefore, give a literal meaning to the words 'by the assessee' occurring in Section 34(3)(a) and that we should construe the words 'by the assessee' as 'by any assessee'.

23. 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 Section 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-compliance of the conditions or violation of the conditions or if circumstances had come into existence where compliance with those conditions become impossible--which is the case before us--certainly an assessee would not be entitled to claim that notwithstanding the new supervening circumstance which has made it impossible to comply with the conditions, the assessee could still be afforded the benefit of the concession granted by the section to which the conditions have been attached. We have, therefore, to hold that the development rebate could not be granted to the assessee for the years in question, and the question No. 1 in T.C. No. 240 of 1974 and the questions in T.C. Nos. 146 and 171 of 1974 have to be answered in favour of the revenue and against the assessee. We accordingly do so.

24. We dispose of these tax reference cases in the above manner and direct the parties to bear their respective costs because the questions raised are of a difficult nature and arguments have been advanced before us for hours.


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