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Birpara Tea Co. Vs. Income-tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberCivil Rule No. 16884(W) of 1975
Judge
Reported in[1980]126ITR704(Cal)
AppellantBirpara Tea Co.
Respondentincome-tax Officer and ors.
Cases ReferredInland Revenue Commissioners v. Titaghur Jute Factory Co. Ltd.
Excerpt:
- .....matter of deduction of a company's obligation to pay gratuity to its employees in computing its profits. for the foregoing reasons, i make this rule absolute.3. let a writ of certiorari issue quashing the impugned show-cause notice dated september 26, 1975, annex. 'e' to the petition, and all further proceedings in pursuance of the said show-cause notice. assessment orders, if any, passed in pursuance of the said notice, shall hereby stand quashed.4. let a writ of mandamus issue commanding the respondents not to give any effect or further effect to the show-cause notice and to the proceeding held in furtherance of the said show-cause notice.5. there will be no order for costs.6. let the operation of this order remain stayed for four weeks fromdate.
Judgment:

C. Mukharjee, J.

1. During the pendency of this rule, the name of the petitioner, M/s. Birpara Tea Company Ltd, was changed and it is now known as M/s. Duncan Agro Industries Ltd. In the above view, I allow the application for amendment dated 5th June, 1978. Let the cause title of the writ petition be amended. Paragraph IA of the amended writ petition, annexed to the amendment application, be inserted as prayed for. In view of the formal nature of the amendment, it is not necessary to direct service of the copy of the amended petition on the respondents. In fact, the amendment application along with the amended writ petition has been already served upon the learned advocate appearing for the respondents.

2. The subject-matter of challenge in this writ petition is a notice issued by the Commissioner of Income-tax, West Bengal-IV, Calcutta, dated 26th September, 1975, annex. 'E' to the writ petition. The Commissioner by the said notice purported to state that on November 16, 1973, the ITO 'E' Ward of the Company District-II, Calcutta, had made the assessment of the company for the year 1972-73 and had allowed its claim for deduction of gratuity as deemed to have accrued during the financial year. According to the Commissioner, the same appeared to be erroneous and prejudicial to the interest of the revenue. The Commissioner, therefore, proposed to pass an order under Section 263 of the I.T. Act as the circumstances of the case may justify including an order enhancing or modifying the said assessment or cancelling the said assessment and directing a fresh assessment according to law. The said show-cause notice has been issued in view of the circular of the Central Board of Direct Taxes, dated September 26, 1974. The said circular purported to override an earlier circular of the Board dated September 21, 1970 on the subject of allowance regarding provision towards service gratuity to employees of assessee-companies. The Board by its circular dated 26th September, 1974, purported to re-examine the question in the light of the decision of the Supreme Court in Bombay Dyeing and . : [1974]93ITR603(SC) . The Central Board of Direct Taxes directed that in view, of the said decision the earlier direction of the Board shall stand withdrawn with immediate effect. The above questions are no longer res integra. A Division Bench of the Bombay High Court in Tata Iron & Steel Co. Ltd. v. D.V. Bapat, ITO : [1975]101ITR292(Bom) , at length considered the effect of the Supreme Court decision referred to in the aforesaid circular of the Central Board of Direct Taxes and came to the conclusion that the aforesaid second circular of the Central Board of Direct Taxes was not valid and did not correctly interpret the decision of the Supreme Court in Metal Box Company's case : (1969)ILLJ785SC and the subsequent decisions in the case of Bombay Dyeing and . v. CWT : [1974]93ITR603(SC) . M.M. Dutt J. in L. Madanlal (Aluminium) P. Ltd. v. ITO : [1978]115ITR293(Cal) has followed the said decision in Tata Iron & Steel Co. Ltd. v. D.V. Bapat, ITO and in almost similar circumstances has struck down a notice of reassessment on the ground that the same was made on non-existent, unreasonable and absurd reasons. It has been also stated before me that Sabyasachi Mukharji J., sitting singly in C. R. 5552(W) of 1975, has also followed the said Bombay High Court decision in Tata Iron & Steel Co. Ltd. v. D.V. Bapat : [1975]101ITR292(Bom) . One of the decisions of Sabyasachi Mukharji J. also relates to a show-cause notice issued against the petitioner by the Commissioner for another assessment year. Sabyasachi Mukharji J. has made the said rule absolute, vide C. R. 16889(W) of 1975 disposed of on March 25, 1976. Mr. Bajoria has submitted that recently the Court of Exchequer in Scotland in Inland Revenue Commissioners v. Titaghur Jute Factory Co. Ltd. reported in Simon's Tax Cases (1978) page 166 has taken nearly a similar View in the matter of deduction of a company's obligation to pay gratuity to its employees in computing its profits.

For the foregoing reasons, I make this rule absolute.

3. Let a writ of certiorari issue quashing the impugned show-cause notice dated September 26, 1975, annex. 'E' to the petition, and all further proceedings in pursuance of the said show-cause notice. Assessment orders, if any, passed in pursuance of the said notice, shall hereby stand quashed.

4. Let a writ of mandamus issue commanding the respondents not to give any effect or further effect to the show-cause notice and to the proceeding held in furtherance of the said show-cause notice.

5. There will be no order for costs.

6. Let the operation of this order remain stayed for four weeks fromdate.


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