Coimbatore Salem Transports Ltd. vs Commissioner of Income Tax

Ramanujam, J.—For the assessment year 1963-64, the accounting period being the year ended December 31, 1962, the assessee-

company was assessed by the Income Tax Officer under the Income Tax Act on a total income of Rs. 3,28,671 by an order dated December 30,

1963. For the purpose of assessment under the Super Profits Tax Act, for the same assessment year 1963--64, the chargeable profits were also

taken at the same figure of Rs. 3,28,671. Thus, the super profits tax assessment followed the Income Tax assessment.

In the Income Tax assessment the assessee claimed deduction to the extent of Rs. 44,237 before the Appellate Assistant Commissioner. The

Appellate Assistant Commissioner granted relief only to the extent of Rs. 6,984. The same relief was also granted in the super profits tax

assessment.

The assessments under the Income Tax Act as well as under the Super Profits Tax Act came ultimately before the Tribunal. The Tribunal

confirmed the order of the Appellate Assistant Commissioner, rejecting the assessee''s claim for deduction in relation to a sum of Rs. 15,550 being

the expenses incurred by the assessee-company in fitting diesel engines in the place of petrol engines to some of its vehicles. The order of the

Tribunal upholding the order of the Appellate Assistant Commissioner was allowed to have become final. The assessee had also claimed the same

relief by way of deduction of the said sum of Rs. 15,550 in the super profits tax assessment. The Tribunal, without going into the question as to

whether the sum of Rs. 15,550 could be allowed as deduction while calculating the chargeable profits in the super profits tax assessment, held that

the Income Tax assessment, wherein the claim for deduction was considered and rejected, having become final, the total income as determined in

proceedings under the Income Tax Act would have to be taken as chargeable profits for the super profits tax assessment as well and that as the

Income Tax assessment for the corresponding assessment year stood concluded by the Tribunal''s decision, no further deduction from the

chargeable profits was permissible under the provisions of the Super Profits Tax Act, 1963. In that view, the Tribunal negatived the assessee''s

claim for deduction of the said sum of Rs. 15,550 in the computation of the chargeable profits under the Super Profits Tax Act.

Aggrieved against the decision of the Tribunal, the assessee has sought reference to this court on the following question, viz. :

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 15,550 was not deductible in

computing the ''chargeable profits'' for the assessment year 1963-64 under the Super Profits Tax Act, 1963, the corresponding Income Tax

assessment having become final ?

According to the learned counsel for the petitioner, Section 2(5) of the Super Profits Tax Act has denned ""chargeable profits"" as the total income

of the assessee computed under the Income Tax Act, 1961, for the relevant previous year, and there is no reference to the total income as

assessed by the Income Tax Officer under the Income Tax Act as erroneously assumed by the Tribunal. The Tribunal, while interpreting the said

Section 2(5), has taken the view that under that section ""chargeable profits"" has been equated to the total income as computed by the concerned

authorities under the Income Tax Act, 1961. It is in this view the Tribunal has stated that as the computation of ""total income"" made under the

Income Tax Act has become final it is no longer open to the assessee to seek a recomputation of the chargeable profits for the purpose of the

Super Profits Tax Act, and that the same computation made by the authorities under the Income Tax Act should automatically be taken as

computation of chargeable profits for the purpose of the Super Profits Tax Act. However, on a due consideration of the matter, we are inclined to

take the view that the definition of ""chargeable profits"" u/s 2(5) does not prevent the assessing authority under the Super Profits Tax Act from

recomputing the total income under the Income Tax Act, if found necessary.

Section 7 of the Super Profits Tax Act, 1963, deals with assessments under the Act. Sub-section (2) of that section enables the Income Tax

Officer to assess the chargeable profits and determine the amount of super profits tax payable on the basis of such assessment. ""Chargeable

profits"" have been defined as the total income of the assessee computed under the Income Tax Act of 1961 in the same previous year as under the

Income Tax Act. The fact that the same officer exercises the functions of an assessing authority under the Income Tax Act as also under the Super

Profits Tax Act cannot be taken to mean that the total income computed by the Income Tax Officer who happened to be the assessing authority

under the Super Profits Tax Act also is the chargeable profits as defined in this Act. The words ""chargeable profits"", it is true, have been equated

to the total income of an assessee ""as computed"" under the Income Tax Act. According to the Tribunal the total income as assessed by the Income

Tax Officer under the Income Tax Act should be taken to be the chargeable profits under the Super Profits Tax Act. If this interpretation were to

be correct, then even if a mistake has crept in the assessment under the Income Tax Act and if the assessment becomes final, the assessment under

the Super Profits Tax Act has to be on the basis of such a mistaken assessment made under the Income Tax Act. But this cannot obviously be the

intention of the statute. Though the total income of the assessee as computed under the Income Tax Act may normally be the ""chargeable profits

for assessment under the Super Profits Tax Act, in cases where a recomputation becomes necessary, either as a result of a mistake in the

assessment under the Income Tax Act or for any other justifiable reason, the Income Tax Officer who makes assessment under the Super Profits

Tax Act can recompute the total income under the Income Tax Act notwithstanding that the. total income of the assessee has been earlier

computed and assessed under the Income Tax Act. The expression ""computed under the Income Tax Act, 1961 ""cannot be read as computed by

the Income Tax Officer in proceedings under the Income Tax Act. We are not able to interpret the definition of ""chargeable profits"" in Section 2(5)

as meaning the total income of an assessee as assessed under the Income Tax Act. The definition of ""chargeable profits"" merely provides that the

chargeable profits"" is the same as the total income of the assessee as computed under the Income Tax Act, which means that the total income of

an assessee computed as per the provisions of the Income Tax Act will be the ""chargeable profits"". The total income as computed in the Income

Tax proceedings, if correct, will be the ""chargeable profits"". But, if such computation is incorrect, then a fresh computation of total income has to

be made to arrive at the chargeable profits. Normally, the total income correctly computed in Income Tax assessment proceedings will be taken as

chargeable profits"" by the assessing authority under this Act. But, if a recomputation of the total income is found necessary for any reason, the

Income Tax Officer may recompute the total income again as per the provisions of the Income Tax Act. We have to, therefore, agree with the

contention of the learned counsel for the assessee in this case.

The learned counsel for the revenue would, however, contend that if such were to be the intention of the legislature in defining ""chargeable

profits"" in the manner it has done, the legislature might have used a clear language as in Rule (1) of Schedule I to the Excess Profits Tax Act, 1940.

The mode of computation of profits for purposes of the Excess Profits Tax Act has been set out in that rule. The above rule provides that profits of

a business during the standard period or during any chargeable accounting period shall be separately computed on the principles on which the

profits of a business are computed for the purpose of the Income Tax Act, u/s 10 of the Indian Income Tax Act, 1922. It is true, under the above

rule, the profits of a business have been directed to be separately computed apart from the computation of the business profits under the Income

Tax Act. But we are not inclined to hold that merely because the definition of ""chargeable profits"" in Section 2(5) of the Super Profits Tax Act

does not refer specifically to a separate or fresh computation, the assessing authority under the Super Profits Tax Act cannot recompute the total

income of an assessee under the provisions of the Income Tax Act in connection with the super profits tax assessment. Accepting the view of the

Tribunal would mean that a computation made by the Income Tax Officer, however erroneous it may be, will have to be taken as a computation

made for the purpose of the Super Profits Tax Act as well, if the computation made by the Income Tax Officer for the purpose of the Income Tax

Act had become final. We are clear that it cannot be the intention of the legislature. We are, therefore, of the view that the Income Tax Officer

functioning under the Super Profits Tax Act can recompute the total income as per the provisions of the Income Tax Act if considered necessary in

proceedings under the Super Profits Tax Act.

The further question is whether the assessee is entitled to the deduction of Rs. 15,550 as claimed by him in his assessment under the Super

Profits Tax Act. The learned counsel for the assessee relies on the decisions in Hanuman Motor Service Vs. Commissioner of Income Tax,

Mysore, and Commissioner of Income Tax Vs. Coimbatore Motor Transport Co-Operative Society for Ex-Servicemen, as supporting the

assessee''s claim for deduction in relation to the said sum of Rs. 15,550. But, as the Tribunal has not gone into the merits of the assessee''s claim

for deduction, we consider it proper that the Tribunal considers this question in proceedings u/s 19 of the Super Profits Tax Act, 1963, read with

Section 260 of the Income Tax Act, 1961. The question referred to us is, therefore, answered technically in favour of the assessee, leaving the

question of deduction for consideration by the Tribunal on merits. There will, however, be no order as to costs.