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Judgment
S.P. Sinha, J.—These are twelve reference applications, six by the assessee and six by the department. They arise out of assessments for the assessment years 1967-68 to 1972-73. Since the questions arising under each of the two sets of reference applications are common, they have been heard together and this judgment will govern all the reference applications.
The Patna Bench of the Income Tax Appellate Tribunal has made these reference applications u/s 256(1) of the I.T. Act, 1961, read with Section 18 of the C. (P.) S.T. Act, 1964. The common question arising in the reference made at the instance of the assessee is ;
"Whether, on the facts and in the circumstances of the case the Tribunal was justified in holding that the provisions of the Companies (Profits) Surtax Act, 1964, were applicable to this case for the assessment years 1967-68 to 1972-73 ?"
The question referred at the instance of the department is :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amounts appearing in the balance-sheet of the assessee as retained earning and unremitted foreign income were reserves for computation of capital under the Super Profits Tax Act ?"
Previously, for the assessment year 1963-64, the very same latter question, as has now been referred for the opinion of this court, had been referred at the instance of the department. That matter was registered by this court as Tax Case No. 58 of 1974, and was heard along with the reference by the assessee which was registered as Tax Case No. 54 of 1974 [ Heckett Engineering Co. Vs. Commissioner of Income Tax, ]. A common judgment was passed in the said two cases on the 21st February, 1979, and it was held that the amounts appearing in the balance-sheet of the assessee as retained earning and unremitted foreign income were reserves for the computation of capital under the Super Profits Tax Act. The question which arises in the reference made at the instance of the department having, therefore, been answered by the said judgment dated the 21st February, 1979, I do not find any purpose in traversing the same field over again and come to the same conclusion. The question referred at the instance of the department being directly covered by the said decision of this court, it is answered accordingly in the affirmative, viz., that the Tribunal was justified in law in holding that the amounts appearing in the balance-sheet of the assessee as retained earning and unremitted foreign income were reserves for the purpose of computation of capital under the S.P.T. Act.
I now come to the references made at the instance of the assessee. The question has already been stated above. That question is also covered by the said decision of this court and had it not been for the added argument made by Shri N. N. Roy for the assessee, I would have answered that question also easily by referring to the answer given in that very judgment. Shri Roy has, however, raised a contention that the matter needs a fresh examination, particularly, in view of the fact that the effect of the decision of the Supreme Court in the case of The Bengal Immunity Company Limited Vs. The State of Bihar and Others, had not been noticed by the court in that judgment.
A few facts are necessary to appreciate the argument which has now been raised by learned counsel for the assessee.
The assessee, M/s. Heckett Engineering Co. is a branch of M/s. Harsoo Corporation which is incorporated in the United States of America. In India the company carries on the business of reclaiming iron and steel contents from slag and scraps, which are available at Jamshedpur in Bihar. The company having been subjected to tax under the C. (P.) S.T. Act, 1964, for the assessment years in question, raised an objection against the jurisdiction of the assessing officer to make such an assessment. The argument made on behalf of the assessee was that unless it had been declared to be a company under the C. (P.) S.T. Act, 1964, it could not be subjected to the levy of tax under the said Act. According to the assessee, although it had been declared to be a company, that was in the context of the Indian I.T. Act, 1922, and that too by an authority which has since ceased to be the authority in respect of the relevant assessment years. Such being the position, that declaration could not enure to the benefit of the revenue after the repeal of the Indian I.T. Act, 1922. Consequently, it has been submitted that the assessment under the said Act was without jurisdiction.
This very argument had been raised in the two cases, Tax Cases Nos. 54 and 55 of 1974, but was repelled by the judgment passed in those cases : Heckett Engineering Co. Vs. Commissioner of Income Tax, . It had been held that although the word "company" has not been defined in the S.P.T. Act, Sub-section (10) of Section 2 of the Act says :
"All other words and expressions used herein but not defined and defined in the Income Tax Act shall have the meanings respectively assigned to them in that Act."
The changes in the definition of "company" were noticed in that judgment and it was held that both under the old Act and under the new Act, even a non-Indian company declared to be a "company", shall be deemed to be a company for the purpose of the I.T. Act and by necessary intendment it would be a "company" for the purpose of the S.P.T. Act. It was further held by reference to the provisions (contained in Section 297(2)(k) of the I.T. Act, 1961, that the declaration made under the Indian I.T. Act, 1922, declaring the assessee to be a company, would hold good even after the repeal of the Indian I.T. Act, 1922 ; such a declaration will continue in force even after the repeal of that Act.
As I said earlier, the discussions made in that judgment virtually answer the question raised in the reference made at the assessee''s instance, but Shri Roy, for the assessee, has raised a contention that the matter requires a reconsideration because the effect of the decision of the Supreme Court in the case of The Bengal Immunity Company Limited Vs. The State of Bihar and Others, has not been considered in its proper perspective.
It may be stated that reference had been made in the said judgment to the said decision and the context that "a fiction created for a certain purpose, viz., in the instant case for the purpose of the Indian I.T. Act, 1922, cannot be extended for the same purpose for another Act, viz., the I.T. Act, 1961". Learned counsel for the assessee submits that the context in which the argument was made was not that the fiction created in the Indian I.T. Act, 1922, cannot be extended for the same purpose to the I.T. Act 1961, but that the fiction created for the purpose of the Indian I.T. Act, 1922, could not be projected to a different Act altogether. The decision in Bengal Immunity [1955] 6 STC 446 has been cited for the proposition that the fiction created for the purpose of a certain Act could not be extended for the same purpose to an altogether different Act and that on the earlier occasion the case had not been approached in that context.
I was one of the members who spoke for the court in Tax Cases Nos. 54 and 55 of 1974 [ Heckett Engineering Co. Vs. Commissioner of Income Tax, ] and that decision was agreed to by my learned brother Sarwar All J. It is true that the decision of the Supreme Court in the case of The Bengal Immunity Company Limited Vs. The State of Bihar and Others, had not been considered in the context as is now being placed but it is difficult to say after so much lapse of time that the contention which is now being raised was the contention made at that time also. But, even if I accept the contention which is being made now to be the contention raised at that time it does not make any difference. In the ultimate analysis the judgment in the said two cases would prevail.
The instant cases are cases of tax being charged under the C. (P.) S.T. Act, 1964, on the basis of the company having been declared as a company under the I.T. Act. "Board" has been defined under the I.T. Act, 1961, as the CBDT constituted under the Central Boards of Revenue Act, 1963 (Act LIV of 1963). Under the Indian I.T. Act, 1922, "Board "meant the Central Board of Revenue constituted under the Central Board of Revenue Act, 1924 (Act IV of 1924). The argument which has been built up on the difference between the authority which is now authorised under the I.T. Act, 1961, to declare a company as a company for the purpose of levy of Income Tax, is that this was not the authority which had declared the assessee to be a company for the purpose of levy of Income Tax and since the authority is no more in existence, the declaration made by it making the assessee a company liable to a charge of Income Tax, did no more survive. Consequently, the charge of tax under the C. (P.) S.T. Act, 1964, was without jurisdiction.
The next part of the argument is by reference to Sub-section (9) of Section 2 of the C. (P.) S.T. Act, 1964, which reads :
"All other words and expressions used herein but not defined and defined in the Income Tax Act shall have the meanings respectively assigned to them in that Act."
The argument is that by virtue of this provision the definition of a "company" under the I.T. Act cannot be projected for the purpose of treating the assessee as a company for the purpose of the C. (P.) S.T. Act.
I think that although the word "company" has not been defined in the C. (P.) S.T. Act, 1964, yet obviously by virtue of Sub-section (9) of Section 2 of the Act, the definition of that expression as given in the I.T. Act has to be adopted for its purpose also.
It may be stated that during the period covered by the assessment years in question in the instant reference, i.e., assessment years 1967-68 to 1972-73, the definition of the word "company" has undergone a change. Under the I.T. Act covering the assessment years 1967-68 to 1970-71, "company" has been defined as :
"(i) any Indian company, or
(ii) any association, whether incorporated or not and whether Indian or non-Indian, which is or was assessable or was assessed under the Indian Income Tax Act, 1922 (XI of 1922), as a company for the assessment year commencing on the 1st day of April, 1947, or which is declared by general or special order of the Board to be a company for the purpose of this Act."
This definition underwent a change with effect from April 1, 1971, which would apply to assessment years 1971-72 and 1972-73. The definition of the expression "company" has not been widened as will be found from Sub-section (17) of Section 2 of the I.T. Act, 1961. It is not necessary to state the definition of the word "company" in extenso, but all that is necessary to be stated is that the expression "company" has now adopted a wider meaning than what was before April 1, 1971. The argument, as stated earlier, however, is that whatever the expression "company" may mean, that would be relevant only for the purpose of the I.T. Act. The definition could not be projected for the purpose of the C. (P.) S.T. Act, 1964.
This contention has already been dealt with in the decision of this court in Tax Cases Nos. 54 and 55 of 1974 Heckett Engineering Co. Vs. Commissioner of Income Tax, , wherein it has been held that the declaration made in the I.T. Act would be deemed to have been a declaration made for the purpose of super profits tax. The relevant provision relating to some of the definitions under the I.T. Act being applicable to the S.P.T. Act or the C. (P.) S.T. Act, being identical (Section 2(10) of the S.P.T. Act is Section 2(9) of the C. (P.) S.T. Act), it would follow as a natural corollary that even for the purpose of the C. (P.) S.T. Act, 1964, the declaration made under the I.T. Act, declaring the assessee to be a company, would be a valid declaration for the purpose of the C. (P.) S.T. Act. It would further follow that that declaration will continue in force by virtue of the provision contained in Section 297(2)(k) of the I.T. Act, 1961.
Shri Roy, however, submits that the Supreme Court in its decision in the case of The Bengal Immunity Company Limited Vs. The State of Bihar and Others, has said in so many words that legal fictions are created only for some definite purpose and that such fiction cannot be projected beyond the purpose for which it has been created. In this case their Lordships had considered the import of the Explanation added to Article 296(1) of the Constitution, as to whether that Explanation besides applying to Clause (a) of Article 286(1) would also apply to its Sub-article (2), and in that context their Lordships observed that the legal fiction created by the Explanation could not apply for a purpose other than the purpose of Clause (a) of Article 286(1).
It has, therefore, been argued by the learned counsel for the assessee that the declaration of an assessee as a "company" for the purpose of the I.T. Act could not be projected and held to be a declaration for the purpose of the C.(P.) S.T. Act, 1964".
It is difficult to accept this argument in view of the clear wordings of Sub-section (9) of Section 2 of the said Act (already quoted above) under which the definitions assigned to different expressions under the I.T. Act, if not defined under the Act, have been adopted. The word "company" having not been defined in this Act, essentially it means that the Act itself enjoins the projection of the definition of a "company" as given under the I.T. Act to it. It further follows that an assessee declared as a "company" under the I.T. Act would be the same for the purpose of the C.(P.)S.T. Act. I, therefore, do not find any merit in the further contention which has now been raised on behalf of the assessee. The decision of the Supreme Court in the case of The Bengal Immunity Company Limited Vs. The State of Bihar and Others, , has no relevance to the instant reference cases because of the particular provisions contained in the Act itself relating to the applicability of the definitions under the I.T. Act to it. In my opinion, therefore, the decision of this court in Tax Cases Nos. 54 and 55 of 1974 [ Heckett Engineering Co. Vs. Commissioner of Income Tax, ] applies squarely to the question referred at the instance of the assessee. It has, accordingly, to be answered in the affirmative, viz., that the Income Tax Tribunal was justified in holding that the provisions of the C. (P.) S.T. Act, 1964, were applicable to this case for the assessment years in question.
In the result, both the questions, one referred at the instance of the assessee and the other referred at the instance of the department, are answered in the affirmative. Since both the parties have failed in achieving their point, there will be no order for costs.
Nagendra Prasad Singh, J.
I agree.