COMMISSIONER OF TAXES, CHITTAGONG (SOUTH) ZONE, CHITTAGONG VS PAHARTALI TEXTILE AND HOSIERY MILLS, PAHARTALI, CHITTAGONG
1992 P T D 1617
[Dhaka High Court (Bangladesh)]
Before A.M. Mahmudur Rahman and Syed J.R. Mudassir Husain, JJ
COMMISSIONER OF TAXES, CHITTAGONG (SOUTH) ZONE, CHITTAGONG
versus
PAHARTALI TEXTILE AND HOSIERY MILLS, PAHARTALI, CHITTAGONG
Applications No. 271 of 1991 (Dhaka) and 5 of 1989 (Chittagong), decided, on 23rd June, 1992.
(a) Words and phrases--- ------Levy"---Meaning.
Commissioner of Income Tax v. Zoroastrian Building Society Ltd. (1955) 27 ITR 218; Dialdas Parmanand Kripalani v. P.S. Talwalkar, 1957 Bom. 71 and L. Haxari Mal Kuthiala v. Income Tax Officer, Special Circle, Ambala Cantt:, 30 ITR 500 ref.
(b) Income-tax Act (XI of 1922)
----S.10(2)(xvi)----Contribution to National Exchequer----If such contribution was made in carrying on the business of the assessee, it qualified deduction under S.10(2)(xvi) of the Act---Expenditure incurred by assessee was to be looked from the business expediency of a business and not from the point of view of the revenue ---Assessee (business house) was in the best position to know what should be the expenses for the business going on running---Where the Income Tax Appellate Tribunal had found that the payment in question was made for the "commercial expediency and in larger interest of the assessee's business" such expenditure, held, was made wholly and exclusively for the purposes of the business of assessee and as such qualified the requirement of law as contemplated under S.10(2)(xvi) of the Act.
Muhammad Moksudur Rahman for Applicant. No one for Respondents.
JUDGMENT
A.M. MAHMUDUR RAHMAN, J: --This application under section 66 of the Income-tax Act, 1922 is at the instance of Revenue referring the following question of law said to have arisen out of the order of the Taxes Appellate Tribunal, Chittagong Bench, Chittagong:
"Whether on the facts and circumstances of the case, the Taxes Appellate Tribunal, Chittagong Bench, Chittagong, was justified in holding that the payment made to the National Exchequer by the assessee constitutes an expenditure deductible under section 10(2)(xvi) of the Income Tax Act, 1922?"
2. The respondent M/s. Pahartali Textile & Hosiery Mill is a nationalised concern and managed and controlled by the Bangladesh Textile Mills Corporation. The Deputy Commissioner of Taxes completed assessment of the income of the assessee company for the assessment year 1979-80 on the basis of a provisional return of its income. In computing of the total income of the assessee company the Deputy Commissioner of Taxes disallowed the claim of Tk. 8,52,129.00 paid to the National Exchequer which the assessee claimed to be a deductible expenditure under section 10(2)(xvi) of the Act. The assessee-company took an appeal before the Appellate Joint Commissioner of Taxes, `A' Range, Chittagong (North), Chittagong. The Appellate Joint Commissioner of Taxes turned down the contention of the assessee that disallowance of the aforesaid amount made by the Deputy Commissioner of Taxes was illegal and confirmed the disallowance in question made by the Deputy Commissioner. On further appeal to the Tribunal the disallowance made by the Deputy Commissioner of Taxes as well as the Appellate Joint Commissioner of Taxes was set aside holding that the contribution to the National Exchequer ranks as Government levy and as such the expenditure in the shape of contribution to the National Exchequer was an allowable expense under section 10(2)(xvi) of the Act. In order to qualify as deduction under section 10(2)(xvi) of the Act it is to be seen whether expenses were wholly and exclusively laid out for` the purpose of carrying on of the business of the assessee company. On reference to the order of the Tribunal we find that the Tribunal held:
"We have examined the claim and find that the contribution to National Exchequer made by the assessee actually stands on the same footing as a Government levy and should, therefore, rank for allowance as per law."
3. This finding leads us to see what the expression "levy" means. The expression fell for consideration before different High Courts of this Sub- Continent and also in the Courts of England. In the case of Commissioner of Income Tax v. Zoroastrian Building Society Ltd. (1955) 27 ITR 218 while construing the expression `levy' employed in 3rd proviso to section 9(2) of the Income Tx Act, 1922, it was held that only natural and proper construction which could be placed upon the expression "levy" is "impose" and not to "collect". Bombay High Court proceeded to hold that it must mean any step taken or any proceeding initiated for ultimate purpose for determining the liability to the assessee and finally collecting the tax. In the case of Dialdas Parmanand Kripalani v. PS Talwalkar, 1957 Bom. 71 it was held that "levy" means any proceeding taken for the purpose of ascertaining the liability of the assessee to pay tax. In the case of L. Haxari Mal Kuthiala v. Income Tax Officer, Special Circle, Ambala Cantt. 30 ITR 500 while construing section 13 of the Finance Act, 1950 it was held that to levy a tax means "to impose or assess" or "to impose, assess or collect under the authority of law". In the aforesaid case the Punjab High Court further held that expression "levy" appearing in section 13 of the Act is wide enough to cover proceeding under section 34 for re-examining and re-determination of income-tax liability in spite of a prior determination.
4. From the aforesaid observations made by the different High Courts of India in the cases referred to above it shows that they attributed the meaning to the expression "levy" for imposition of tax liability by enactment of the Parliament. From the order of the Tribunal of the instant case before us we do not find any reference under which law the contribution to the National Exchequer was made. If the contribution was made in carrying on the business of the assessee company certainly, it qualifies deduction under section 10(2)(xvi) of the Act provided the amount was expended wholly and exclusively for the purpose of carrying on the business of the assessee company. It is unfortunate to observe that the Tribunal which is the last fact finding forum has not at all given its attention to this aspect of the case. In view of the observations made in the decisions referred to above we find that the word "levy" has been loosely used by the Tribunal.
5. It was contended before us by the Revenue that the Taxes Appellate Tribunal erred in holding that the payment was made out of commercial expediency and in larger interest of the assessee's business and because of the various benefits it used to receive from the Government. The expenditure incurred by the assessee is to be looked from the business expediency of a business house and not from the point of view of the Revenue. It is the business house which is in the best position to know' what should be the expenses for the assessee company going on running. In the instant case it is not disputed that the Government gives subsidies to the nationalised companies for running their business operation. Where it is found by the Tribunal that the payment in question was made for the "commercial expediency and in larger interest of the assessee's business" we have no doubt that such expenditure was made wholly and exclusively for the purpose of the business of the assessee company and as such it qualifies the requirement of law as contemplated under section 10(2)(xvi) of the Income Tax Act. Consequently, our answer to the question formulated in this application is in the affirmative and against the Revenue.
Parties are to bear their respective costs althrough.
M.B.A./1719/TQuestion answered in affirmative.