UNION OF INDIA VS J.K.SYNTHETICS LTD.
1993 P T D 894
[199 I T R 14]
[Supreme Court of India]
Present: S. Ranganathan, M. Fathima Beevi and N.D. Ojha, JJ
UNION OF INDIA and another
versus
J.K.SYNTHETICS LTD.
Civil Appeal No. 1111 of 1976, decided on 15/01/1992.
(Appeal by special leave from the judgment and order, dated July 17, 1975, of the Allahabad High Court in C.M. W.P. No. 494 of 1975).
(a) Income-tax---
----Business expenditure---Subsequent withdrawal of allowance if benefit obtained by cessation or remission---Excise duty---High Court holding that duty not payable---Excise department preferring appeal---Provision for withdrawal to be invoked only after final decision---Indian Income Tax Act,1961, S.41(1).
(b) Income-tax---
----Previous year---Permission to change---Nature of conditions which may be imposed---Recalling permission on ground conditions not complied with-- Decision of High Court---No opinion expressed by Supreme Court---Indian Income Tax Act, 1961, S.3(4).
(c) Income-tax---
----Expenditure on scientific research---Assessment pending approval of institution- --Prescribed authority directing manner of assessment---Held not proper by High Court---Department not pressing appeal owing to approval of institution---Indian Income Tax Act, 1961, S.35(3).
In J.K. Synthetics Ltd. v. O.S. Bajpai, ITO (1976) 105 ITR 864, the Allahabad High Court had decided (1) that certain conditions imposed on the respondent by the Income-tax Officer while granting approval for change of its previous year were not proper and the reversal of the approval, because two of the conditions were not fulfilled, was not proper in law; (ii) that the prescribed authority was not empowered to issue directions as to how assessment was to be made pending reference of the claim for expenditure on scientific research; and (iii) that the respondent was entitled to deduction of its claim for excise duty liability, though its writ petition challenging its liability to pay had been accepted by a Single Judge of the High Court because the matter was pending in appeal before a Division Bench and, therefore, section 41 of the Income-tax Act, 1961, could not be invoked. The Department preferred an appeal to the Supreme Court, but did not press the appeal in relation to expenditure on scientific research since the concerned authority had approved of the institution under section 35(3). The Supreme Court dismissed the appeal with the observations: (i) that since the liability to tax under section 41 would depend on the outcome of the appeal, there would be no prejudice to the Department if the assessment were modified thereafter; (ii) that, having regard to the fact that the Department had recognised the change in the previous year, for several years subsequently, any cancellation of the approval for the change would involve upsetting of assessments for over ten years and create undue hardship, and the fact that recently the Act had been amended to make the financial year the previous year for all assessees, no opinion need be expressed on the question whether the approval to the change was rightly revoked or not.
S.C. Manchanda, Senior Advocate (S. Rajappa and Ms. A. Subhashini, Advocates with him) for Appellants.
Harish N. Salve and Vibhu Bakhru, Advocates for Respondents.
ORDER
Three points were decided by the High Court in this matter. The first pertained to cancellation by the Income-tax Officer of a change in the previous year allowed to the assessee from the year ending June 30 to December 31. The second point related to the question whether the assessee's liability to excise duty in certain matters had ceased justifying action under section 41(i) of the Income Tax Act, 1961. The third point related to a claim for deduction in respect of expenditure on scientific research. The High Court has held that the cancellation of the order regarding the previous year was not justified, that the liability had not ceased as an appeal was still pending in the matter in the Supreme Court and
that the expenditure on scientific research was allowable as a deduction. The Union of India has preferred this appeal.
So far as the third question is concerned, it is not pressed before us on behalf of the Department in view of the fact that the concerned authority has approved of the institution under section 35(3) of the Act. So far as the second question is concerned, it is obvious that the liability to tax under section 41 of the Act will depend on the outcome of the appeal before this Court. It is also stated that, as regards another part of the liability, the issue is pending before the Tribunal. It would, therefore, appear that no cessation of liability can be postulated until the Tribunal has decided the matter. There is no prejudice to the Department if the assessment is modified depending upon the outcome of the decision of this Court as well as the final outcome of the proceedings which are now pending before the Tribunal. This leaves only the first question for consideration.
So far as the first question is concerned, learned counsel for the respondent submitted that the present appeal relates to the assessment year 1972-73. Subsequently, assessments have been made on the footing of the calendar year being the previous year almost up to the assessment year 1984-85, the position subsequently not being clearly known. In these circumstances, it is submitted that, having regard to the fact that the Department has recognised the change for several years subsequently, it will be very inequitable to allow the cancellation of the order permitting change of previous year for 1972-73. This will involve the upsetting of assessments for over ten years and more and create undue hardship. It is also pointed out that, recently, the statute itself has been amended to make the financial year the previous year for all assessees. Having regard, therefore, to the subsequent developments as well as the subsequent history of the assessments in the present case, we are of the opinion that we need not express any opinion on the question decided by the High Court, exercising our jurisdiction under Article 136. We, however, make it clear that we express no opinion on the question whether the change of previous year was rightly revoked or not.
With these observations, the civil appeal is disposed of. There will be no order regarding costs.
M.B.A./2256/T Order accordingly.