COMMISSIONER OF INCOME-TAX VS KANJI SHIVJI & CO.
2001 P T D 833
[242 I T R 124]
[Supreme Court of India]
Present: S. P. Bharucha, A. P. Misra and N. Santosh Hegde, JJ
COMMISSIONER OF INCOME‑TAX
versus
KANJI SHIVJI & CO.
Civil Appeal No.9777 of 1995, decided on 25/01/2000.
(Appeal from the judgment and order, dated September 8, 1988 of the Bombay High Court in I. T. A. No. 112 of 1988).
Income‑tax‑‑‑
‑‑‑‑Firm‑‑‑Business expenditure‑‑‑Disallowance of interest paid by firm‑‑ Law applicable‑‑‑Explanation 2 to S.40(b) introduced w.e.f. 1‑4‑1985, is declaratory ‑‑‑Indian Income Tax Act, 1961, S.40(b).
In Brij Mohan Das Laxman Das v. CIT (1997) 223 ITR 825 (SC) a Bench of two Judges of the Supreme Court concluded that the Explanation 2 to section 40(b) of the Income Tax Act, 1961, introduced with effect from April 1, 1985, was declaratory. This view was accepted by a Bench of three Judges in Suwalal Anandilal Jain v. CIT (1997) 224 ITR 753 (SC). The application of section 40(b) and the said Explanation was not really in issue in Rashik Lal & Co. v. CIT (1998) 229 ITR 458 (SC). The observations in Rashik Lal & Co. v. CIT (1998) 229 ITR 458 (SC) relating to the said Explanation must, therefore, be' treated as obiter dicta. The conclusion of the Court in the earlier cases of Brij Mohan Das Laxman Das v. CIT (1997) 223 ITR 825 (SC) and Suwalal Anandilal Jain v. CIT (1997) 224 ITR 753 (SC) still represents the correct exposition of the law.
Brij Mohan Das Laxman Das v. CIT (1997) 223 ITR 825 (SC) and Suwalal Anandilal Jain v. CIT (1997) 224 ITR 753 (SC) fol.
Rashiklal & Co. v. CIT (1998) 229 ITR 458 (SC) held obiter dicta.
H.N. Salve, Solicitor‑General.
Harish Chandra, K.N. Shukla, B. Sen: Amicus curiae, Senior Advocates for Appellant.
S. Rajappa, Ms. Sushma Suri, Shail Kumar Dwivedi, A.V. Rangam, B. Krishna Prasad, Ms. Renu George, B. Gupta, Ms. Bina Gupta, Mrs. Rakhi Raym, Mrs. T. Sudha, Ganpathi Iyer, Gopalkrishnan, Raghavendra Gopal Krishnan and M.B. Rao, Advocates for Respondents.
ORDER
This appeal stands referred to a Bench of three Judges because it was found that a Bench of two learned. Judges had taken the view that the conclusion of an earlier Bench of three learned Judges was difficult to accept. The issue relates to whether Explanation 2 to section 40(b) of the Income Tax Act, 1961, introduced with effect from April 1,1985, is prospective in operation or only declaratory.
In Brij Mohan Das Laxman Das v. CIT (1997) 223 ITR 825 (SC), two learned Judges concluded that the said Explanation was declaratory, This view was accepted by a Bench of three learned Judges in Suwalal Anandilal Jain v. CIT (1997) 224 ITR 753 (SC).
In the case of Rashik Lal & Co. v. CIT (1998) 229 ITR 458 (SC), this view was doubted. A Bench of two learned Judges observed that it was difficult to accept the proposition that the said Explanation was only clarificatory for the reason that if what was contained in the said Explanation was already the law in force, then giving effect to the said Explanation from 1st April, 1985, did not make any sense. But the Bench immediately noted (page 467): "However, in the case before us, no question of payment of any interest is involved". In other words, the application of section 40(b) and the said Explanation was not really in issue in Rashik Lal's case (1998) 229 ITR 458 (SC). The observations in Rashik Lal's case (1998) 229 ITR 458 (SC) relating to the said Explanation must, therefore, be treated as obtier dicta.
The conclusion of this Court in the earlier cases of Brij Mohan Das Laxman Das (1997) 223 ITR‑825 and Suwalal Anandilal Jain (1997) 224 ITR 753 still represents the correct exposition of the law. Following these decisions, the civil appeal must be dismissed.
We are obliged to Mr. B. Sen, learned counsel for his assistance at our request.
Appeal dismissed.
No order as to costs.
M.B.A./417/FCAppeal dismissed.