IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10.3.2008 CORAM: THE HONOURABLE MR.JUSTICE ELIPE DHARMA RAO AND THE HONOURABLE MR.JUSTICE S.R.SINGHARAVELU Writ Appeal No.1041 of 2006 The Assistant Commissioner of Income-tax, Company Cirlce -I (1), Aakayar Bhavan - New Block sixth floor, 121 Mahatma Gandhi Road, Chennai-600034. ... Appellant Vs. Apollo Hospitals Enterprises Limited, represented by Mr.S.K.Venkataraman, Company Secretary-cum Chief Financial Officer, Ali Towers, Fourth Floor, 55 Greams Road, Chennai-600006. ... Respondent * * * Writ Appeal preferred under Clause 15 of the Letters Patent as against the order of the learned single Judge, dated 8.6.2006 made in W.P.No.4991 of 2006. Writ Petition filed under Article 226 of the Constitution of India to issue a writ of Certiorari to call for the records on the files of the respondent herein in AX 1/015/2000-01 dated 30.03.2005 under Section 148 of the Income Tax Act 1961. * * * For appellant : Mrs.Pushya Sitharaman For respondent : Mr.N.Inbarajan * * * https://hcservices.ecourts.gov.in/hcservices/ JUDGMENT ELIPE DHARMA RAO, J. This Writ Appeal is directed against the order passed by a learned single Judge of this Court in W.P.No.4991 of 2006 dated 8.6.2006. 2. The respondent herein is running hospitals in different parts of the country and by an order of amalgamation dated 18.4.2000, a Scheme was approved to amalgamate M/s.Deccan Hospital Corporation Limited (in short 'DHCL'), running a Hospital at Jubilee Hills, Hyderabad with the respondent and consequent to the amalgamation, the said hospital vested with the respondent. As on 31.3.1999, the said DHCL had an unabsorbed depreciation of Rs.11,60,29,077/=, which vested with the respondent under the Scheme of Amalgamation. For the assessment year 2000-2001, the respondent submitted returns and claimed the benefit of Section 72A of the Income-tax Act (hereinafter referred to as the Act) to have the said unabsorbed depreciation of DHCL as the depreciation of the respondent. By letter in G.I.No.AX1-015/2000-01, dated 7.3.2003, certain particulars were called for from the respondent by the Department and thereupon, the assessment was completed by the Deputy Commissioner of Income-tax, Company Circle-I(1)(the then Assessing Officer), vide assessment order dated 28.3.2003 under Section 143(3) of the Act and the benefit of Section 72-A of the Act was availed by the respondent. It is seen that the respondent has preferred an appeal against certain issues pertaining to set-off of the minimum alternate tax, before the Commissioner of Income-tax (Appeals) III, Chennai under Section 246-A of the Act, and the same was disposed on 21.8.2003 in ITA.No.99/03-04/A.III and further appeal is pending before the Income-tax Appellate Tribunal, Chennai. 3. While such is the position, the appellants herein issued a notice under Section 148 of the Act in PAN.AX.1/015/2000-01, dated 30.3.2005, stating that they have reason to believe that the income of the respondent, chargeable to tax for the assessment year 2000-01 has escaped assessment within the meaning of Section 147 of the Act and therefore, proposed to assess the income for the said assessment year and required the respondent to submit a return in the prescribed form. For the said notice, the respondent submitted a reply on 18.4.2005, requesting to provide the reasons that their income escaped assessment and after many communications and personal hearings, ultimately, the appellants have held that the respondent is not entitled to the set-off they have availed. This action of the appellants was challenged by the https://hcservices.ecourts.gov.in/hcservices/ respondent herein by filing Writ Petition No.4991 of 2006. The learned single Judge of this Court, by the order dated 8.6.2006, has allowed the said writ petition filed by the respondent herein, relying on the judgments of the Honourable Apex Court in C.I.T. vs. RAO THAKUR NARAYAN SINGH [(1965) 56 I.T.R. 234] and PHOOL CHAND BAJRANG LAL [(1993) 203 I.T.R. 456] wherein it was held that the Department cannot reopen the assessment order passed by mere change of opinion or by drawing a different inference from the same facts as were earlier available. Aggrieved, this appeal is preferred by the Department. 4. It is to be mentioned that while the first judgment delivered by the Honourable Apex Court in C.I.T. vs. RAO THAKUR NARAYAN SINGH [(1965) 56 I.T.R. 234] relied on by the learned single Judge is of the year 1965, the second judgment in PHOOL CHAND BAJRANG LAL [(1993) 203 I.T.R. 456] is pertaining to the assessment year 1963-64. In both the cases, no misapplication of law, as is the case in hand, was the subject matter. Further, it cannot be said that the assessing officer has no power at all to assess or reassess any income chargeable to tax which has escaped assessment since the assessing officer is entitled to assess or reassess any income chargeable to tax, which has escaped assessment for any assessment year. Such power of the Assessing Officer is traceable to Section 147 of the Income-tax Act, which reads as follows: "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (heareafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year...." https://hcservices.ecourts.gov.in/hcservices/ 5. Further, under Section 149 of the Act, the time limit for notice has been prescribed as follows: "Section 149: No notice under Section 148 shall be issued for the relevant assessment year, - (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year." 6. The relevant assessment year in the case on hand is 2000- 2001 and the impugned action of reassessment has been initiated by the appellant by issuing the notice under Section 148 of the Act on 30.3.2005. It is seen that the said notice was issued by the Assistant Commissioner of Income-tax, who is the Assessing Officer. Therefore, it cannot be said that the impugned action was initiated by a person who has no jurisdiction at all, as has been wrongly argued on behalf of the respondent. Therefore, the judgment of the Division Bench of the Delhi High Court in CONSOLIDATED PHOTO AND FINVEST LTD. vs. ASSISTANT COMMISSIONER OF INCOME-TAX [(2006) 281 ITR 394 (DELHI)] relied on by the learned counsel for the respondent, wherein the notice was issued after the limitation period, has no application to the case on hand. 7. Now, let us scrutinise the case regarding the plea taken by the Department to reassess the income. It is no doubt a true that DHCL has amalgamated with the respondent and as on 31.3.1999, the said DHCL had an unabsorbed depreciation of Rs.11,60,29,077/= which vested with the respondent hospital, subsequent to the amalgamation and for the assessment year 2000-2001, the respondents submitted their returns and claimed the benefit of Section 72A of the Act, and the assessment was completed by the Deputy Commissioner, vide assessment order dated 28.3.2003 under Section 143(3) of the Act. The entire reading of the said assessment order dated 28.3.2003 would show that the assessing officer has not at all discussed anything regarding the set-off under Section 72A. When this fact came to the knowledge of the Department, they have initiated the impugned action of reassessment, wherein we cannot find any illegality. Further more, when the Department has a reason to believe that the set-off was claimed and availed on a wrong notion by the respondent, since the hospital was not an 'industrial undertaking', we cannot find fault with the impugned action of the appellant. https://hcservices.ecourts.gov.in/hcservices/ 8. Section 72A of the Act deals regarding the 'carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc.' For the sake of better appreciation, we extract hereunder the said Section: "72A: (1) where there has been an amalgamation of a company owning an industrial undertaking or a ship or a hotel with another company or an amalgamation of a banking company referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a specified bank, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly...." 9. Therefore, the prime condition for claiming set-off under this Section is that the company amalgamating must be owning an 'industrial undertaking' or a ship or a hotel. In the case on hand, both the DHCL and the respondent are hospitals and not having any industrial undertaking or a ship or a hotel. 10. The contention of the respondents is that by a long series of decisions rendered under Sections 32A and 33 of the Act, 'hospitals' have been considered to be engaged in protection or processing of thing or article and as such entitled to be looked upon as 'industrial undertakings'. It is also submitted that in their own case, in respect of the assessment year 1989-90, the Commissioner of Income-tax (Appeals), by its order in I.T.A.113/1992-93, dated 28.2.1995 it was held that the respondents are entitled to investment allowance under Section 32A of the Act as an industrial undertaking, which was upheld by the Tribunal in I.T.A.1440(MDS)/1995, dated 20.4.2004 and the appeal is pending before this Court in T.C.A.(TC) A.No.955 of 2004. 11. In support of his contentions, the learned counsel for the respondent relied on the following judgments of various High Courts: (1) COMMISSIONER OF INCOME TAX, TAMIL NADU-IV vs. DR.V.K.RAMACHANDRAN [128 ITR 727 (MADRAS)], (2)COMMISSIONER OF INCOME TAX vs. TRINITY HOPSITAL [225 ITR 178 (RAJASTHAN)], (3)COMMISSIONER OF INCOME TAX vs. UPASANA HOSPITAL [225 ITR 845 (KERALA)] and https://hcservices.ecourts.gov.in/hcservices/ (4)NATVARLAL AMBALAL DAVE vs. COMMISSIONER OF INCOME TAX [225 ITR 936 (GUJARAT)] 12. All these judgments pertain to investment allowance and other allowances like development rebate wherein the assesses were allowed to avail such allowances or rebates by various Courts, proceeding on the basis that hospital is an industrial undertaking under the provisions of the Industrial Disputes Act. But, all these judgments relied on by the respondent in this regard, including that of their own case, are all the matters before 1.4.2000 i.e. prior to introduction of Finance Act, 2001 whereunder clause (aa) to sub-section (7) of Section 72A was inserted with retrospective effect from 1.4.2000 to the Income-tax Act, whereunder the 'industrial undertaking' is defined as follows: "(aa) 'industrial undertaking' means any undertaking which is engaged in - (i)the manufacture or processing of goods; or (ii)the manufacture of computer software; or (iii)the business of generation or distribution of electricity or any other form of power; or (iiia) the business of providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services; or (iv) mining; or (v)the construction of ships, aircrafts or rail systems. (clause (iiia) was inserted by Finance Act, 2002 w.e.f. 1.4.2003) 13. Thus, the legislature has designedly used the expressions and the expression has been so widely defined as not to leave anything necessary out of its comprehension and purview and there is no ambiguity. In the case on hand, there is no dispute regarding the fact that the amalgamation was approved on 18.4.2000 and the amalgamation took place in the assessment year 2000-2001 and that the set-off was claimed by the respondent in the assessment year 2000-2001. Therefore, the above amendment of Section 72A(7)(aa) of the Act is very well applicable to the case on hand. Thus, when the term 'industrial undertaking' has been well defined in the Income-tax Act, which is the matter on hand, the contentions of the respondent based on the judgments delivered prior to the introduction of such amendment to the Income-tax Act and the definition rendered for the same term under the Industrial Disputes Act, 1947, cannot be accepted. If the Act which is the subject matter of the issue involved does not contain any definition for a disputed term, then only, for appreciation of the case, we can resort to other Acts, which bears the definition for the same term. But, in the case on hand, no such position has arisen and much has been argued on behalf of the respondents that https://hcservices.ecourts.gov.in/hcservices/ since being a 'hospital', it is an industrial undertaking within the meaning of the Industrial Disputes Act, which is not at all the subject matter. Since admittedly, both the DHCL and the respondent are only 'hospitals', and when hospitals are not brought into the folder of 'industrial undertakings' by Section 72A(7)(aa), neither the DHCL nor the respondent, which are only hospitals can be termed as 'industrial undertakings', so as to make them eligible to claim the benefits under Section 72A of the Act. Therefore, it cannot be said that the appellant has initiated the impugned action of reassessment merely on ground of change of opinion or by drawing a different inference, as was the cases before the Honourable Apex Court in the judgments relied on by the learned single Judge. In the case on hand, the reassessment was necessitated since the respondent has availed set-off, quoting and applying a law, which is not at all applicable to them. When the respondent and the DHCL are not at all the industrial undertakings, as has been mandated by Section 72A, the set off availed by the respondent is totally illegal and the same needs to be reviewed, which has been properly done by the appellants. Therefore, in view of the amending provision of Section 72A(7)(aa) of the Act, the above judgments relied on by the learned counsel for the respondent are no longer a good law and therefore, they cannot be made applicable to the facts of the case on hand. 14. When at the earlier instance, the relief was availed by the respondent under a wrong perception of law and when clearly the provisions of Section 72A do not at all applicable to the 'hospital', so as to term it an 'industrial undertaking', it cannot be said that the appellant has no right or power to review the earlier erroneous exemption availed by the respondent. It is not the case of the respondent that without giving any opportunity to them, the set-off availed by them was reviewed. In fact, the appellant has given notice to the respondent to explain regarding the set-off availed on an erroneous perception of law earlier. If such wrong claims availed by the assessees, particularly quoting wrong application of law are not allowed to be reviewed, a chaotic situation will arise, putting a big dent to the exchequer, having negative repercussions on the developmental activities of the country. In this factual backdrop of the case, where the reassessment has been ordered not because of a change of opinion, but having found out the illegal gain made by the respondent, the judgment of the Division Bench of the Madhya Pradesh High Court in BADRI PRASAD RAMESHWAR PRASAD vs. COMMISSIONER OF INCOME-TAX [VOL.219 ITR PAGE 441] relied on by the learned counsel for the respondent also has no application to the facts of the case on hand. https://hcservices.ecourts.gov.in/hcservices/ 15. It has been argued on behalf of the appellant Department that as against certain issues pertaining to set-off of the minimum alternate tax, the respondent preferred an appeal before the Commissioner of Income-tax (Appeals) III, Chennai under Section 246-A of the Act and the same was disposed on 21.8.2003 in I.T.A.No.99/03-04/A.III, whereupon an appeal is pending before the Income-tax Appellate Tribunal, Chennai and would submit that parallel proceedings were initiated by the respondent for the same cause of action and hence the claim of the respondent has to be dismissed on this sole ground. But, on a perusal of the entire materials placed on record and in the light of our above discussion, we are able to find that as against the set-off availed by the respondent regarding the loss of the amalgamating company, the impugned actions have been initiated by the appellants herein and claiming set-off under some other heads, the respondent has filed the said appeal, which are totally on different issues and therefore, it cannot be said that parallel proceedings are initiated for the same cause of action. 16. The learned single Judge has not at all considered the scope of application of Section 72A and definition for the term 'industrial undertaking' enunciated under Section 72A(7)(aa) of the Act and relying on the judgments pronounced by the Honourable Apex Court totally on a different circumstances, has allowed the writ petition filed by the respondent herein. 17. For all the above discussions we hold that neither the respondent nor the DHCL are the 'industrial undertakings' within the meaning of Section 72A(7)(aa) of the Act and hence the set-off availed by the respondent for the assessment year 2000-2001 is illegal; that the impugned action initiated by the appellant is very well within the stipulated time of limitation prescribed under Section 147 of the Act and the appellant being the Assessing Officer has got jurisdiction to reassess such set-off illegally availed by the respondent. This Court wonders as to how such a huge claim of Rs.11,60,29,077/= has 'escaped' the assessment of the Department, leading to illegal availing of set-off by the respondent for the said amount that too when there is no order permitting the respondent to avail such set-off, causing loss of revenue to the State. Therefore, the officers of the appellant at the helm of affairs at the relevant point of time shall be made responsible for their lethargic attitude in discharging their official duties and for their dereliction in duty. Therefore, we direct the appellants to initiate necessary disciplinary proceedings against the officers who are responsible for availing of such illegal set- off by the respondent leading to loss of revenue to the State and https://hcservices.ecourts.gov.in/hcservices/ report compliance to this Court, within twelve weeks from the date of receipt of a copy of this judgment. In the result, this writ appeal is allowed and the order passed by the learned single Judge is set aside. No costs. Rao Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar To 1. The Commissioner of Income Tax, Madras 34. 2. The Assistant Commissioner of Income-tax, Company Cirlce -I (1), 121 Mahatma Gandhi Road, Chennai-600034. 3. The Section Officer (Judicial) High Court, Madras. + 1 cc to Mr. N. Inbarajan, Advocate, SR No.13250 + 1 cc to Mr. Pushya Sitharaman, Advocate, SR No.13303 judgment in W.A.1041/2006 SJI(CO) SR/18.3.2008 https://hcservices.ecourts.gov.in/hcservices/