51()

'liHE COMMISSIONER OF INCOME-TAX, WEST BENGAL,

II CALCUITA v.

M/S. NAGA HILLS TEA CO. LTD.

February 8, 1973

[K. S. I!EGDE, P., JAGANMOHAN REDDY AND H. R. KHANNA, JJ.l

Finnnce Act, 1959, First Schedule, Part 11, Paragl'aph D--Carry over of unabsorbed rebate--Scope of.

For the assessment year 1959-60 the total income of the assessee. company was utilised and a rebate was allowed, on the corporation tax payable by it, under the provisions of Finance Act, 1959. Thereafter, that reb-ate was wiardrawn on the ground that there was an unabsorbed reduction of rebate in the assessment year 1957-58. For the assessment year 1958-59 the assessee's assessment disclosed a loss and no corporation tax was legal for that year.

It was contended by the assessee that the unabrbed reduction in rebate for the year 1957-58 could only be carried forward and set off against the rebate for the assessment year 1958·1959 under the provisions of Finance Act, 1958, and as there was no rebate available for the assessment year 1958-59 the unabsorbed reduo

tion in rebate exhausted itself and could not be further set off against the rebate available in the assessment year 1959-60.

The contention was rejected by the Income-tax Officer and the Appellate Assistant Commi~ sioner. The Tribunal and the High Court in reference, however, held in favour of the assessee.

Dismissing the appeal to this Court,

HELD : It is a cTear from paragraph D of Part II of the First Schedule to the Finance Act, 1959, that it does not provide for carry over of any unabsorbed rebate from year to year. All that the provision provides for is that if there is any unabsorbed reduction of rebate in the assessment year 1958-59, then that can be taken into consideration while allowing rebate in the assessment year 1959-60. A power in favour of the revenue to tatce mto consideration any unabsorbed reduction in rebate for any year prior to 1958-59 cannot be read into the provision.

At any rate, the view taken by the High Court appears to be a reasonable one, and, it a provision of taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee must be accepted.

[513F-H; 5140-E]

CIVIL APPELLATE JURISDICTION: Civil Appeal No.--496 of 1970.

Appeal bv Certificate from the Judgment and order dated August 13, 1964 of the Calcutta High Court at Calcutta in Income tax Reference No. 148 ot 1966.

T. A. Ramachandran, S. P. Nayar and R. N. Sachthey, for the appellant. H

B. Sen, Lellu Seth, 0. P. Kizaitan and B. P. Maheshwari, for the respondent.

C.I.1'. v. NAGA HILLS TEA CO. LTD. (Hegde, J.) 511

A The Judgment of the Court was delivered by

HBGDE, J. This appeal biY certificate arises from the decision of the Calcutta High Court in a reference under section 66 ( 1) of the Indian Income-taX. Act 1922 (to be hereinafter referred to as the 'Act') . The question referred to the High Court for its

8 its opinion reads : ·

"Whether, on the facts and in the c;; ircwnstances of the case, the Tribunal was right in boldiJJ& that the assessee, having not been assessed to super-tax fot the assessment year 1958-59, the unabSorbed reduction in rebate under clause (i)(a) of the second proviso to Paragraph D of Part II of the First Schedule to the Finance Act, 1957, could not be set oft against the rebate available to the assessee under the Finance Act,

1959, and that accordingly the Income-tax Officer was not justified in reducing the rebate of Rs. 16,114/- available to the assessee for the assesment year 1959-

60?"

Followig its earlier decision in Commissioner of Income Tax, West Bengal-I v. Deoria Sugar Mills Ltd.,(l) the High Court answered that question in favour of the assessee. Aggrieved by that decision the Commissioner of Income Tax for West Bengal has brought this appeal.

The facts material for the purpose of deciding question as could be gathered from the case stated by the Tribunal may now be set out. The assessment year y.rith which we are con- . cemed in this case is 1959-60; the relevant accounting year being the calendar year 1958. The -assessee is a Tea Company. For the assessment year 1959-60 it was assessed to a total income of F Rs. 55,257/ -. The Corporation tax payable by the assessee on that amount was computed at Rs. 26,357 I-. On that a rebate of Rs. 16,114/ - was allowed under the provisions of the Fmance Act

1959. Thereafter that rebate was withdrawn by the Income Tax Officer on the ground that there wu an unabsorbed reduction of rebate amounting to Rs. 27,144/· in the assessment year 1957 G

58. While making assessment for the assessment year 1959-60 the. Income Tax Officer reduced the rebate to nil by taking into consideration the unabsorbed reduction of rebate in the assessment year 1957-58. At this stage it may be noted that in the

asses8ee's assessment for the assessmeat year 1958-59 the loss of Rs. 73,920/- was determined and no corporation tax was levied

H for that year.

It was contended before the Income-tax Officer that the unabsorbed reduction in rebate for the .year 19S7-S8 could only be

(1) 80 L T.ll. 408.

SUPREME COURT REPORTS [197.3] 3 s.c.R.

carried forward and set off against the rebate for the assessment 4 year 1958-59 under the provision of he Finance Act, 1958, and as there was no rebate available for the assessment year 1958-59, -the unabsorbed reduction in rebate exhausted itself and could not be further set off against the rebate available for the assessment year 1959-60. This contention was rejected by the Income-tax Officer.

In appeal, the Appellate Assistant Commisisoner con- & firmed the decision of the Income-tax Officer but on a further appeal being taken to the Tribunal, the Tribunal accepted the contention of the assessee and thereafter, at the instance of the Commissioner, the question formulated above was referred to the High Court. As mentioned earlier, the High Court has answered that question in favour of the assessee.

We may now read the relevant provisions of the Finance Act,

1959. They are found in Paragraph D ot Part IT of the First Schedule to the Finance ACt, 1959 and are as under:

"In the case of the Life Insurance Corporation of India established under the_ Life Insurance Corporation Act, 1956 (XXXI of 1956),-

RATE OF SUPER-TAX On the whole of its profits and gains

from life insurance business.

In the case of every other company,-

RATE OF SUPER-TAX

On the whole of the total income Provided that,-

11%

50%

(i) a rebate at the rate of 40 per cent on so much of the total income as consists of dividends from a subsidiary Indian company and a rebate at the rate of 35 per cent on the balance of the total jncome shaH be a11owed in the case of any company which- ( a) in respect of its profits liable to tax under the Income-tax Act for the year ending on the 31st day of March, 1960, has made the prescribed arrangements for the declaration and payment within India of the dividends payable out of such profits and for the deduction of super-tax from dividends in accordance with the provisions of sub-section (3D) of section 18 of that Act; and

(b) is such a company as is referred to in subsection (9) of-section-23A of. the IncOme-tax Act with a total income not exceeding Rs. 25,000;

C.I.T, v. NAGA lULLS TEA CO, LTD, (Hegde, /.) 513

(ii) a rebate at the rate of 40 per cent on so much of the total income as COD$ists of dividends from a sub- 6idiary Indian company and a rebate at the rate of 30% on the balance of the toW income shall be allowed in the case of any company which satisfied condition (a) but not condition (b) of the preceding clause;

(iii) , a rebate at the rate of 40% on so much of the total income as consists of dividends from a subsidiary Indian company and a rebate at the rate of 20% on the balance of the total income shall be allowed in the case of my company not entitled to a rebate under either of the preceding clauses : Provided further that,-

(i) the amount of the rebate under clause (i) or clause (ii) shall be reduced by the Sl!ffi_, if any, eal to the amount or_ the aggregate of the amounts, as the case may be, computed as hereunder :-

(a) on tat part of the . aggregate of the sums arrived at in accordance with clause (i) of the second proviso to paragraph D of Part II of the First Schedule to the Finance Act, 1958 (XI of 1958), as has not been deemed to have been taken into account, in accordance with cfause (ii) of the said -proviso, for the purpose of reducing the rebate mentioned in clause (i) of the said proviso t<> nil;

(b) ..................•. "

At the outset we may mention that the provision of law is extremely confusing. It required more than one reading on our part to understand what it means. One thing is clear from the provision, namely, it does not provjde for carryover of any unabsorbed rebate from year to year. Mr. Ramachandran contended that when the Finance Act says "on that paq of the aggregate of the sums arrived at in accordance with clause ( i) of the second proviso to Paragraph D of Part II of the First Schedule to the Finance Act 1958 (Act XI of 1958) as has not been deemed to have been taken into acc6unt, in accordance with clause (ii) of the said proviso, for the purpose of reducing the rebate mentioned in clause ( i) of the said proviso to nil", it means that the unabsorbed deduction of rebate can be carried forward untill it is reduced to nil. We are' unable to accept this contention as correct. In our opinion, all that provision provides for is that if there is any unabsorbed reduction of rebate in the assessment year 1958-59, then that c~ be taken into considera tion while allowing rebate in the assessment year 1959-60. We

SUPREME COURT REPORTS [1973] 3 s .c.a.

are unable to rea~ into th~ pro-...:ision in question a power to Revenue to take mto _cns1derat10n any unasorbed reductione rebate for any year pnor to 1958-59. That 1s the view tak m the Calcutta High Cour~ in t?e case mentioned earlier. eti~ Calcutta High Court opmed m that case that the second P . • to Paragraph D of Part II of the First Schedule to the Ffu 0 150 Act, 1959 providt;~ that the amount ?f rebate to be allowed u~~~ clauses (i) and (u) of the first proviso thereto has to be reduced a to the sum,..if any, equal to the amoun~ or the aggregate of th: amount, as the case may be, computed m the manner set out in the second proviso. It further observed :

"Now, clause (i) (a) of the second proviso refers to th, aggregate of the sums arrived at in accordance with clause (i) c{ c the second proviso to Paragraph D of Part II of the First Schedu~ to the Finance Act of 1958." The aforesaid proviso in 195~ Act, therefore, can apply only when there was a total income in terms of 1958 Act and certain reduction from that total incom~ remained unabsorbed in 1958. If a particular assessee baJ suffered loss in 1958, there was no income to which a rate ci I} super-tax prescribed in the 1958 Act could be applied and if n0 rate of super-tax was applicable, there was no question of rebat! or reduction in rebate to be allowed under the 1958 Act." We are in entire agreement with the view expressed therein. At any rate the view taken by the High Court appears to be a reasonable view. 1i a provision of a Taxing Statute can be reasonably inter £ preted in two ways, that interpretation whkh is favourable :o the assessee, has got to be accepted. This is a well accepted Vlew of b~ . .

In the result this appeal fails and the same is dismissed with costs.

V.P.S.