THE COMMISSIONER OF INCOME-TAX, WEST BENGAL, II CALCUTTA vs. M/S. NAGA HILLS TEA CO. LTD.

CIVIL APPEAL No. 496/1970Supreme Court[1973] 3 S.C.R. 51008 February 1973Bench: 3 JudgesAuthor: K.S. HEGDE, P. JAGANMOHAN REDDY, HANS RAJ KHANNA5 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s. Naga Hills Tea Co. Ltd., is a tea company. For the assessment year 1959-60, its total income was Rs. 55,257/-, and corporation tax was computed at Rs. 26,357/-. A rebate of Rs. 16,114/- was initially allowed under the Finance Act, 1959. However, the Income-tax Officer (ITO) withdrew this rebate, citing an unabsorbed reduction of rebate of Rs. 27,144/- from the assessment year 1957-58. The assessee's assessment for the assessment year 1958-59 had resulted in a loss of Rs. 73,920/-, with no corporation tax levied for that year. The assessee contended that the unabsorbed reduction in rebate from 1957-58 could only be carried forward and set off against the rebate for 1958-59 under the Finance Act, 1958. Since there was no rebate available for 1958-59 due to the loss, the unabsorbed reduction should have been exhausted and not carried forward to 1959-60. The ITO and Appellate Assistant Commissioner rejected this contention, but the Income Tax Appellate Tribunal and the High Court ruled in favour of the assessee.

What did the Supreme Court hold?

The Supreme Court, dismissing the appeal, held that Paragraph D of Part II of the First Schedule to the Finance Act, 1959, does not provide for the carry-over of unabsorbed rebate from year to year. The provision only allows for an unabsorbed reduction of rebate in the assessment year 1958-59 to be taken into consideration when allowing rebate in the assessment year 1959-60. The Court held that a power for the revenue to consider any unabsorbed reduction in rebate for any year prior to 1958-59 cannot be read into the provision. The Court agreed with the High Court's interpretation that the second proviso to Paragraph D of Part II of the First Schedule to the Finance Act, 1959, refers to 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. If an assessee suffered a loss in 1958, there was no income to which the rate of super-tax prescribed in the 1958 Act could be applied, and consequently, no question of rebate or reduction in rebate under the 1958 Act arose. The Court also noted that if a provision of a taxing statute can be reasonably interpreted in two ways, the interpretation favourable to the assessee must be accepted. The appeal was dismissed.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee, having not been assessed to super-tax for 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 off 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 assessment year 1959-60? (Question of law and mixed fact and law, turning on Paragraph D of Part II of the First Schedule to the Finance Act, 1959, and the Finance Act, 1958). Assessee's contentions: The unabsorbed reduction in rebate for the assessment year 1957-58 could only be carried forward and set off against the rebate for the assessment year 1958-59 under the Finance Act, 1958. As there was no rebate available for the assessment year 1958-59 due to a loss, the unabsorbed reduction in rebate exhausted itself and could not be further set off against the rebate available in the assessment year 1959-60. Revenue's contentions: The revenue contended that the unabsorbed reduction in rebate from 1957-58 could be considered for setting off against the rebate in 1959-60. The judgment does not explicitly record the revenue's arguments beyond what was rejected by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 66(1),Section 18(3D),Section 23A(9)

AI-generated summary — verify with the full judgment below

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 corpora- tion tax was legal for that year.

It was contended by the assessee that the unab~rbed 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

The order continues below.

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