INDIA UNITED MILLS LTD vs. COMMISSIONER OF EXCESS PROFITS TAX, BOMBAY.

CIVIL APPEAL No. 160/1953Supreme Court[1955] 1 S.C.R. 81028 October 1954Bench: 5 JudgesAuthor: MEHR CHAND MAHAJAN, SUDHI RANJAN DAS, GHULAM HASAN, NATWARLAL HARILAL BHAGWATI, T.L. VENKATARAMA AIYYAR13 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Tribunal held that the word 'discovers' in Section 15 of the Excess Profits Tax Act, 1940, is of sufficient amplitude to include subsequent events that have a material bearing on the facts and circumstances on which the assessment was made or relief was granted. The Tribunal reasoned that the relief granted under Section 26(3) was based on the anticipated non-requirement of the buildings, plant, and machinery after the war. When it was discovered that these assets were, in fact, being utilized for business purposes even after the termination of hostilities, this discovery directly contradicted the premise on which the relief was granted. Therefore, the Excess Profits Tax Officer was entitled to proceed under Section 15 to reassess the profits for the years 1941, 1942, and 1943. The Tribunal distinguished the cited cases by noting that they dealt with valuations of existing assets rather than relief granted based on future anticipated events. The appeal was dismissed.

What were the facts?

The assessee, India United Mills Ltd., had obtained relief under Section 26(3) of the Excess Profits Tax Act, 1940, for the chargeable accounting periods 1941, 1942, and 1943. This relief was granted based on their representation that certain buildings, plant, and machinery acquired for war material production would not be required after the termination of hostilities. Allowances of Rs. 4,06,394, Rs. 4,00,000, and Rs. 3,94,000 were made for these years, respectively. After the war ended on March 31, 1946, the Excess Profits Tax Officer discovered that the assessee was, in fact, still using this plant and machinery for their business. Consequently, the officer initiated reassessment proceedings under Section 15 of the Act for the years 1941, 1942, and 1943. The assessee's objection that the discovered facts related to a period subsequent to the accounting years was overruled by the Excess Profits Tax Officer and the Appellate Assistant Commissioner, but reversed by the Appellate Tribunal.

What were the issues?

1. Whether the word 'discovers' in Section 15 of the Excess Profits Tax Act, 1940, is limited to facts existing during the relevant chargeable accounting period, or if it includes facts discovered subsequent to that period, which is a question of law. Assessee's contention: The assessee argued that the facts discovered by the Excess Profits Tax Officer, namely the continued use of the plant and machinery after the war, related to a period subsequent to the accounting years for which relief was granted. Therefore, these subsequent facts could not form the basis for reopening the assessments for those earlier years under Section 15 of the Act. They relied on cases like Dodworth v. Dale and Anderton and Halstead Ltd. v. Birrell. Revenue's contention: The revenue contended that the word 'discovers' in Section 15 is broad enough to encompass subsequent events that materially affect the basis on which the original assessment or relief was granted. They argued that when the Excess Profits Tax Officer found that the assets, for which relief was granted based on their anticipated non-use, were actually being used, he had the power to reopen the assessment.

Which sections of the Income-tax Act were involved?

Section 15,Section 26(3)

AI-generated summary — verify with the full judgment below

Z,avtrbhai .Amoid0,1 ..

Tht State of Bombay. V tnkatarama AJ'1a1 J. 1954 •October28. 810 SUPREME COURT REPORTS [1955] this Court which was presented under article 132(1), the only ground that was put forward as involving a substantial question as to the interpretation of the Constitution was, whether the Bombay Act No. XXXVI of 1947 was repugnant and void nnder article 254 of the Constitution. No other question having been raised in the petition, we must decline to permit the appellant to raise this point.

In the resnlt, -the appeal fails and is dismissed.

Appeal dismissed. INDIA UNITED MILLS LTD. v. COMMISSIONER OF EXCESS PROFITS TAX, BOMBAY. l_JvlEHR CHAND MAHAJAN C.J., S. R. DAs GHULAM HASAN, BHAGWATI and VENKATARAMA AYYAR JJ.] Excw P,.ofits Tax Act (XV of 1940), s.<. 15, 26(3)-Meaning and i111port of the tvord 'discovers'-Allotvance granted to assessec on his rcprese11tatio11-Sttbsequent facts shotv that representation as untrue, Effect of.

The \Vord ·'discovers' in s. 15 of the Excess Profits Tax Act, 1940, is not limited to facts discovered, which existed during the relevant chargeable accounting period for which assessment is

The order continues below.

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