COMMISSIONER OF INCOME TAX Vs. KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED
HIGH COURT OF KERALA
COMMISSIONER OF INCOME-TAX
KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD.
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Gopalan Nambiyar, C. J. -
(1.) The Income Tax Appellate Tribunal, Cochin Bench, has referred the following questions of law for our opinion
(1) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in holding that the reassessment made under S.147(b) of the Income Tax Act, 1961 for the assessment year 196768 is not valid and proper
(2) Whether, on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in holding that the order of the Appellate Assistant Commissioner, which is appealed against by the assessee, cannot be said to be "Information" within the meaning of S.147(b) of the Income Tax Act, 1961 and that, so far as the Income Tax Officer is concerned, it is only a change of opinion
(3) Whether, on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in holding that even if that order of the Appellate Assistant Commissioner appealed against by the assessee constitutes information within the meaning of S.147 of the Income Tax Act, 1961, such information being related to assessment year 197071 it cannot be said that the Income Tax Officer had in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment for the assessment year 196768
(2.) The assessee is a Government owned Company. The assessment year with which we are here concerned is 1967-68. The assessment was originally completed on 22nd November 1967. Among other things, the Assessee claimed that a grant given by it to the Labour and Industrial Bureau, was an allowable deduction under S.37 of the Income Tax Act 1961, in the computation of the total income. That was not disputed by the Income Tax Officer; and as a matter of course or routine, he would appear to have allowed it. This is how the statement of facts has stated the position. The original assessment did not indicate any discussion as to why it was allowed as a deduction. Annexure A is a copy of the original assessment. Subsequently for the assessment year 1970-71 also the assessee made a similar claim for deduction. This was refused by the then Income Tax Officer who was different from the officer who allowed the deduction in the year 1967-68. The assessee's appeal against the said order was dismissed by the Appellate Assistant Commissioner by his order dated 22nd September 1971 (Annexure C). Para.5 of the said order dealt with the deducibility of the expenses claimed by the assessee as follows:
"5. Taking first the cash grants to the Labour and Industrial Bureau it is difficult to see how these can possibly be regarded as expenditure laid out wholly and exclusively for the purpose of assessee's business or profession. What Sri Iyer has in mind is perhaps the original meaning of the word 'business' viz., what one does as a regular activity. That, however, is not the meaning that is to be ascribed to the word in the context of income tax where one is concerned with activities of such a sort as are expected to yield income and where the only purpose is to make such income. S.213 defines the word as including any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture. While this definition is not exhaustive it is certainly indicative of the sense in which the word is used. It might be the 'business' of a charitable organisation to make donations to those in need but that would not be an activity within the meaning of the word in the Income Tax Act. The grants to the Labour and Industrial Bureau cannot, to my mind, have any connection whatsoever to any profit motive on the part of the assessee company. Obviously the payment were in furtherance of the objective that the economy of the State might be developed."
On the basis of the information disclosed in the appellate order that the expense in question was not an allowable deduction, the Income Tax Officer reopened the assessment for the year 1967-68 under S.147(b) of the Act and asked the assessee to show cause why the payment which had been allowed as a deduction should not be disallowed in the assessment for that year. By his order dated 15th March 1973 he revised the assessment disallowing the claim for deduction of the payment to the Labour and Industrial Bureau (Annexure B). The assessee's appeal to the Appellate Assistant Commissioner was dismissed. The said order was reversed by the Income Tax Appellate Tribunal which has referred the three questions stated above, for our opinion.
(3.) S.147(b) of the Income Tax Act reads: "147. Income -- escaping assessment.-- If --
(a) * * * *
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income Tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of S.148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be for the assessment year concerned (hereafter in S.148 to 153 referred to as the relevant assessment year).
(Explanations 1 and 2 omitted as unnecessary).;
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