BURMAH SHELL OIL STORAGE AND DISTRIBUTING CO OF INDIA LTD Vs. INCOME TAX OFFICER
LAWS(CAL)-1975-7-30
HIGH COURT OF CALCUTTA
Decided on July 03,1975

BURMAH-SHELL OIL STORAGE AND DISTRIBUTING CO. OF INDIA LTD. Appellant
VERSUS
INCOME-TAX OFFICER Respondents





Cited Judgements :-

JEEWANLAL 1929 LTD VS. INCOME TAX OFFICER [LAWS(CAL)-1976-3-28] [REFERRED TO]
JEEWANLAL 1929 LTD VS. INCOME TAX OFFICER J WARD [LAWS(CAL)-1980-12-23] [REFERRED TO]
JAMES FINLAY AND CO LTD VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1982-4-19] [REFERRED TO]
INCOME TAX OFFICER VS. BURMAH SHELL OIL STORAGE AND DISTRIBUTING CO OF INDIA LTD [LAWS(CAL)-1982-4-26] [REFERRED TO]
ATUL KUMAR DEOVRAT AND CO VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1986-12-8] [REFERRED TO]
JIYAJEERAO COTTON MILLS LTD VS. ASSISTANT COMMISSIONER OF INCOME TAX [LAWS(CAL)-1991-5-32] [REFERRED TO]
PATOA BROTHERS VS. COMMISSIONER OF INCOME TAX [LAWS(GAU)-1980-10-1] [REFERRED TO]
JYOTI TRADERS VS. S M GORE INCOME TAX OFFICER A 1 WARD BOM [LAWS(BOM)-1984-8-11] [REFERRED TO]
RAVE ENTERTAINMENT PVT. LTD. VS. COMMISSIONER OF INCOME TAX [LAWS(ALL)-2015-4-430] [REFERRED TO]


JUDGEMENT

A.N.Sen, J. - (1.)Burmah-Shell Oil Storage and Distributing Company of India Ltd. (hereinafter referred to as the company or the petitioner) has presented this writ petition challenging the validity of two notices one bearing No. CC-XXIII/5-b/67-68/79, dated the 17th August, 1971, issued by the Income-tax Officer, Central Circle XXIII, Calcutta, and the other bearing No. 1426/IAC/ICFP-124/67-68, dated the 18th August, 1971, issued by the Inspecting Assistant Commissioner of Income-tax, Range-1(C), Calcutta.
(2.)The petitioner is a company incorporated under the provisions of the English Companies Acts with liability of its members limited by shares and has its registered office at Burmah House, Piper Sway, Swindon, in the United Kingdom. The petitioner carries on business, inter alia, at Burmah Shell House, Ballard St., Bombay-1, and also at No. 31, Binoy Badal Dinesh Bag, in the town of Calcutta. The business of the company consists in the importation and of purchase and storage, sale and distribution of petroleum and allied products. The capital of the company has been contributed in pounds sterling and as on 31st December, 1966, the authorised capital of the company consisted of 2,50,00,000, divided into 1,25,00,000 " A " ordinary shares of pound one each and 1,25,00,000 " B " ordinary shares of pound one each. All the shares of the company have been issued and are fully paid up. The accounts of the company are expressed in terms of pounds sterling including the profit and loss account of the company. The company is obliged by law to lay before its shareholders at its annual general meeting a profit and loss account expressed in terms of pounds sterling. The financial year of the company is from January to December. The company has been assessed to income-tax in India for a number of years. For the assessment year 1967-68, the company duly filed its return and the assessment year in question in the present proceeding is the assessment year 1967-68. On the 5th of June, 1966, the rupee was devalued. As a result of the devaluation of the rupee the petitioner in respect of its trading for the financial year 1966, claims to have suffered a loss in consequence of the fall in the sterling value of its current assets held in India including oil stocks. It appears that the petitioner has further provided in respect of depreciation an amount based on its original actual cost in terms of sterling of its capital assets, which by reason of the said devaluation was greater in terms of rupees than it would othewise have been, and the petitioner claimed in his income-tax return for the assessment year 1967-68, depreciation on the enhanced basis on account of the devaluation. The petitioner also claimed development rebate and terminal or balancing charge in respect of assets discarded or sold on the basis of their original actual cost in sterling. Assessment year 1967-68 was the first year in which these questions fell to be considered and the petitioner had in its return for the said year claimed deduction for the loss on devaluation and the said greater depreciation on its fixed assets and also the said development rebate. The return of the petitioner for the assessment year 1967-68 was duly filed and sent with a covering letter and in the said letter and also in the return, the petitioner specifically pointed out that it was claiming devaluation loss and the said greater depreciation. In course of the assessment proceedings on the basis of the said return filed by your petitioner for the assessment year 1967-68, the Income-tax Officer made several queries and asked for several clarifications all of which were duly furnished by the petitioner. In course of the said proceedings, the petitioner also filed a revised return under cover of a letter dated 20th May, 1971. In the said revised return, the petitioner again made it clear that it had claimed devaluation loss and the said greater depreciation as well as development rebate and terminal charge on the aforesaid basis of devaluation of the rupee. After the filing of the revised, return the petitioner at the request of the Income-tax Officer furnished a statement of depreciation and development rebate on the basis that no greater amount was allowable by virtue of devaluation. On the basis of the loss suffered by the petitioner on account of devaluation and on the basis of the claim of the petitioner for greater depreciation and also development rebate the petitioner in the return originally filed had shown substantial loss of over Rs. 68,00,000 (Sixty-eight lakhs). In the course of the assessment proceeding before the Income-tax Officer, the petitioner was represented by Shri V. Newatia of M/s. Price Waterhouse Peat & Co., and Shri O.P. Mathur, Taxation Officer of the company. They were heard by the Income-tax Officer and the Income-tax Officer for reasons recorded in his order disallowed the entire claim of the petitioner on account of devaluation loss and added back an amount of Rs. 8,19,01,945 to the petitioner's income claimed by the petitioner by way of deduction on this account. The Income-tax Officer also disallowed a large part of the petitioner's claim on account of depreciation, terminal allowance and development rebate. On the basis of the view expressed by the Income-tax Officer that the entire claim of the petitioner on account of devaluation loss and that the greater part of the claim of the petitioner on account of depreciation, terminal allowance and development rebate were not allowable and on the basis of the said claims being rejected and being added to the income of the petitioner as a necessary consequence of such rejection, the total income of the petitioner was assessed at Rs. 8,25,26,427. Against the said order of assessment by the Income-tax Officer, the petitioner preferred an appeal before the Appellate Assistant Commissioner and the Appellate Assistant Commissioner of Income-tax for reasons recorded in his order dated 4th December, 1972, substantially upheld the order of the Income-tax Officer and the Appellate Assistant Commissioner on the question of the devaluation loss held that the fall in the sterling value of the Indian assets which was a notional or hypothetical loss and it was not a real loss sustained during the year of account. Against the order of the Appellate Assistant Commissioner, the petitioner has preferred a further appeal to the Income-tax Appellate Tribunal which is still pending.
(3.)In the course of the assessment proceedings the Income-tax Officer considered it fit to initiate penalty proceedings against the petitioner and in the assessment order itself the Income-tax Officer has recorded--" proceedings for leyy of penalty under Section 271(1)(c) have been initiated separately". On the 17th of August, 1971, the Income-tax Officer, Central Circle XXIII, Calcutta, issued the following notice bearing No. CCXXIII/ 5-b/67-68/79 to the principal officer of the company at Bombay :
"Whereas in the course of proceedings before me for the assessment year 1967-68, it appears to me that you have concealed the particulars of your income or deliberately furnished inaccurate particulars of such income and whereas the penalty proceedings have to be referred to the Inspecting Assistant Commissioner of Income-tax. According to Sub-section (2) of Section 274 of the Income-tax Act, 1961, you are hereby informed that the case for levy of a penalty under Clause (c) of Sub-section (1) of Section 271, is being referred by me to the Inspecting Assistant Commissioner of Income-tax, Range I(c), Cal. Further proceeding in regard to the levy of a penalty will take place before the said Inspecting Assistant Commissioner of Income-tax as provided in Sub-section (2) of Section 274."



Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.