CENTURY ENKA LTD Vs. INCOME TAX OFFICER D WARD
LAWS(CAL)-1976-4-26
HIGH COURT OF CALCUTTA
Decided on April 29,1976

CENTURY ENKA LTD. Appellant
VERSUS
INCOME-TAX OFFICER, D WARD Respondents





Cited Judgements :-

KOTA BOX MANUFACTURING CO VS. INCOME TAX OFFICER [LAWS(ALL)-1978-4-75] [REFERRED TO]
J K SYNTHETICS LIMITED VS. UNION OF INDIA [LAWS(ALL)-1983-1-38] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. WARNER HINDUSTAN LIMITED [LAWS(APH)-1978-1-24] [REFERRED TO]
WARNER HINDUSTAN LIMITED VS. INCOME TAX OFFICER [LAWS(APH)-1980-4-3] [REFERRED TO]
UNION CARBIDE INDIA LTD VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1980-4-18] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. ANAND BAHRI STEEL AND WIRE PRODUCTS [LAWS(MPH)-1980-12-8] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. GANGA IRON INDUSTRIES [LAWS(MPH)-1985-6-2] [REFERRED TO]
MADRAS INDUSTRIAL LININGS LIMITED VS. INCOME TAX OFFICER [LAWS(MAD)-1977-7-7] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. DUNLOP INDIA LTD [LAWS(CAL)-1990-1-16] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. COCHIN REFINERIES LIMITED [LAWS(KER)-1996-1-41] [REFERRED TO]
GANESH STEEL INDUSTRIES VS. INCOME-TAX OFFICER [LAWS(P&H)-1980-5-4] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. SANTOSH INDUSTRIES [LAWS(RAJ)-1987-7-32] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. LODHA ENTERPRISES [LAWS(RAJ)-1987-7-4] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. SRI GANGANAGAR FERTILIZER CORPORATION [LAWS(RAJ)-1987-7-27] [REFERRED TO]
J J FOAMS P LIMITED VS. COMMISSIONER OF INCOME TAX [LAWS(DLH)-1997-4-68] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. MODERN BAKERIES INDIA LIMITED [LAWS(DLH)-2001-1-50] [REFERRED TO]
PERIYAR CHEMICALS LIMITED VS. COMMISSIONER OF INCOME TAX [LAWS(KER)-1986-1-8] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. VARDHMAN SPINNING [LAWS(P&H)-1997-1-34] [REFERRED TO]
THE COMMISSIONER OF INCOME TAX, DELHI-V NEW DELHI VS. M/S. RAVINDRA TUBES LTD., HISSAR [LAWS(P&H)-1989-3-133] [REFERRED TO]


JUDGEMENT

Sabyasachi Mukharji, J. - (1.)In this application I am concerned with the assessment made under the Income-tax Act, 1961, for the assessment year 1972-73. The petitioner is a public limited company. For the aforesaid assessment year the petitioner claimed relief under section 80J of the Income-tax Act, 1961, and in view of the contentions urged in this application it is necessary to refer to the relevant portion of the assessment order dealing with this question. The said assessment order stated, inter alia, as follows: " (vi) Relief Under Section 80J. The assessee claimed Rs. 49,69,033 under Section 80J for the year on the basis of average capital. For reasons discussed in the preceding year, the assessee's claim is disallowed. The claim is confined to Rs. 21,85,515 as under: JUDGEMENT_909_ITR107_1977Html1.htm
(2.)It appears that in accordance with Rule 19A(2) of the Income-tax Rules, 1962, for the purpose of granting relief on the capital employed the aggregate amount of the value of the assets on the first day of the previous year has been taken to be the basis. Rule 19A(2) in so far as it directs that the capital employed on the first day of the computation period should be taken as the basis has been held by me to be beyond the scope of Section 80J of the Act and as such not within the competence of the rule-making authority. I have so held in Civil Rule No. 2887(W) of 1972 Century Enka Ltd. v. Income-tax Officer. For the reasons given in the said judgment I must hold in this case also that, so far for the computation of capital employed the aggregate amount of the assets on the first day of the computation period has been taken as the basis, it is invalid and the Income-tax Officer must recompute the same in the light of the observations made in the aforesaid judgment. In this case, however, counsel on behalf of the revenue sought to argue that in view of Section 296 of the Act the question whether the rule was beyond the purpose of the Act did not really fall for consideration. It was urged that Section 296 of the Act enjoined that the rules framed by the Central Government should be placed before Parliament, and the same might be modified by Parliament. This is one of the methods by which the legislative forum maintains supervision over the subordinate authority in respect of delegated legislation. But by this process the rules framed by the delegates do not become legislation of Parliament. In some statutes where it is intended by the legislature that the rules when framed should have the effect of the statute, the rule-making power in such statutes has specifically provided for such situations; for instance, in the Central Excises and Salt Act, 1944, before its amendment in 1973, Section 38 had provided that the rules when framed under the Act would become part of the statute. If such was the position in the instant case different considerations might have arisen and it might have required consideration as to whether such rules which by the provisions of the Act are directed to be part of the statute could be considered to be beyond the jurisdiction of the rule-making authority. Even where an Act provides that the subordinate legislation shall have the effect as if enacted in the Act, in England it has been held it did not prevent the same being questioned in court on the ground of inconsistency with the Act. See the decision in the case of Minister of Health v. The King [1931] AC 494 (HL). Such, however, is not the position in the instant case. Under Section 295 of the Income-tax Act, 1961, the Board is only authorised to make rules to carry out the purposes of the Act. As was observed by the Supreme Court in the case of Commissioner of Income-tax v. Taj Mahal Hotel, the rules framed under an authority could only be for carrying out the provisions of the Act and could not take away what was conferred by the Act or whittle down its effect. Inasmuch as I have held that the purpose of Section 80 J was being whittled down by Rule 19A(2), I have held that such rule was beyond the compentency and jurisdiction of the rule-making authority. In England in the case of Institute of Patent Agents v. Lockwood [1894] AC 347 (HL) it was held that where statute provided for laying of the rules before Parliament and Parliament had the authority to annul the rules, such a provision would make the rules beyond challenge on the ground of incompetency of the rule-making authority. But in India the position is different. Subordinate legislation cannot be said to be valid unless it is within the scope of the rule-making authority. See the decision of the Supreme Court in Kerala State Electricity Board v. Indian Aluminium Co. Ltd.
(3.)The second aspect, however, which was urged in this case was regarding the validity of Sub-clause (3) of Rule 19A, which is as follows :
" (3) From the aggregate of the amounts as ascertained under Sub-rule (2) shall be deducted the aggregate of the amounts, as on the first day of the computation period, of borrowed moneys and debts due by the assessee (including amounts due towards any liability in respect of tax) not being,-- (a) in the case of an assessee being a company, the amount of its debentures, if any, and (b) in the case of any assessee (including a company), any moneys borrowed from an approved source for the creation of a capital asset in India, if the agreement under which such moneys are borrowed provides for the repayment thereof during a period of not less than seven years. Explanation.--For the purpose of this sub-rule,-- (i) 'approved source' means the Government or the Industrial Finance Corporation of India or the Industrial Credit and Investment Corporation of India Ltd. or any banking institution or any person in a country outside India or any of the following financial institutions, namely:-- (a) a State Financial Corporation established under the State Financial Corporations Act, 1951 (LXIII of 1951); (b) the Industrial Development Bank of India, established under the Industrial Development Bank of India Act, 1964 (XIX of 1964); (c) the Madras Industrial and Investment Corporation of India Ltd.; (d) the Refinance Corporation of Industry Ltd.; (e) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (XXXI of 1956); (ii) " tax " means-- (a) income-tax or super-tax (including advance tax), due under any provision of the Act; (b) wealth-tax due under any provision of the Wealth-tax Act, 1957 (27 of 1957); (c) super profits tax due under any provision of the Super Profits Tax Act, 1963 (XIV of 1963); (d) surtax due under any provision of the Companies (Profits) Surtax Act, 1964 (VII of 1964); (iii) any liability in respect of tax shall be deemed to have become due-- (a) in the case of advance tax due under any provision of the Act, on the date on which the payment first became due; and (b) in the case of any other tax, on the first day of the period within which it is required to be paid."

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