BANERJEE, J. - (1.) THE assessee holds mining concessions for iron and manganese ores, in the District of Singhbhum, in Bihar. THE ore extracted by the assessee is utilised solely for the manufacture of iron and steel and steel products at its own factories. No portion of the ore mined by the assessee is sold for profit to outsiders.
(2.) FOR the years 1958-59 and 1959-60 (corresponding to the accounting years, ended, respectively, on March 31, 1958, and March 31, 1959), the Cess Deputy Collector of Singhbhum computed the annual profits from the mines of the assessee, on estimation basis, at Re. 1 per ton of iron ore and Rs. 1-4-0 per ton of manganese ore and determined the cesses payable by the assessee under the Cess Act (Bengal Act IX of 1880, as amended in Bihar), at Rs. 59,222 and Rs. 1,62,540, respectively. The imposition of this cess was objected to by the assessee, inter alia, on the ground that it was not liable at all to the levy of cesses, because it did not sell any ore and could not, as such, be said to have made any profit from the mines, within the meaning of s. 6 of the Cess Act, 1880. The objection did not appeal to the Cess Deputy Collector. The assessee appealed against the order of the Cess Deputy Collector, levying cesses, before the Dy. CIT. The appeal failed except to the extent that the Dy. CIT remanded the matter to the Cess Deputy Collector for a proper estimation of the annual profit, which had not been correctly made. The order of the Dy. CIT was affirmed in revision by the CIT at Ranchi (Chhota Nagpur Division). There was a further revision petition made before the Board of Revenue, which shared the same fate. Therefore, the assessee moved the High Court at Patna against the order of the Board of Revenue, under Art. 226 of the Constitution, praying for the quashing of the order levying cess. The High Court rejected the writ petition. The matter was ultimately taken before the Supreme Court by the assessee. At the time the reference to this Court was made, the matter was pending before the Supreme Court. Now, of course, the Supreme Court has pronounced its judgment on the dispute, along with similar disputes involved in two other matters, in one of which Tata Iron and Steel Co. Ltd. was the appellant and in the other of which the Indian Copper Corporation Ltd. was the appellant. The judgment of the Supreme Court is reported as Tata Iron and Steel Co. Ltd. vs. State of Bihar (1963) 48 ITR 123 (SC). The Supreme Court was pleased to dismiss the appeal. We shall refer to some of the observations by the Supreme Court in the aforesaid appeal hereinafter. The challenge to the imposition and levy of cess notwithstanding, the assessee paid the cesses and thereafter claimed the two sums of of Rs. 59,222 and Rs. 1,62,540 as deductions in the computation of its income, respectively, for the asst. yrs. 1958- 59 and 1959-60, under s. 10(2) (xv) of the Indian IT Act. The ITO disallowed the claim. The assessee preferred two separate appeals against the assessment orders for the two years before the AAC, who dismissed the appeals. The assessee thereafter preferred two second appeals before the Tribunal, which were heard together and disposed of by one judgment. The question before the Tribunal was whether sub-s. (4) of s. 10 operated as a bar against cesses being allowed as business expenditure under s. 10(2) (xv). It was contended on behalf of the assessee that sub-s. (4) of s. 10 was not attracted because there was no profit made by the assessee by mining operations, the mines being exploited only for the purpose of extraction of raw materials for manufacture of goods in the own factories of the assessee. This contention was sought to be repelled by the Revenue with the argument that cess was payable on the "annual net profits" and being a liability fixed on profits cess fell within the mischief of sub-s. (4) of s. 10. The two Members of the Tribunal differed. The Judicial Member analysed sub-s. (4) of s. 10 and expressed the opinion that in order to fall within the mischief of sub-s. (4) of s. 10 : (a) profits or gains of any business must arise or accrue and the cess levied thereon, or (b) cess must be assessed at a proportion of or otherwise on the basis of such profits or gains. According to the Judicial Member, it was common ground that the assessee company did not sell or trade or deal in ores; the assessee only raised the ores from its mines and transmitted the same entirely to its manufactories for manufacture of finished goods. In the opinion of the Judicial Member, to hold that the company made a profit by raising and transmitting the ores from its mines to its factories would be a negation of the well- established principal that no one can make a profit out of oneself. Further, according to the Judicial Member, the words "profits and gains of business" in s. 10(4), must be construed as having the same sense in which those identical words have been used in s. 10(1), that is to say, in the sense of such profits and gains of business as are assessable to tax. The Judicial Member was of the opinion that the iron and manganese ores, raised by the assessee, had never been assessed to income- tax. That fact that the cess authorities cared to levy cess on the annual net profits from mines and quarries, under s. 6 of the Cess Act, was, in the opinion of the Judicial Member, inconsequential in the context of s. 10 of the Indian IT Act, which must be interpreted on its own terms. On the aforesaid line of reasoning, the Judicial Member held that the sums of Rs. 59,222 and Rs. 1,62,540 had not in fact been levied on the profits or gains of any business within the limited sense in which those words were used in sub-s. (4) of s. 10.
(3.) THE Accountant Member took a different view. He was of the opinion that under s. 6 of the Cess Act, the liability for payments of cess was directly related to the net profits of the business. THErefore, sub-s. (4) of s. 10 of the Indian IT Act was bar to the claim made by the assessee. We set out below an extract from the order of the Accountant Member : "THEre is no doubt that the liability to assessee directly related to the net profits as is clear from the plain reading of s. 6. .... THEse net profits are an integral part of the business profits of the assessee and as such the cess comes within the mischief of s. 10(4). It is not as if reference to net profits is only for the purposes of computation; it is, in fact, the main incident from which the liability to cess arises..... In the present case .... both as a major source of incidence and main basis for computation, the profits come into the picture. THEse profits from an integral part of the business profits of the assessee-company. Accordingly, s. 10(4) is clearly attracted and deduction of the cess cannot be allowed." Consequent on the difference of opinion between the Judicial Member and the Accountant Member, the following question was referred to the President of the Tribunal, under s. 5A (7) of the Indian IT Act, for necessary order : "Whether, on the facts of the present case, the amounts of Rs. 59,222 and Rs. 1,62,540 paid by the appellant as cess to the Government of Bihar are permissible allowance in the computation of the income of the assessee from business for the respective asst. yr. 1958-59 and 1959-60 ?" ;