1. Challenge to communications from tax board regarding commencement of manufacture or production under Section 80J, Income-tax Act, 1961. (Para 1 )
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1971 Supreme(SC) 518
SUPREME COURT OF INDIA
A.N.Grover : H.R.Khanna : K.S.Hegde
J.K.Synthetics Limited
Versus
Central Board Of Direct Taxes
Case No. : 443 of 1971
Date of Decision : 9/24/71
Communications from the tax board that are mere replies to an assessee's letters are not statutory directions and cannot bind taxing authorities, particularly regarding questions of fact or the exercise of judicial powers.
Headnote:(A) Income-tax Act, 1961 - Section 80J and Section 119 - Communications from the Board - Nature and binding effect - Replies to communications sent by an assessee are not directions under Section 119 - Board is not competent to give directions regarding the exercise of judicial power by its subordinates - Determination of the year in which an undertaking began to manufacture or produce articles is a question of fact to be decided by the concerned taxing authorities on its own merits, uninfluenced by extraneous considerations. (Para 1)
Facts of the case:
A writ petition was filed challenging certain communications sent by the tax board regarding the date an undertaking began to manufacture or produce articles. The writ petition was dismissed by the High Court. Subsequently, an appeal was filed, but the appellants sought permission to withdraw the writ petition.
Findings of Court:
The communications in question were merely replies to letters and were not made in exercise of any statutory powers. They cannot be considered directions under Section 119 of the Income-tax Act, 1961, as they pertain to the exercise of judicial powers by taxing authorities.
Issues: Whether the communications sent by the board were binding directions under the law and whether they could influence the taxing authorities' determination of the date of commencement of production.
Ratio Decidendi: The board cannot bind taxing authorities on questions of fact or the exercise of judicial power; such determinations must be made by the authorities on the merits of the case, independent of the board's opinions or observations of the court.
Result: Appeal dismissed as being withdrawn.
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Table of Contents
2. Communications from the tax board are mere replies, not directions under Section 119, Income-tax Act, 1961, and cannot bind authorities on questions of fact. (Para 1 )
3. The tax board is not competent to issue directions regarding the exercise of judicial powers by subordinates, especially concerning questions of fact. (Para 1 )
4. Prayer to withdraw the writ petition allowed and the appeal dismissed as withdrawn. (Para 3 )
5. Can communications from the Central Board of Direct Taxes be considered directions under Section 119 of the Income-tax Act, 1961?
Not if they are merely replies to communications sent by taxpayers and were not made in exercise of powers conferred on the Board by law. (Para 1 )
6. Is the Central Board of Direct Taxes competent to give directions regarding the exercise of judicial powers by its subordinates?
No, the Board is not competent to give directions regarding the exercise of any judicial power by its subordinates. (Para 1 )
7. Are opinions expressed by the tax board in replies to taxpayers binding on the taxing authorities?
No, such communications are mere replies and cannot bind taxing authorities, who must decide questions of fact on their own merits, uninfluenced by extraneous considerations. (Para 1 )
K.S.HEGDE, J.
(1) THE writ petition filed by the appellants was summarily dismissed by a division bench of the Delhi High court. While dismissing the writ petition the learned Judges gave a speaking order. Against that decision this appeal has been brought by certificate. After some discussion the Counsel for the appellants sought the permission of the court to withdraw the writ petition in the peculiar circumstances of the case. This writ petition is primarily directed against certain communications sent by the Central Board of Direct Taxes dated 18/03/1970 and 25/07/1970 respectively to the appellants. We were informed by the Counsel for both the parties that the decisions conveyed in those communications were not made in exercise of any of the powers conferred on the Board by any law. They were merely replies to the communications sent by the appellants. They cannot be even considered as directions under S. 119 of the Income-tax Act, 1961, as they pertain to decisions to be taken by concerned taxing authorities. The Board is not competent to give directions regarding the exercise of any judicial power by its subordinates. The opinions expressed in those communications pertain to the exercise of judicial powers by the taxing authorities, as it is for those authorities to determine as to the year in which the undertaking began to "manufacture or to produce articles within the meaning of S. 80J of the Income-tax Act, 1961. The communications sent by the Board and impugned in the writ petition are replies sent by the Board to the letters written by the appellants. They cannot bind the taxing authorities who have to decide the question .in issue on its own merits, uninfluenced by extraneous considerations. The question in issue is a question of fact.
(2) WE are sure that the concerned authorities will not be influenced either by the opinion expressed by the Board as to when the undertaking began to "manufacture or to produce articles" or by the observations of the High court while dismissing the writ petition in deciding the question of the liability to pay tax or the question of levying penalty either on the company or its shareholder.
(3) THE appellants-petitioners prayer to withdraw the writ petition from which this appeal arose is allowed and the appeal is dismissed as being withdrawn, for the reasons mentioned earlier. No costs.
