1. Carriage contractor — Alleged short delivery of bitumen — Addition to income under Section 69A, Income-Tax Act, 1961. (Para 3 , 6 , 7 )
Back
Next 
2023 Supreme(SC) 531
SUPREME COURT OF INDIA
K.M. Joseph, Hrishikesh Roy, JJ.
M/s. D.N. Singh – Appellant
Versus
Commissioner of Income Tax, Central, Patna and Another – Respondents
Civil Appeal Nos.3738-3739 of 2023 (Arising out of SLP(C) No(s).10617-10618 of 2023 @ Diary No(s).7803 of 2018)
Decided On : 16-05-2023
Important Points
Under Section 69A of the Income-Tax Act, 1961, a common carrier is a bailee, not an owner, even if goods are misappropriated. Additionally, 'other valuable article' denotes intrinsically high-priced items, excluding ordinary commodities like bitumen, which only possess value through bulk quantity.
Subject
Tax Law - Income Tax
Act Referred
CARRIAGE BY ROAD ACT: S.15
CARRIERS ACT: S.6, S.8
CONSTITUTION OF INDIA: Art.19(1)(f)
CONTRACT ACT: S.148, S.58, S.151, S.158
CUSTOMS ACT: S.135(b)(ii)
EVIDENCE ACT: S.110
INCOME TAX ACT: S.9, S.82, S.22, S.23, S.24, S.10, S.32, S.132, S.69(b), S.35(10), S.260(a), S.154
INCOME TAX RULES: R.112(a)
INDIAN PENAL CODE: S.405, S.406
SALE OF GOODS ACT: S.39, S.27
TRANSFER OF PROPERTY ACT: S.53, S.55, S.54
CARRIERS ACT: S.6, S.8
CONSTITUTION OF INDIA: Art.19(1)(f)
CONTRACT ACT: S.148, S.58, S.151, S.158
CUSTOMS ACT: S.135(b)(ii)
EVIDENCE ACT: S.110
INCOME TAX ACT: S.9, S.82, S.22, S.23, S.24, S.10, S.32, S.132, S.69(b), S.35(10), S.260(a), S.154
INCOME TAX RULES: R.112(a)
INDIAN PENAL CODE: S.405, S.406
SALE OF GOODS ACT: S.39, S.27
TRANSFER OF PROPERTY ACT: S.53, S.55, S.54
Headnote
(A) Income Tax Act, 1961 - Section 69A - Classification of ownership and valuation of goods - Court discusses the distinction between actual ownership and mere possession by a carrier, establishing that possession contrary to contract negates ownership. The term 'other valuable article' does not include bitumen, as it lacks intrinsic value akin to money, bullion, or jewellery. Appellant was found not to be the owner of the bitumen lifted but failed to deliver, hence not liable for income tax according to the provisions concerning income derived from ownership of valuable articles. (Paras 63-79)
(B) Ownership - Legal definition of ownership relevant in taxation context requires not only possession but also rights associated with ownership, clarifying that a mere carrier lacking residual rights cannot be deemed an owner under Section 69A. (Paras 27-32)
(C) Valuable Article - Definition extends only to high-value items; speed of delivery or quantity does not elevate low-cost goods like bitumen to the status of 'valuable articles' under tax law. (Paras 65-79)
Facts of the case:
Appellant was a carrier contracted to deliver bitumen but was accused of misappropriating it, resulting in tax implications for not reporting undeclared income from alleged short deliveries. Additionally, the High Court maintained the revenue's interpretation of ownership and applicability of Section 69A to the appellant's income calculations. (Paras 3-5)
Findings of Court:
Court held that the appellant's failure to deliver the contracted quantity negated any claim of ownership. The value of bitumen, interpreted as a 'valuable article', did not meet the necessary criteria to justify tax implication under Section 69A. (Paras 20, 62, 69)
Issues: The main questions were whether the appellant could be deemed the 'owner' of bitumen lifted for delivery and whether bitumen qualified as 'other valuable article' under Section 69A. (Paras 7-10)
Ratio Decidendi: The rationale emphasized the necessity of ownership for tax liability under Section 69A, finding that due to lack of ownership rights, merely being a carrier did not satisfy the ownership criteria necessary for tax obligations. Furthermore, 'other valuable articles' must connote high-value items, distinctly excluding common, low-cost goods like bitumen. (Paras 34-37, 60-62)
Result: Appeals allowed, High Court's order set aside, appeal against tax assessment dismissed.
(B) Ownership - Legal definition of ownership relevant in taxation context requires not only possession but also rights associated with ownership, clarifying that a mere carrier lacking residual rights cannot be deemed an owner under Section 69A. (Paras 27-32)
(C) Valuable Article - Definition extends only to high-value items; speed of delivery or quantity does not elevate low-cost goods like bitumen to the status of 'valuable articles' under tax law. (Paras 65-79)
Facts of the case:
Appellant was a carrier contracted to deliver bitumen but was accused of misappropriating it, resulting in tax implications for not reporting undeclared income from alleged short deliveries. Additionally, the High Court maintained the revenue's interpretation of ownership and applicability of Section 69A to the appellant's income calculations. (Paras 3-5)
Findings of Court:
Court held that the appellant's failure to deliver the contracted quantity negated any claim of ownership. The value of bitumen, interpreted as a 'valuable article', did not meet the necessary criteria to justify tax implication under Section 69A. (Paras 20, 62, 69)
Issues: The main questions were whether the appellant could be deemed the 'owner' of bitumen lifted for delivery and whether bitumen qualified as 'other valuable article' under Section 69A. (Paras 7-10)
Ratio Decidendi: The rationale emphasized the necessity of ownership for tax liability under Section 69A, finding that due to lack of ownership rights, merely being a carrier did not satisfy the ownership criteria necessary for tax obligations. Furthermore, 'other valuable articles' must connote high-value items, distinctly excluding common, low-cost goods like bitumen. (Paras 34-37, 60-62)
Result: Appeals allowed, High Court's order set aside, appeal against tax assessment dismissed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. Ramesh P. Bhatt, Sr. Adv. Mr. Diggaj Pathak, AOR Mrs. Shweta Sharma, Adv. Mr. Rohit Priya Ranjan, Adv. Ms. Prachi Kohli, Adv.
For the Respondent(s): Mr. N Venkatraman, A.S.G. Mr. Raj Bahadur Yadav, AOR Mr. Udai Khanna, Adv. Mr. Saurabh Mishra, Adv. Mrs. Diksha Rai, Adv. Mr. Shubranshu Padhi, Adv.
For the Appellant(s) : Mr. Ramesh P. Bhatt, Sr. Adv. Mr. Diggaj Pathak, AOR Mrs. Shweta Sharma, Adv. Mr. Rohit Priya Ranjan, Adv. Ms. Prachi Kohli, Adv.
For the Respondent(s): Mr. N Venkatraman, A.S.G. Mr. Raj Bahadur Yadav, AOR Mr. Udai Khanna, Adv. Mr. Saurabh Mishra, Adv. Mrs. Diksha Rai, Adv. Mr. Shubranshu Padhi, Adv.
Table of Contents
2. Whether a carrier can be treated as owner under Section 69A — Whether bitumen constitutes other valuable article under the same section. (Para 19 )
3. Carrier as bailee lacks ownership rights — Bitumen is a common commodity, not an intrinsically high-priced valuable article under Section 69A. (Para 39 , 60 , 61 , 77 , 79 )
4. Section 69A requires ownership and intrinsically high-priced articles; common carriers are bailees, and common commodities are not valuable articles. (Para 61 , 79 )
5. Appeals allowed — Impugned judgment set aside — Addition to income deleted. (Para 79 )
6. Can a common carrier be considered the owner of goods for the purpose of Section 69A of the Income-Tax Act, 1961?
No. A common carrier is a bailee entrusted with possession for delivery. Even in cases of short delivery or misappropriation, the carrier does not acquire legal ownership or the power of alienation, which are essential prerequisites for the application of Section 69A. (Para 39 , 60 , 61 )
7. Does the term other valuable article under Section 69A include common commodities like bitumen?
No. Valuable articles must be intrinsically costly or high-priced items, similar to bullion or jewellery. Common commodities, even if they possess a high total value due to bulk quantity, do not qualify as valuable articles under this section. (Para 77 , 79 )
8. How are the principles of ejusdem generis and noscitur a sociis applied to interpret other valuable article in Section 69A?
These principles restrict the meaning of other valuable article to the genus of money, bullion, and jewellery. Consequently, the phrase covers only high-value, marketable items and excludes ordinary articles that are not intrinsically precious. (Para 73 , 77 )
JUDGMENT
K.M. Joseph, J.
Index
| Index | |
| A. THE FACTS | |
| B. SUBMISSIONS OF PARTIES | |
| C. ANALYSIS | |
| D. A CARRIER, A BAILEE? | |
| E. THE CARRIAGE BY ROAD ACT , 2007 | |
| F. CRIMINAL BREACH OF TRUST | |
| G. THE SALE OF GOODS ACT , 1930 | |
| H. IS A THIEF AN OWNER? OWNERSHIP BEING ILLEGAL | |
| I. THE CIRCULAR DATED 07.07.1964 | |
| J. THE DEPARTMENTAL INSTRUCTIONS DATED 11.05.1994 | |
| K. R. B. JODHA MAL DISTINGUISHED BY HIGH COURT | |
| L. “OTHER VALUABLE ARTICLE” | |
| M. PRINCIPLE OF EJUSDEM GENERIS; NOSCITUR A SOCIIS | |
| N. WHETHER BITUMEN IS ‘OTHER VALUABLE ARTICLE’ | |
1. Delay condoned.
2. Leave granted.
A. THE FACTS
3. The appellant-assessee carried on business as carriage contractor for bitumen loaded from oil companies namely HPCL, IOCL and BPCL from Haldia. The goods were to be delivered to various divisions of the Road Construction Department of the Government of Bihar. According to the appellant, it has been in the business for roughly three decades.
4. By the impugned Order dated 05.03.2009 in M.A. 214 of 2002, the High Court has dismissed the Appeal filed by the appellant under Section 260A of the Income-Tax Act, 1961 (hereinafter referred to as, ‘the Act’, for short). The assessment year involved in the impugned Order is 1996-1997. Appellant filed a Review Petition, i.e., Review Petition No. 102 of 2009. By Order dated 18.12.2017, the Review Petition came to be dismissed. It is, accordingly, that the present Special Leave Petition has been filed, challenging both the Orders.
5. A scam was reported in the media. The scam consisted of transporters of bitumen, lifted from oil companies, misappropriating the bitumen and not delivering the quantity lifted to the various Divisions of the Road Construction Department of the Government of Bihar. The scam had its repercussion in the assessments under the Act.
6. It all began, as far as the appellant is concerned, in the assessment year 1995-1996. By an Assessment Order dated 27.03.1998 being passed, the Assessing Officer, taking note of the scam, issued Show-Cause Notice dated 23.01.1998, alleging that the appellant had lifted 14507.81 metric tonnes of bitumen but delivered only 10064.1 metric tonnes. This meant that the appellant had not delivered 4443.1 metric tonnes. The appellant produced photocopies of challans to establish that the bitumen had been delivered. Summons was issued by the Assessing Officer to the Executive Engineers and Junior Engineers. It is the case of the appellant that all Junior Engineers, except Shri Madan Prasad and Ahia Ansari accepted the factum of delivery of bitumen. The Assessing Officer, in fact, noticed that only those Junior Engineers accepted receipt of bitumen, where the Engineer In-charge or the Executive Engineer accepted the delivery. Shri Madan Prasad denied that the signature alleged to be his, was not his signature. The Assessing Officer found that the Junior Engineers denied putting stamp and took the position that if there was stamp, then, it must indicate the name of the section. The Assessing Officer added a sum of Rs.21985700/- being the figure arrived at, by finding that 4443.80 metric tonnes of bitumen had not been delivered. This was done by invoking Section 6 9A of the Act.
7. Chronologically, this Court notices that for the assessment year 1996-1997, the Assessing Officer passed Order dated 31.03.1999. The appellant, in its Return, disclosed a net profit of Rs.676133/-. On scrutiny, the Assessing Officer, again, noticing the scam and finding that, while 10300.77 metric tonnes had been lifted by the appellant, only 8206.25 metric tonnes had been delivered. Accordingly, it was found that 2094.52 metric tonnes had not been delivered. On the said basis and again invoking Section 69A of the Act, a sum of Rs.10471720.30 was added as income of the appellant.
8. As against the Order dated 27.03.1998 for the Assessment Year 1995-1996, in Appeal, by Order dated 15.09.2000, the Commissioner Appeals found that all Junior Engin
