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High Court Of Calcutta
D. K. Sen
NEW INDIA INVESTMENT CORPORATION LTD - Appellant
Versus
INCOME-TAX OFFICER - Respondent
Case Referred 4775 (W) Of 1976
Decided On : 05/19/1983
INCOME TAX - Total Income - Variation in Income or Loss Returned - Section 144b of the Income Tax Act, 1961 - Interpretation - Scope and Effect - Whether the expression "the income or loss returned" in Section 144b(1) of the Act refers to the total income or loss as shown in the return of the assessee after computation or to the amounts shown under different heads of income.
Fact of the Case:
The petitioner, a company, filed a "nil" return of income for the assessment year 1973-74. The Income Tax Officer (ITO) rejected the return and computed the income at about Rs. 50,000. The petitioner challenged the assessment on the ground that the ITO had failed to comply with the provisions of Section 144b of the Income Tax Act, 1961, as the variation in income exceeded Rs. 1 lakh and the ITO had not forwarded a draft order of assessment to the petitioner for objections.
Finding of the Court:
The court held that the expression "the income or loss returned" in Section 144b(1) of the Act refers to the total income or loss as shown in the return of the assessee after computation and not to the amounts shown under different heads of income. Therefore, Section 144b is attracted only if the variation in the total income or loss exceeds the limit prescribed by the Board.
Issues: 1. Whether the expression "the income or loss returned" in Section 144b(1) of the Income Tax Act, 1961, refers to the total income or loss as shown in the return of the assessee after computation or to the amounts shown under different heads of income? 2. Whether Section 144b is attracted if the variation in the total income or loss exceeds the limit prescribed by the Board?
Ratio Decidendi: 1. The court interpreted the expression "the income or loss returned" in Section 144b(1) of the Income Tax Act, 1961, to mean the total income or loss as shown in the return of the assessee after computation and not to the amounts shown under different heads of income. 2. The court held that Section 144b is attracted only if the variation in the total income or loss exceeds the limit prescribed by the Board.
Final Decision: The court dismissed the petitioner's application, holding that Section 144b of the Income Tax Act, 1961, was not attracted in the instant case as the variation in income was less than the prescribed limit of Rs. 1 lakh.
( 1 ) NEW India Investment Corporation Ltd. , the petitioner, was at the material time and still is an assessee within the meaning of the I. T. Act, 1961. The petitioner's income, it is alleged, consists of, inter alia, profits from dealing in shares, dividends, interest on loans and interest from Government securities. The petitioner maintains its accounts in accordance with the mercantile system.
( 2 ) IT is alleged that in 1970, the petitioner advanced money on interest to Bagla and Co. At the beginning of the accounting year 1972 the balance due from Bagla and Co. was Rs. 12. 10 lakhs. Bagla and Co. , it is alleged, had financial difficulties and on the 3rd August, 1972, an agreement was entered into by and between the petitioner and Bagla and Co. which provided that Bagla and Co. would repay the principal amount of the advance in instalments and that no interest would be charged by the petitioner in respect of the amounts outstanding in the past and also in the future. It is alleged that this agreement was entered into by the petitioner on the ground of commercial expediency. In the profit and loss account of the petitioner for the accounting year 1972 the amount of interest accrued up to the 31st December, 1971, being Rs. 32,050. 69, was written off as a bad debt.
( 3 ) THE petitioner alleges that it had also advanced money on interest to Central Cotton Mills Ltd. , which became a sick undertaking, closed down on the 1st of June, 1970, and remained closed till the 3rd March, 1972, when the management thereof was taken over by the Govt. of India and thereafter by the National Textile Corporation Ltd. From the balance-sheet of Central Cotton Mills Ltd. as on the 31st March, 1971, it appeared that there was little chance of recovery of the unsecured loan advanced by the petitioner. The Sick Textile Undertaking (Nationalisation) Ordinance, 1974, under which compensation was payable for taking over of the undertaking provided that such compensation would be utilised first for payment of secured loans and other prior claims and thereafter for payment of unsecured loans. By reason of the aforesaid and as advised, the petitioner did not provide for interest due on the said loan amounting to Rs. 1,16,100 in the accounting year 1972.
( 4 ) ON the 21st June, 1973, the petitioner filed its return of income for the assessment year 1973-74 showing a nil total income and claimed refund of Rs.
45,269, being the tax deducted at source. The audited profit and loss accounts, balance-sheet and directors' report for the accounting year 1972, were filed with the return. In the accounts, the said Rs. 32,050. 69 was shown as written off as an irrecoverable debt and deductible in the computation of the total income of the petitioner. It was disclosed that no provision for interest due on the loan to Central Cotton Mills Ltd. had been made. Other particulars of the petitioner's income were fully disclosed.
( 5 ) ON the 19th March, 1976, the ITO, Central Circle XXXII, Calcutta, the respondent No. 1 herein, made an order of assessment on the 17th March, 1976, under Section 143 (3) of the I. T. Act, 1961, of the income of the petitioner for the assessment year 1973-74.
( 6 ) IN the said order the respondent No. 1 determined the total income of the petitioner for the said assessment year at Rs. 50,230. In computing such income the respondent No. 1 disallowed the said claim of bad debt of Rs. 32,051 and also made an addition of Rs. 1,16,100 as interest accrued and receivable from Central Cotton Mills Ltd.
( 7 ) THE petitioner contends that the aforesaid additions and disallowances were illegal and arbitrary. The petitioner contends further that apart from the said additions and disallowances the respondent No. 1 did not allow relief to the petitioner under Section 80k of the I. T. Act, 1961, and made an allowance, less than what the petitioner was entitled to under Section 80m of the said Act.
( 8 ) THE petitioner also contends t
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