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2014 Supreme(Gau) 995
GAUHATI HIGH COURT
K. Sreedhar Rao, A.K. Goswami, JJ.
Mcleod Russel India LTD. - Appellant
Versus
State of Assam & Ors. - Respondent
WP(C) Nos. 6643, 4343, 4344, 4345, 5326, 5327, 5328, 5329, 5848, 5849, 5850, 5852, 6729, 5846 of 2010, 790, 901, 905, 906, 907, 908, 909, 383,386, 395, 396, 2677,2667, 2671, 2675, 2669, 2670, 2572, 2574, 2585, 2589, 2556, 2666, 2557, 2588, 2672, 249, 252, 254, 349, 3935, 2646, 3826, 3823, 2637, 3842, 2640, 2648, 690, 736, 737, 745, 746, 791, 792, 2586 of 2011
Decided On : 23-09-2014
For the Respondents: Mr. D. Saikia, Mr. R. Dubey.
Headnote:
Constitution of India, 1950 – Article 366 and 246(3) - Income-tax Act - Section 80-HHC , 2(1A) , 2(24) , 2(45) and 5 - Agricultural Income-tax Act - Section 2(a) and 8(2) - Agricultural Income-tax Rules - Rule 5 - Kerala Income-tax Act - Section 5 - Income-tax Rule, 1962 - Rule 8 - Tea companies - Sale of tea grown and manufactured by the seller - Deduction of profit from export - Assessment is in progress and in some cases, reassessment is complete - In some cases revisional authority exercising suo motu revisional powers held that assessments made by assessing authority under Agricultural Income-tax prior to decision in Williamson Financial Services case (supra) is erroneous and prejudicial to interest of Revenue thus set aside assessments and directed assessing authority to reassess - Assessment have been made pursuant to law declared by this court in Bazaloni Group Ltd. v. Commissioner of Income-tax permitting deduction of profit from exports from gross income and such assessments having become final and concluded whether revisional authority or assessing authority under State Act can reopen assessments based on judgment of Supreme Court - Held, Supreme Court also held that if there is any error in assessing net income on part of the Income-tax Authorities remedy for State is to file appeal or invoke re visional jurisdiction under Income-tax Act to get such erroneous assessments corrected - However, assessing authority under State cannot independently sit in appeal over assessment made by authorities under Income-tax Act - Remedy of appeal or revision is only solution available to State in such a circumstance - It is needless to say that when assessments are made pursuant to decision of this court permitting deduction of profit from exports from gross and when that issue has been finally and conclusively decided by this court and when no appeal has been filed against such decision - It would be binding on State and income-tax authorities - On ground of change in law they cannot reopen assessments made earlier to decision of Supreme Court in Williamson Financial Services case - If it is prejudicial to interest of Revenue, it may not debar State to pursue remedy as suggested by Supreme Court in Williamson Financial Services case (supra) by filing appeal or revision and in such appeal or revision under Income-tax Act assessees who have derived benefit of decision of this court where deduction pf profit from exports is effected from gross - Writ petitions are allowed.
1. In the above writ petitions by and large the facts and the issues are similar. The assessees in these writ petitions are the tea companies. The provisions of article 366 and rule 8 of the Income-tax Rule, 1962 provide that the income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business and 40% of such income shall be liable to be income-tax. The Income-tax Act, 1961 also provides for deductions from the gross income to arrive at the net income. In the said net income, so assessed, income-tax is to be leviable on the 40% and the rest of 60% of such income would be liable to Agricultural Income leviable by the State.
2. The provisions of section 80-HHC of the Income-tax Act permit the profit from the exports exempt from income-tax. In the assessment practice, the profit from export was being deducted from the gross income to arrive at the net income. An issue arose whether the deduction of profit from export should be deducted from the gross income or from the net income of 40% assessed under the Income-tax Act to be taxable.
3. The Supreme Court in Commissioner of Income-tax v. Williamson Financial Services and Others, (2008) 2 SCC 202, in paragraphs 36, 37/38, 66 and 67 has made the following observations:
"36. The computation of income from tea has to be in accordance with the relevant provisions of the enactments relating to the Indian income-tax and the deductions towards various expenses incurred for earning the income shall be liable under the said enactments relating to Indian income-tax. Thus, where computation of income from cultivation, manufacture and sale of tea is-made in accordance with the provisions of the Income-tax Act, the Agricultural Income-tax Officer would have no option but to accept the computation by AO under the 1961 Act and treat 40% of such income, as business income and the balance 60%, as agricultural income.
37. To the above extent there is no dispute. The question before us is whether computation, 'of section 80-HHC deduction could be said to be part of computation provision under the 1961 Act, particularly/provisions dealing with computation of income under the head "business income" and particularly when the said deduction has to be made from "gross total" income" under Chapter VI-A.
38. The term "agricultural income" has been defined under section 2(1A) of the 1961 Act. It is exempted from tax under the 1961 Act because Parliament has no power under the Constitution to levy tax on agricultural income. The word "income" has been defined in section 2(24) of the said Act to include profits and gains. The term "total income" is defined in section 2(45) of the said Act. The definition of the term "total income" involves two ingredients - firstly, that the income must consist of the total amount of income referred to in section 5 and secondly, it must be computed in the manner laid down in the Income-tax Act. Therefore, the manner of computation laid down by the Income-tax Act forms an integral part of the definition "total income". The correct method of approach is to treat nothing as being charged to tax until by the process of computation laid down by the said Act, the status of income, profits and gains, emerges. This principle is very important for deciding the present case. We repeat that computation laid down by the said Act forms an integral part of the definition of "total income". Section 4 charges the total income of an assessee to income-tax. Section 5 of the Income-tax Act defines "total income".
66. In short, deductions under Chapter VI-A are deductions not from a particular head of income but from gross total income. Therefore, section 80-1II 1C is not part of the computation of income under the head "Business".
67. For the afore-stated reasons, we hold that section 80-HHC deduction of the 1961 Act is required to be allowed after apportionment of income under Rule 8(1) of the 1962 R
