Grasim Industries Ltd. Vs. Assistant Commissioner of Income-tax and ors. - Court Judgment

Excerpt:
- code of criminal procedure, 1973 [c.a. no. 2/1974]. section 41: [ swatanter kumar, cj, smt ranjana desai & d.b. bhosale, jj] arrest of accused - held, a police officer or a person empowered to arrest may arrest a person without intervention of the court subject to the limitations specified under the provisions of the code. the provisions of section 41 of the code provides for arrest by a police officer without an order from a magistrate and without a warrant. a distinct and different power under section 44 of the code empowers the magistrate to arrest or order any person to arrest the offender. under section 44 of the code, that power is vested in the court of the magistrate when an offence is committed in his presence. if the legislature has taken care of providing such specific power under section 44 of the code, then there could be no reason for such a power not to be specified under the provisions of chapter xii of the code. in terms of section 41, a police officer may arrest a person without a warrant or order from the magistrate for any or all of the conditions specified in that provision. language of this provision clearly suggested that the police officer can arrest a person without an order from the magistrate. thus, there appears to be no reason why on the strength of section 156(3) of the code, any restriction should be read into the power specifically granted by the legislature to the police officer. of course, freedom of investigation is the essence of these provisions but in order to suppress the mischief it is sufficiently indicated under different provisions of the code that the arresting officer should exercise his power or discretion judiciously and should be free of motive. some kind of inbuilt safeguard is available to the accused in the cases where the magistrate directs investigation under section 156 (3) of the code by taking recourse to the provisions of section 438 of the code by approaching the court of session or the high court for such relief. thus, during the course of investigation of a criminal case, an accused is not remediless and that would further buttress the above view. [jagannath singh v dr. ajay upadyay & anr 2006 cri lj 4274; 2006 (5) air bom r held per incuriam]. - he contended that while section 80aa was deemed to have been inserted with effect from april 1, 1968, section 80ab came to be inserted only with effect from april 1, 1981. he, therefore, contended that whereas section 80aa was made retrospectively, parliament clearly intended to make section 80ab prospective. 2) bill of 1980, was introduced on june 18, 1980. he, therefore, contended that parliament clearly intended section 80ab to be prospective whereas it intended section 80aa to be retrospective. he contended that after april 1, 1981, parliament has clearly laid down that the deduction under section 80ab has to be computed after making all deductions under sections 30 to 43a of the act. 2) act of 1980, parliament had clearly intended to say that what is included in the gross total income is not only a specified category of income, but also a particular quantum of income belonging to that specified category. therefore, section 80ab is clearly declaratory in nature like section 80aa and it merely declares what the correct position has always been. in his concurring judgment has observed that section 80aa was clearly declaratory in nature and it merely declared what the correct position has always been and, therefore, there was no question of imposition of any fresh tax with retrospective effect by virtue of the said section .it may be pointed out that the supreme court has reversed its own judgment in the case of cloth traders (p.1. on april 3, 2000, atter hearing arguments at length, the following order is passed :'for reasons to follow subsequently, appeal stands rejected.'2. accordingly, we now propose to give reasons.3. the short point which arises for consideration in this appeal under section 260a in respect of the accounting year relevant to the assessment year 1974-75 is as follows :'whether prior to the introduction of section 80ab by the finance (no. 2) act of 1980 (with effect from april 1, 1981), the assessee was entitled to deduction under section 80hh with reference to the assessee's income from the profits and gains derived from new industrial undertaking without making all the deductions under sections 30 to 43a of the act including the development rebate under section 33 of the act ?'4. the assessee is a company. in its assessment for the assessment year 1974-75, it claimed relief under section 80ab of the income-tax act, 1961 ('the act'), in respect of the profit of a new industrial undertaking in backward areas. the assessee claimed that it had established a unit in a backward area in district dharwar, karnataka, and it had started production in may, 1972. that it had fulfilled all the conditions for claiming special deduction under section 80ab. before the assessing officer, the assessee claimed that it was entitled to deduction under section 80ab on the profits and gains of the said undertaking without deduction of development rebate. this argument was rejected by the assessing officer, whose order was confirmed by the appellate authority and the tribunal. hence, this appeal.5. mr. mistry, learned counsel appearing on behalf of the assessee, contended that in this appeal we are concerned with the accounting year relevant to the assessment year 1974-75. he contended that by the finance (no. 2) act of 1980, parliament introduced two sections in chapter vi-a, viz., section 80aa and section 80ab. he contended that while section 80aa was deemed to have been inserted with effect from april 1, 1968, section 80ab came to be inserted only with effect from april 1, 1981. he, therefore, contended that whereas section 80aa was made retrospectively, parliament clearly intended to make section 80ab prospective. he pointed out that the provision relating to concessional tax treatment of intercorporate dividends was there on the statute book since 1953 and, prior to the finance (no. 2) act of 1980, full deduction was granted in respect of income by way of dividends received by a domestic company from an indian company formed after february 28, 1975, and engaged exclusively in the manufacture or production of specified articles. in computing the total income of the assessee, the deduction specified in section 80m was allowed from the gross total income. however, the departmental view all along was to grant deduction at the specified percentage on the net amount of such dividends and not the gross amount thereof. in the case of cloth traders (p.) ltd. v. addl cit : [1979]118itr243(sc) , the supreme court held that the deduction admissible for such dividends shall be calculatedwith reference to the gross amount of dividends and not with reference to the dividend income as computed in accordance with the provisions of the act, i.e., after making the deductions provided under the act. in order to get over the difficulty caused by the aforestated ruling of the supreme court, the said finance (no. 2) act of 1980 inserted a new section 80aa to provide that the deduction under section 80m in respect of inter corporate dividend will be calculated with reference to the dividend income as computed in accordance with the provisions of the act (before making any deduction under chapter vi-a) and not with reference to the gross amount of such dividends. however, in order to preserve the sanctity of the ruling of the supreme court in the case of cloth traders (p.) ltd.'s case : [1979]118itr243(sc) , the finance act made a saving provision in section 44 to provide that the new section 80aa will not apply to the assessment of an assessee for a particular assessment year where the supreme court has on appeal/ reference held before june 18, 1980, that the deduction should be allowed with reference to the full amount of dividends. hence, mr. mistry contended that in the case of intercorporate dividends, section 80aa stood inserted specifically with retrospective effect which was not the case in , respect of section 80ab which was expressly made prospective, i.e., with effect from april 1, 1981. mr. mistry contended that both section 80aa and section 80ab constituted a part of the finance (no. 2) act of 1980. he pointed out that the finance (no. 2) bill of 1980, was introduced on june 18, 1980. he, therefore, contended that parliament clearly intended section 80ab to be prospective whereas it intended section 80aa to be retrospective. in this connection, mr. mistry has relied upon circular no. 281 (see [1981] 131 itr 4), dated september 22, 1980, indicating reasons for giving retrospective effect to section 80aa and prospective effect to section 80ab. mr. mistry invited our attention to para. 15.7 of the said circular in which it has been stated that in view of the observations of the supreme court in cloth traders (p.) ltd.'s case : [1979]118itr243(sc) , regarding provisions of other sections contained in chapter vi-a, the finance act inserted section 80ab to clarify that while calculating the deductions in sections 80ab to 80tt, the net income as computed in accordance with the provisions of the act (before making' any deduction under chapter vi-a) shall . alone be regarded as the income which is received by the assessee and which is included in his total gross income and, accordingly, the deductions in section 80ab to section 44 will be calculated with reference to the net income as computed in accordance with the provisions of the act (before making any deduction under chapter vi-a) and not with reference to the gross amount of such income. in the said paragraph it has also been stated that the new section 80ab will take effect from april 1, 1981. hence, mr. mistry contended that the said circular makes the position very clear that section 80ab will apply prospectively and not retrospectively. hefurther contended that in view of the judgment of the supreme court in the case of uco bank v. cit : [1999]237itr889(sc) , the department was bound to give effect to the above circular. mr. mistry, accordingly, contended that in respect of the period prior, to april 1, 1981, the assessee was entitled to deduction under section 80 hh with reference to the assessee's income from the profits and gains derived from new industrial undertaking without making deduction under sections 30 to 43a. he contended that after april 1, 1981, parliament has clearly laid down that the deduction under section 80ab has to be computed after making all deductions under sections 30 to 43a of the act. he, however, pointed out that before april 1, 1981, the law was very clear and is supported by various judgments of various high courts which laid down that deduction under section 80ab has to be computed without such deduction under sections 30 to 43a of the act. in this connection, mr. mistry has relied upon the judgment of the orissa high court in the case of cit v. tarun udyoy : [1991]191itr688(orissa) and cit v. patiala flour mills co. p. ltd. . on the other hand, mr. r. v. desai, learned senior counsel appearing for the department, contended that the controversy raised in this appeal is no more res integra. he referred to the judgment of the division bench of this court in the case of cit v. albright morarji and pandit ltd. : [1999]236itr914(bom) , in which it has been laid down that profits and gains derived from an industrial undertaking referred to in section 80ab had to be computed in accordance with the provisions contained in sections 30 to 43a of the act. that was a case of investment allowance. in rejoinder, mr. mistry, however, contended that the judgment of this court in the case of albright morarji : [1999]236itr914(bom) , was delivered ex parte. he contended that in that judgment this court has not considered the contentions now raised by the assessee, viz., that section 80ab which was introduced by the finance (no. 2) act of 1980 was prospective and not retrospective. he further contended that the circular referred to above has also not been pointed out to this court in the case of albright morarji : [1999]236itr914(bom) . he, therefore, contended that the matter requires consideration in the light of the above circular indicating that section 80ab was prospective.6. we do not find any merit in the submissions. section 80ab begins with the words 'where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking'. the expression 'gross total income' is defined under section 80b(5) to mean the total income computed in accordance with the provisions of the act, before making any deduction under chapter vi-a. therefore, what is included in the gross total income in such a case is not only the category of such income included in the gross total income but also the quantum of the income so included. this is the basic test which needs to be applied to answer the question raised by the assessee in this appeal. in the case ofdistributors (baroda) p. ltd. v. union of india : [1985]155itr120(sc) , the supreme court has categorically laid down that the expression 'gross total income' in section 80b(5) would mean the total income computed in accordance with the provisions of the act before making any deductions under chapter vi-a and what is included in the gross total income is a particular quantum of income belonging to the specified category. therefore, the words 'such income by way of profits and gains derived from an industrial undertaking referred to in section 80ab', must be referable not only to the category of income but also to the quantum of income included in the gross total income and, therefore, such income belonging to a specified category and forming part of the gross total income is required to be computed in accordance with the provisions of the act. therefore, on a bare reading of the provisions of section 80ab along with section 80b(5), it is clear that even prior to the finance (no. 2) act of 1980, parliament had clearly intended to say that what is included in the gross total income is not only a specified category of income, but also a particular quantum of income belonging to that specified category. in our opinion, therefore, the finance (no. 2) act of 1980, has merely made the position which was implicit explicit. therefore, section 80ab is clearly declaratory in nature like section 80aa and it merely declares what the correct position has always been. in fact, in the concurring judgment of the supreme court in the case of distributors (baroda) pvt, ltd : [1985]155itr120(sc) , sen j. in his concurring judgment has observed that section 80aa was clearly declaratory in nature and it merely declared what the correct position has always been and, therefore, there was no question of imposition of any fresh tax with retrospective effect by virtue of the said section . it may be pointed out that the supreme court has reversed its own judgment in the case of cloth traders (p.) ltd. : [1979]118itr243(sc) , vide the judgment in the case of distributors (baroda) pvt. ltd. : [1985]155itr120(sc) . at this stage, itself, we may mention that in the case of h.h. sir rama varma v. cit : [1994]205itr433(sc) , the supreme court has held that section 80ab was enacted to declare the law as it always stood in relation to the deductions to be made in respect of the income specified under chapter vi-a. therefore, in any view of the matter, it is clear that even without section 80ab, the profits and gains derived from an industrial undertaking referred in section 80ab have to be computed in accordance with the provisions of sections 30 to 43a of the act and in any event since section 80ab has been held to be retrospective by the supreme court in h. h. sir rama varma's case : [1994]205itr433(sc) , it is not open to the assessee to say that the said section is prospective. as stated above, mr. mistry, however, placed reliance on the judgment of the supreme court in the case of uco bank v. cit : [1999]237itr889(sc) , in support of his contention that in view of the circular issued by the central board of taxes, it was not open to the department to contendthat such a circular was not binding on the department particularly when the said circular has made it clear that section 80ab was prospective. we do not find any merit in this contention. firstly, the department has not relied upon the circular. the department has placed reliance on the judgment of the supreme court in the case of h. h. sir rama varma : [1994]205itr433(sc) , and on the judgment of this court in the case of albright morarji : [1999]236itr914(bom) . further, the judgment of the supreme court in uco bank's case : [1999]237itr889(sc) , is not applicable to the facts of this case. in that matter, the circular laid down a uniform test for the assessing authority to decide as to whether the interest income which is transferred to the suspense, account arose in respect of a doubtful loan. it was held that such a circular was not contrary to section 145 of the income-tax act. hence, the judgment of the supreme court in uco bank's case : [1999]237itr889(sc) , has no application to the facts of this case. in the case of keshavji ravji and co. v. cit : [1990]183itr1(sc) , the supreme court has laid down that the board cannot pre-empt a judicial interpretation of the scope and ambit of a provision of the act by a circular and that the task of interpretation of the laws is the exclusive domain of the courts. mr. mistry fairly stated that there is no indication in the finance bill/memorandum of the said section 80ab being prospective. he, therefore, placed reliance on the circular. as stated above, the position in law is clear even before the finance (no. 2) act of 1980 that section 80ab is held to be declaratory. section 80ab has been held to be retrospective in h. h. sir rama varma's case : [1994]205itr433(sc) . in any event, the circular cannot be used to pre-empt a judicial interpretation of the scope and ambit of section 80ab. hence, there is no substance in this appeal.7. before concluding, we may also refer to the judgment of this court in the case of albright morarji : [1999]236itr914(bom) . in that matter the assessee claimed relief under section 80ab of the income-tax act in respect of the accounting year relevant to the assessment year 1980-81 in respect of the profit of a new industrial undertaking in backward areas. the income-tax officer held that profits and gains derived from the said industrial undertaking being negative, after taking into account the investment allowance, no relief was allowable to the assessee under section 80ab. the matter was carried in appeal to the commissioner, who took the view that the investment allowance should have been allowed against profits of the assessee from other units and since there were overall profits the claim under section 80ab should not be denied. however, there was no dispute that if the investment allowance was adjusted against the profits of the new industrial undertaking, there would be a loss from the undertaking and the assessee would not be entitled to relief under section 80ab of the act. the department appealed to the tribunal, who affirmed the order of the commissioner. accordingly, the matter came by reference undersection 256(1) to this court. after considering the provisions of section 80ab(1) read with section 80b(5) and without reference to section 80ab, the division bench of this court came to the conclusion that profits and gains derived from an industrial undertaking included in the gross total income would obviously be the profits and gains computed in accordance with the provisions of the act. that under section 29 of the act, which deals with the manner of computation of income from profits and gains of business, it was clear that such income was required to be computed in accordance with the provisions of sections 30 to 43a. in that judgment, this high court has considered the entire case law including the judgment of the supreme court in h. h. sir rama varma's case [1994] 205 itr 435. therefore, on a bare reading of the judgment of this court in the case of albright morarji : [1999]236itr914(bom) , it is clear that the said judgment is based on review of the various provisions of the act both with and de hors section 80ab. in the said judgment, it has been laid down that section 80ab though inserted by the finance (no. 2) act of 1980 with effect from april 1, 1981, was merely declaratory. we are, therefore, of the view that the law laid down by the judgment of the division bench of this court in the case of albright morarji : [1999]236itr914(bom) is correct and binding on this court. we do not see any reason to differ. in the circumstances, we are not inclined to examine the judgments of the other high courts.8. accordingly, appeal stands rejected.