Commissioner of Income-tax Vs. Sri Rama Talkies - Court Judgment

Excerpt:
direct taxation - registration - sections 184 (7) and 184 (8) of income tax act, 1961 - whether continuation of registration for part of relevant previous year from 29.10.1962 to 15.10.1963 for assessment year 1964-65 was maintainable in terms of provisions under section 187 (1) of act - contended mere change of partners not sufficient to hold change in constitution of firm - argued change in constitution of firm not used in limited sense under section 184 (7) of act - firm constituted by partners was in accordance with terms of deed - partner replaced by another is change in constitution firm under section 187 (2) - held, continuation of registration for part of previous year from 29.10.1962 to 15.10.1963 for assessment year 1964-65 was not maintainable in terms of section 187 (1) of act. - maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields butter (makkhan) and buttermilk as by product. the shelf life of dahi is two days whereas that of butter is a week. by simmering unsalted butter in a pot until all water is boiled, ghee is obtained which has shelf life of more than a year in controlled conditions. ghee at least as of now is most synthesized, ghee is a natural product derived ultimately from milk. so to say, milk is converted to dahi, then butter. scientifically or common sense point of view, even though ghee is not directly obtained from milk (which is certainly a product of cow/buffalo), it is certainly a product of a product of livestock i.e., cow or buffalo. it would be rather illogical or irrational to say that ghee is not a milk/dairy product or to say that it is not a product of livestock. section 2(x) and 2(iv) of the act used the plural products of livestock. the legislative intention is very clear that not only a product of livestock like milk (when notified by government), butter etc., are products of livestock but even derivative items (derived from a product of livestock) are intended to be product of livestock for the purpose of the act. thus the term ghee is to be interpreted on the basis of expression products of livestock as defined in section 2(xv) of the act. whatever products are declared as such by the government by notification, they become products of livestock for purpose of the act. consequently it was held that ghee is the product of livestock and by reason of power conferred under section 3(1) read with section 3(3) of the act on them it is competent for the government to declare ghee as product of livestock for the purpose of regulating its purchase and sale, in any notified market area. [per p.s. narayana, j,(dissenting)]if livestock or agricultural produce and the categories thereof had been specified in the statute itself by appending in the schedule or otherwise, that would stand on a different footing from the present provisions of the act which contemplate the issuance of notifications in accordance with the procedure ordained by the provisions specified supra. in view of the clear definition of the livestock and products of livestock, the ghee being derivative of butter or cream, if the language employed in definition to be taken as they stand, the only conclusion would be is that the ghee would not fall within ambit of the definitions aforesaid. sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] declaration of notified area held, it is only under section 3 that government are required to publish draft notification inviting objections and section 3(3) mandates to consider objections and suggestions before issuing declaration order. it is very conspicuous that section 4 does not contemplate any draft notification inviting objections and suggestions before either constituting market committee, establishing notified market area or declaring notified market area for the purpose of levy of market fees. thus, except ordaining government to issue preliminary/draft notification inviting objections at the time of issuing declaration order under section 3(3) of the act nowhere much less under section 4 contemplates issuing a notification inviting objections. when the legislature has chosen to exclude principles of natural justice, the court cannot introduce rule of audi alteram partem and render statutory provisions unworkable. in such a case, maxim, expressum facit cessare tacitum (when there is express mention of certain things, then anything not mentioned is excluded) would apply. section 7: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] levy of market fee element of quid pro quo - held, levying fees and tax are two forms of exercise of sttaes taxing power. there is no quid pro quo between tax payer and public authority as tax is a part of common burden. it is also well settled that fee is charge for special service or a benefit given to a class of individual fee payers and fee collected need not have correlation with actual service in exactitude but if it is shown that substantial portion of the fee is expended or the purpose for which it is levied, it would be justified. expressum facit cessare tacitum sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] meaning when there is express mention of certain things, then anything not mentioned is excluded. - section 185 empowers the income-tax officer, if the requisite conditions are satisfied, to pass an order registering the firm for the assessment year. section 186 empowers the income-tax officer to cancel the registration for the assessment year if he is satisfied that the firm is not genuine. these provisions clearly show that what is contemplated by the act is registration of a firm for the entire assessment year. but, in a case like the present we do not see how the firm can be granted registration for part of the previous year and refused registration for the other part.chinnappa reddy, j. 1. 'sree rama talkies', a firm consisting ofthree partners, (1) t. aswarthanarayana, (2) venkaiah naidu, and(3) audinarayana, and registered under the income-tax act, was carryingon business from 1953. the instrument of partnership was dated april 1,1953, and it provided that the partnership was to be for a period of twentyyears and in the event of the death of any partner the partnership was notto dissolve but was to continue with the heir of the deceased partner takinghis place. the registration of the firm was continued year after year bythe income-tax department till the assessment year 1964-65. the accounting year which corresponded to the assessment year 1964-65 was october 29,1962, to november 15, 1963. aswarthanarayana, one of the partners, diedon october 15, 1963, and he was succeeded in the partnership by his widow,mangamani. on september 26, 1964, the firm, instead of applying for freshregistration as required by section 184(8) when there was a change in theconstitution of the firm, applied in form no. 12, for continuation of registration under section 184(8) as if there was no change in the constitutionof the firm. the income-tax officer thereupon issued a notice to the firmto show cause why registration should not be refused as its declaration inform no. 12 that there was no change in the constitution of the firm wasnot true and as no fresh partnership deed had been submitted. the firmsent a reply saying 'form no. 12 filed along with the return of income isquite in order till october 15, 1963'. the firm also prayed for a month'stime to produce the deed of partnership. this was on march 29, 1964. nodeed was, however, produced and the income-tax officer finally passed anorder on october 12, 1970, refusing registration on the ground that theapplication was not in proper form as what was submitted was only anapplication for continuation and not a fresh application for registration andalso on the ground that the deed of partnership had not been produced.the order was confirmed by the appellate assistant commissioner. theincome-tax appellate tribunal, however, directed the income-tax officerto grant continuation of registration up to october 15, 1963. according tothe tribunal the act did not prohibit the grant of registration for part of,a previous year. at the instance of the commissioner of income-taxthe following question has been referred to us : 'whether, on the facts and in the circumstances of the case, continuation of registration for a part of relevant 'previous year', namely, fromoctober 29, 1962, to october 15, 1963, for the assessment year 1964-65 was maintainable in terms of the provisions of section 187(1) of the income-tax act, 1961 ?' 2. section 184 deals with application for registration, section 185 with procedure on receipt of application and section 186 with cancellation of registration. section 184(4) states : 'the application shall be made before the end of the previous year for the assessment year in respect of which registration is sought.' 3. section 184(7) provides that where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year. section 184(8) provides that where there is any change in the constitution of the firm, the firm shall apply for fresh registration for the assessment year concerned. section 185 empowers the income-tax officer, if the requisite conditions are satisfied, to pass an order registering the firm for the assessment year. section 186 empowers the income-tax officer to cancel the registration for the assessment year if he is satisfied that the firm is not genuine. these provisions clearly show that what is contemplated by the act is registration of a firm for the entire assessment year. the registration no doubt relates to the previous year but where the assessee claims to be the same firm throughout the previous year and submits a single return as if there was only one assessee during the whole of the previous year, there is no escape from the position that the registration for the assessment year can be granted in relation to the whole of the previous year and not for a part of the previous year. of course, where a firm ceases to exist or is succeeded by a different firm during the course of the previous year it may be permissible to grant registration for the assessment year in relation to the part of the previous year during which it existed. but, in a case like the present we do not see how the firm can be granted registration for part of the previous year and refused registration for the other part. it would be most anomalous to do so. it would mean that the firm would be both a registered firm and an unregistered firm for the same assessment year--a two-faced firm. how then is the firm to be assessed how is its income to be computed how are the losses and incomes to be set off who is to pay the tax and in what proportion what is the accounting year of the registered 'face' of the firm and that of the unregistered 'face' of the firm the assessee itself did not divide the previous year into two periods and make up its accounts to show the profits or losses separately for the two periods. the income returned by the firm cannot be apportioned between the two periods when accounts are not so made up. 4. sri t. ananta babu urged that there was no change in the constitution of the firm. all that had happened was that one partner had diedand his hem had taken his place without the firm being dissolved, as provided by the terms of the deed of partnership. he submitted that a mere change of partners was not sufficient to hold that there was a change in the constitution of the firm. according to him, constitution of the firm did not mean the constituent partners of the firm but meant the set of rules and regulations governing the firm and its partners. we do not think that the expression 'change in the constitution of the firm' is used in any such limited sense in section 184(7). to ordinary understanding a firm is constituted by its partners and if, in accordance with the terms of, the deed, a partner is replaced by another, there is a change in the constitution of the firm. that is also the meaning given to the expression in section 187(2). the view taken by us on these questions is generally supported by the view taken by our brothers, kondaiah and sriramulu jj., in r. c. no. 34/1968. 5. the question referred to us is answered in favour of the department and against the assessee. there will be no order as to costs.