Commissioner of Income-tax Vs. India Meters Ltd. - Court Judgment

Excerpt:
- t.n. estates (abolition & conversion into ryotwari) act, 1948 [act no. 26/1948]. sections 5(2) & 67; [a.p. shah, cj, mrs. prabha sridevan & p. jyothimani, jj] suo motu revisional powers held, on a bare reading of the provisions of section 5(2) of the act, it is clear that the power conferred on the director by section 5(2) to cancel or revise any of the orders, acts or proceedings of the settlement officer is very wide. in the first place, the director need not necessarily be moved by any party in that behalf, and the power could be exercised either on an application by an aggrieved person or suo motu. for example, if the director comes to know that contrary to the scheme of the act or due to misrepresentation or fraud played, a patta had been granted to a person under the relevant provisions of the act, then to set right that mistake, the director should be enabled to exercise his power so as to effectuate the scheme of the act and to implement the purpose behind the act. the fact that the rule making authority has prescribed procedure in exercise of the powers under section 67 for making an application to the director does not mean that the suo motu power which is explicit in section 5(2) of the act is in any way curtailed or taken away. therefore, the contention of the respondent that making an application is sine qua non for invoking the power under section 5(2) of the act is not tenable. -- t.n. estates (abolition & conversion into ryotwari) act, 1948. sections 5(2) & 67; suo motu revisional powers held, on a bare reading of the provisions of section 5(2) of the act, it is clear that the power conferred on the director by section 5(2) to cancel or revise any of the orders, acts or proceedings of the settlement officer is very wide. in the first place, the director need not necessarily be moved by any party in that behalf, and the power could be exercised either on an application by an aggrieved person or suo motu. for example, if the director comes to know that contrary to the scheme of the act or due to misrepresentation or fraud played, a patta had been granted to a person under the relevant provisions of the act, then to set right that mistake, the director should be enabled to exercise his power so as to effectuate the scheme of the act and to implement the purpose behind the act. the fact that the rule making authority has prescribed procedure in exercise of the powers under section 67 for making an application to the director does not mean that the suo motu power which is explicit in section 5(2) of the act is in any way curtailed or taken away. therefore, the contention of the respondent that making an application is sine qua non for invoking the power under section 5(2) of the act is not tenable. n.v. balasubramanian, j.1. tax case no. 436 of 1999 is a reference under the income-tax act, 1961, and tax cases nos. 35 and 36 of 1998 are references made under the companies (profits) surtax act, 1964.2. we first take up the reference under the income-tax act as the answer to the question referred therein will also govern the question referred in the references under the companies (profits) surtax act.3. the question of law referred under the income-tax act reads as under :'whether, on the facts and in the circumstances of the case, the tribunal was right in law in holding that the assessment has lost its foundation in view of the order of a division bench of the high court remitting the matter to the single judge for fresh disposal ?'4. the facts are not in dispute. the assessee is a public limited company incorporated in the year 1963. the assessee-company incurred a huge loss up to september 30, 1974, and it was declared as a relief undertaking under the tamil nadu relief undertaking (special provision) act, 1969, and there was a lock-out also. the company had an accumulated loss of rs. 362 lakhs as on march 31, 1991, as against the paid up share capital of rs. 74 lakhs and with a view to revive the company, a scheme for reduction of share capital under section 101 of the companies act, 1956, as well as a compromise or arrangement under section 391 of the companies act, 1956, was arrived at. the parties to the compromise or arrangement were the secured creditors most of whom were financial institutions, the unsecured creditors and the industrial reconstruction corporation of india. the scheme was to be effective and operative in accordance with the provisions of the companies act, 1956, under which a certified copy of the order of the court approving the scheme must be filed with the registrar of companies. it is seen that the scheme was approved by the majority of the shareholders and the secured creditors and a learned single judge of this court has also sanctioned the scheme by order dated august 16, 1983. some of the unsecured creditors raised objections against the order granting sanction to the scheme and filed an appeal before a division bench of this court and the division bench in o. s. a. no. 215 of 1984, by judgment dated november 26, 1991, reversed the judgment of the learned single judge granting approval of the scheme and allowed the appeal preferred by the unsecured creditors. the division bench also remitted the matter to the learned single judge for rehearing the matter. the division bench also opined that it is open to the learned single judge to call for a meet-ing of the different classes of unsecured creditors for their consent to the scheme in accordance with law.5. the assessing officer was of the view that on the basis of the scheme sanctioned by the learned single judge of this court certain sacrifices have been made by all the creditors and invoking the provisions of section 41(1) of the act, he brought to tax a sum of rs. 95,58,053 being the interest amount sacrificed by the creditors and also a sum of rs. 21,000 being the insurance, commitment charges, etc., sacrificed by the creditors. the assessing officer also levied tax on the sacrifice relating to suppliers and non-statutory dues amounting to rs. 22,78,838. the order of the assessing officer was under challenge in the appeal before the commissioner of income-tax (appeals) who dismissed the appeal. the assessee took the matter in further appeal to the appellate tribunal.6. the appellate tribunal considered the matter in the light of the judgment of the division bench of this court in o. s. a. no. 215 of 1984 dated november 26, 1991, setting aside the judgment of the learned single judge granting sanction to the scheme. it found that in view of the judgment of the division bench of this court the scheme was not sanctioned and therefore no sacrifice was made by any of the creditors, and allowed the appeal preferred by the asses-see.7. it is stated that as against the judgment of the division bench in o. s. a. no. 215 of 1984, the respondent therein has filed a special leave petition before the supreme court and the supreme court has granted the leave and granted stay of operation of the judgment of the division bench which means that the matter could not be proceeded before the learned single judge. we are of the view that the scheme of compromise or arrangement remains unapproved either in the case of secured creditors or in the case of unsecured creditors. therefore, the question of assessment of the sacrifices made by the creditors relating to interest, etc., does not arise. we, therefore, hold that the appellate tribunal was correct in holding that the action of the assessing officer in invoking section 41(1) of the act to tax the sacrifices made by the creditors has lost its foundation in view of the judgment of the division bench of this court in o. s. a. no. 215 of 1984 reversing the judgment of the learned judge who granted approval to the scheme. in other words, the scheme has not come into force. we do not find any error or infirmity in the order of the appellate tribunal holding that section 41 of the act has no application. accordingly, we answer the question referred in t. c. no. 436 of 1999 in the affirmative, against the revenue and in favour of the assessee. no costs.t. c nos. 35 and 36 of 1998 :8. this is a reference under the companies (profits) surtax act. pursuant to the directions of this court in t. c. p. nos. 361 and 362 of 1996 dated august 5, 1997, the appellate tribunal has stated a case and referred the following question of law :'whether, on the facts and in the circumstances of the case, the appellate tribunal was right in upholding the order of the first appellate authority cancelling the surtax assessment orders for the assessment years 1986-87 and 1987-88 ?'9. the appellate tribunal, on the basis of its order rendered in the income-tax proceedings, in the assessee's own case, upheld the order of the commissioner of income-tax (appeals) holding that the assessee was not liable for any surtax under the companies (profits) surtax act. we have already held that in the light of the decision of the division bench of this court in o. s. a. no. 215 of 1984 the scheme of compromise or arrangement has not come into effect. we hold that since the assessments under the income-tax act have lost their foundation, the assessee is not liable for surtax liability found in the order of assessment. we therefore hold that the appellate tribunal was right in upholding the order of the commissioner of income-tax (appeals) cancelling the relevant surtax assessments. accordingly, the question of law is answered in the affirmative, against the revenue and in favour of the assessee. no costs.