ESKAYEF LIMITED Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) As the parties and the questions that arise for determination in these cases are common, I propose to dispose of them by a common order.

(2.) M/s. Smith Kline & French (India) Limited a foreign Company incorporated in England with limited liability, which had a manufacturing unit for manufacture of drugs and pharmaceuticals and a branch office at Bangalore city was the original petitioner in these cases and under a scheme of amalgamation sanctioned by this Court, has merged in, an Indian Company called M/s. Eskey Ltd., which has now come on record as the petitioner in the place of the original petitioner. But in order to appreciate the questions raised, these cases will be examined as if there was no amalgamation and the foreign company will hereafter referred to as the assessee.

(3.) For the assessment year 1979-80, relevant to the accounting year ending on 30-11-1978, the assessee filed its return under Section 5 of the Companies (Profits) Surtax Act, 1964 (Central Act No. VII of 1964) (the Act) before the Income-tax Officer, Company Circle-I, Bangalore (I.T.O.) (Annexure-A) interalia disclosing that it was not liable to pay any tax under the said Act. But the I.T.O. without accepting the same and on the basis of other materials available with him like the assessment order for the year preceeding the assessment year issued a notice on 24-1-1980 (Annexure-B) to the assessee proposing to make a provisional assessment for the aforesaid year determining its liability for a sum of Rs. 34,69,552/- as set out in a detailed computation statement annexed to the same. In response to the said notice of the I.T.O., the assessee filed its objections before the ITO on 8-2-1980 (Annexure-C) reiterating that it was not assessable to tax under the Act and even if it was so assessable, it was assessable for a sum of Rs. 10,69,234/- as against a sum of Rs. 34,69,552/- detailed in the computation statement. On an examination of the return and the objections filed by the assessee, the I. T. O. on 3011-1980 (Annexure-E) made his provisional assessment order under Sec. 7(2) of the Act determining a sum of Rs. 18,18,646/- as sur-tax payable by the assessee for the aforesaid assessment year and also issued a consequent demand notice for the aforesaid sum (Annexure-E1). In W.P. 4849 of 1980, the assessee has challenged the constitutional validity of Section 7 of the Act, the consequent assessment order and the demand notice issued by the I T.O. On 29-3-1980, this Court while issuing rule nisi made an interim order on terms. But during the pendency of this petition, the I.T.O. on 29-6-1980 made his regular assessment for the aforesaid assessment year under Sec. 6 of the Act which has been separately challenged in an appeal by the assessee under the Act.