COMMISSIONER OF INCOME TAX Vs. KAR VALVES LIMITED

JUDGEMENT

(1.) THE following question of law has been referred for our opinion under Section 256(1) of the I.T. Act, 1961, by the Income-tax Appellate Tribunal, Cochin Bench, viz.:

(2.) THE assessee is a limited company. THE assessment year with which we are concerned is 1972-73. THE assessee was doing business under the name and style of "THE Cochin State Power and Light Corporation Ltd." till the Kerala State Electricity Board exercised its option to purchase the undertaking under the Indian Electricity Act, 1910. That was with effect from December 2, 1970. THE meter readings of the electricity consumed in any month was being taken by the staff of the company with effect from the succeeding month and the bills were prepared by it. Spot billing was done in respect of some consumers on the 1st and 2nd December, 1970, for the electricity consumed in November, 1970. After the undertaking was vested in the Electricity Board on and from December 3, 1970, the staff of the assessee-company could not attend to the meter reading work of the consumers. THE cyclic billing of the consumers for the period from October 31, 1970, to December 2, 1970, which normally should have been done by the assessee's staff, had to be done by the Electricity Board, for and on behalf of the assessee. Such monies were collected by the Electricity Board and credited to the assessee. THErefore, for the purpose of their accounting which closed on 31st March, 1971, the assessee estimated such receipts representing the sale of electricity till December 2, 1970, at Rs. 3,77,3,08. Income-tax return for 1971-72 was made on that basis. On December 17, 1971, the Electricity Board wrote to the assessee regarding the pending matters. This letter showed the amount received by the assessee for the period November and December, 1970, was Rs. 5,21,031. As Rs. 3,77,308 was taken to represent the sale of energy for this period, the excess amount, viz., Rs. l.,43,753 was shown as received in the subsequent accounting year. Before the ITO, the assessee claimed that this amount of Rs. 1,43,753 was income "attributable to priority industries", in respect whereof, it was entitled to deduction under Section 80A(1) of the Act. THE officer negatived the claim on the ground that the assessee-company was not carrying on business during the accounting year and the deduction was, therefore, not tenable. On appeal by the assessee, the AAC sustained the reasoning and the conclusion of the ITO. On further appeal, to the Tribunal, the Tribunal held, differing from the two authorities below, that it was not necessary to show that the assessee functioned either during the whole or any part of the accounting year. Nevertheless, it sustained (sic) the conclusion of the authorities on the ground that it was enough to show that the amount in respect of which the deduction was claimed was "attributable" tb'a priority industry. Going by the dictionary meaning of this expression, the Tribunal was of the view that it was enough to show that there was a nexus between the amount sought to be deducted and the priority industry in respect of which the deduction was claimed.

(3.) IF the definition were to be bodily telescoped into Section 80-I of the section, it might be possible to get out the meaning and the content of the section for which counsel for the revenue contends before us. It seems to us that such a course would neither be fair nor permissible. The definition section is subject to the repugnancy clause and is to be read and understood only if there is nothing repugnant in the subject or the context. To read the requirement that the priority industry must have actually Carried on business during the accounting year would be to reduce the ingredient in Section 80-I that it should be enough if the amount sought to be deducted is "attributable" to a priority industry, to something other than what it states or provides for. Profits are attributable to a priority industry, even though, at any specific point of time, the industry might not have carried on business. We also think that such a way of construction and understanding of the section is opposed to the general scheme of computation of income under several heads, and provision for deduction on various counts, embodied in the I. T. Act, 1961, and provided for by several sections.