COMMISSIONER OF INCOMETAX Vs. KAJR VALVES LTD

JUDGEMENT

(1.) THE following question of law has been referred for our opinion under S. 256 (1) of the Income-tax Act 1961, by the Income-tax appellate Tribunal, Cochin Bench, viz. : "whether, on the facts and in the circumstances of the case and in view of the fact that the industry was not in existence during the accounting year, the Income-tax Appellate Tribunal was justified in holding that the Assessee is entitled to relief under S. 80-I of the Income-tax Act for the assessment year 1972-73?"

(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 kerala State Electricity Board exercised its option to purchase the undertaking under the Indian Electricity Act 1910. That was with effect from 2-12-1970. 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 Ist and Second December 1970 for the electricity consumed in November 1970. After the undertaking was vested in the Electricity Board on and from 3-12-1970 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 31-10-70 to 2-12-70, 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 2-12-1970 at Rs. 3,77,308/ -. Income-tax retorn for 1971-72 was made on that basis On 17-12-1971, the Electricity Board wrote to the Assessee regarding the pending matters. This letter showed that 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. 1,43,753/- was shown as received in the subsequent accounting year. Before the Income-tax Officer, the Assessee claimed that this amount of Rs. 1,43,743/-was income "attributable to priority industries", in respect whereof, it were entitled to deduction under S. 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, Appellate Assistant Commissioner sustained the reasoning and the conclusion of the Income-tax Officer. 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 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' to 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. 4. We think that, on the whole, the view taken by the tribunal was correct S. 80 A (1) was one of those sections in Chapter VI-A of the Incometax Act 1961 which was newly introduced by the Finance Act of 1965. At the time it was so introduced, it consisted only of four sections-Ss. 80-A to 80. D. S. 80--E was added by the Finance Act 1966; and S. 80f was added by the finance Act 1967. S. 80-I was added by the Finance Act 2 of 1967 on 1-4-1968 and was deleted by the Finance Act 1972 with effect from 1-4-1973. S. 80-I as it stood at the relevant time reads: "804. Deduction in respect of profits and gains from priority industries in the case of certain companies. (1) In the case of a company to which this section applies, where the gross total income includes any profits and gains attributable to any priority industry, 'there shall be allowed, in accordance with and subject to the provisions of this Section, a deduction from such profits and gains of an amount equal to eight per cent, thereof, in computing the total income of the company. (2) This section applies to a domestic company, save in a case where such company is a company which is referred to in S. 108 and has a gross total income of fifty thousand rupees or less. (3) Where a company to which this section applies is entitled also to the deduction under S. 80h, the deduction under sub-section (1)of this Section shall be allowed with reference to the amount of the profits and gains, attributable to the priority industry or industries as reduced by the deduction under S. 80h in relation to such profits and gains". (5% is a substitution for 8% by the Finance Act 2 of 1971 ). On the language of S. 80-I of the Act, it is difficult to read into the Section the requirement that the priority industry must have actually carried on business during the accounting year. But Counsel for the revenue would contend that this requirement is implicit by reason of the definition of priority industry given in S. 80-B clause (7 ). That definition reads as follows: "80-B (7) 'priority industry' means the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Sixth Schedule or the business of any hotel where such business is carried on by an Indian company and the hotel is for the time being approved in this behalf by the Central Government". If the definition were to be bodily telescoped into S. 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 actuality carried on business during the accounting year would be to reduce the ingredient in S. 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, eventhough, 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 Income-tax Act 1961 and provided for by several sections. Counsel drew our attention to S. 28 of the Act. But we see no scope for reading the terms that of Section and drawing analogies for controlling the clear language of the S. 80-t of the Act. In the result, we answer the question referred in the affirmative i. e. in favour of the Assessee and against the Revenue. No order as to costs. A copy of this judgment under the signature of the registrar, and the seal of the Court, will be communicated to the Income-tax appellate Tribunal, as required by law. . .