NAIK S V Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference by the Tribunal at Bombay on an application by the assessee under sub -s. (1) of s. 66 of the Indian IT Act, referring the following questions of law, viz. :

(2.) The learned advocate for the IT Department invites us to reconsider this decision on the ground that the words of s. 60A do not warrant this conclusion and that the modification referred to in the said section need not necessarily work in favour of the assessee, but can also work in favour of the Department. We have considered the views of the Tribunal in its appellate order dt. 12th Dec., 1953, and are not impressed by them. Sec. 60A deals primarily with avoiding any hardship or anomaly removing any difficulty caused as a result of the extension of the Indian IT Act to the Part B States or to the merged territories granting exemptions, reduction in rate or making any other modifications in respect of income -tax in favour of any class of income or in regard to the whole or any part of the income of any person or class of persons. In other words, it authorises the Central Government to make an exemption, reduction or modification as regards the liability to tax in favour of any class of income or in regard to the whole or any part of income of any person or class of persons in order to avoid hardship, anomaly or to remove any difficulty. The learned advocate for the Department contends that the words "in favour of" relating to other modifications should only be confined to modification in favour of any class of income, and not with respect to the whole or any part of the income of any person or class of persons. We are unable to accept this contention for the reason that the Central Government is authorised by general or special order to make exemption, reduction in rate or other modification (i) in respect of income - tax in favour of any class of income, and (ii) in regard to the whole or any part of the income of any person or class of persons. We are not concerned whether the exemption, reduction in rate or other modification relates to the first, namely, class of income, or to the second, namely, the income of any person or class of persons. It is bound to be in favour of the assessee. If the argument of the learned advocate was to be accepted that the modification can be in favour of the Department also, the only way in which it can be modified in favour of the Department would be to increase the burden of the tax on the whole or any part of the income over and above that which is authorised to be levied by the Act itself. It is frankly admitted by the learned advocate that this is not what is intended, and if this is not what is intended we fail to understand what other implication the word "modification" can have in regard to the whole or any part of the income of any person or class of persons unless it be to modify it in his favour as may be necessary or expedient having regard to the application of the Indian IT Act to Part B States or other merged territories. Therefore, we see no reason to change the view we have taken in CIT, Hyderabad vs. D. B. R. Mills (supra).

(3.) The learned advocate for the Department submits that if the amendment to paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, is not valid under s. 60A of the Indian IT Act, we should consider it as an order made under s. 12 of the Finance Act. We have considered this aspect of the matter in the aforementioned case and were clearly of view that the content of the power under s. 12 is different from that under s. 60A of the Indian IT Act and that it is not permissible to regard the order made under s. 60A to have been made under s. 12 of the Finance Act when the authority vested with the power under both the sections deliberately chose to exercise the power under s. 60A. At page 595 of the aforesaid case we observed as under :