1986 (3) TMI 22 - HC - Income Tax

Summary

Issues Involved:
1. Limitation of Revisional Order
2. Jurisdiction of Deputy Commissioner
3. Merger Doctrine
4. Erroneous View of Law

Summary:

1. Limitation of Revisional Order:
Mr. Joshi argued that the revisional order dated November 4, 1976, was barred by limitation u/s 41(2) of the Maharashtra Agricultural Income-tax Act. The court held that the show-cause notice for suo motu revision was issued within two years of the order dated October 31, 1974, and thus was not barred by limitation.

2. Jurisdiction of Deputy Commissioner:
Mr. Joshi contended that the Deputy Commissioner lacked jurisdiction to revise the order of the Agricultural Income-tax Officer dated October 31, 1974, as it was an order implementing the Tribunal's directions. The court agreed, stating that the Deputy Commissioner could not revise an order passed in implementation of the Tribunal's directions, citing CIT v. Tejaji Farasram Kharawala and other relevant cases.

3. Merger Doctrine:
Mr. Joshi argued that the order of April 26, 1968, merged with the Tribunal's order dated December 29, 1970, and thus could not be revised by the Deputy Commissioner. The court rejected this argument, noting that the Deputy Commissioner did not revise the 1968 order, which had already been set aside by the Tribunal. Therefore, there was no merger.

4. Erroneous View of Law:
The Deputy Commissioner disallowed the bonus deduction on the ground that it related to income from 1957-58 and 1958-59, not the relevant previous year ending March 31, 1962. The court found this view erroneous, citing Commr of Agrl. I.T. v. Phalton Sugar Works Ltd., which held that revenue expenditure incurred in the relevant previous year is allowable, irrespective of the income year it relates to. The court emphasized that the expenditure must be incurred in the relevant previous year and not necessarily relate to the income of that year.

Conclusion:
The petition succeeded. The court quashed the revisional order dated November 4, 1976, and the Commissioner's order dated February 14, 1978, confirming it. The bank guarantee given by the petitioner was ordered to be canceled, and the respondents were directed to pay the petitioners' costs.