1977 (9) TMI 32 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 14 of the Companies (Profits) Surtax Act, 1964, as amended with effect from April 1, 1971.
2. Determination of the right of action under section 14 and consequential provisions under section 13 of the Surtax Act for orders passed by the Income-tax Appellate Tribunal before April 1, 1971.

Analysis:
The case involved the interpretation of section 14 of the Companies (Profits) Surtax Act, 1964, as amended with effect from April 1, 1971. The question at hand was whether the right of action under section 14 and the consequential provisions under section 13 of the Surtax Act could be invoked for orders passed by the Income-tax Appellate Tribunal before April 1, 1971. The Tribunal opined that such action was not permissible for orders predating the mentioned date and referred the legal question for determination by the court.

The court examined the provisions of section 14 and highlighted that the right of action concerning orders passed by the Appellate Tribunal under section 254 of the Income-tax Act was granted for the first time by the Taxation Laws (Amendment) Act of 1970 with effect from April 1, 1971. The court emphasized that the right to recompute chargeable profits under section 14 was contingent on orders passed after the specified date. It was noted that allowing action on orders preceding the amendment date would lead to a broad application of the provision, contrary to the legislative intent behind the amendment.

In considering relevant legal precedents, the court distinguished cases cited by the revenue, emphasizing that the specific issue of conferring the right of action post-amendment date was not addressed in those decisions. The court also referenced Supreme Court judgments related to the interpretation of tax laws to support its conclusion that the right of action under section 14 should be limited to orders falling within the scope of the amendment.

Ultimately, the court concurred with the Tribunal's view, holding that the right of action under section 14 could not be extended to orders passed by the Tribunal before April 1, 1971. The court answered the legal question in the affirmative, favoring the assessee and ruling against the department. No costs were awarded in the judgment.