TMI Blog1975 (10) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... on 139 of the Income-tax Act, 1961. This is as a result of discovering our omission to include claim for relief under sections 84 and 101 of the Income-tax Act, 1961, in respect of our industrial undertaking at Ambattur, Madras. Our industrial undertaking at Ambattur, Madras, began to manufacture or produce articles in the previous year relevant to the assessment year 1960-61. We hereby declare that this undertaking was not formed by splitting up or reconstruction of a business already in existence. The buildings, machinery, plant, etc., of the new undertaking were not used for any purpose before. The new industrial undertaking has begun manufacture of articles in India within the prescribed number of years with reference to 1st April, 1948. It employs more than ten workers in a manufacturing process carried on with the aid of power. Computation of profits of the new industrial undertaking has been made in accordance with the provisions of Chapter IV-D of the Income-tax Act, 1961. Due to oversight the claim for relief under sections 84 and 101 of the Act was not made for the assessment years 1960-61, 1961-62 and 1962-63 at the time of the assessment. However, we lodge herewith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption of the earlier years was due to inadvertence and that the assets and liabilities were so inextricably mixed up that it was not possible to furnish the information which the Income-tax Officer required and about which he has mentioned in the assessment order. It was also submitted that the gestation period was over and that there was no development rebate or unabsorbed depreciation to be carried forward (which would affect the profits of the year under reference from the new unit). The Appellate Assistant Commissioner held, agreeing with the contentions put forward by the assessee, that it was entitled to the relief claimed. He also held that the failure of the assessee to claim in this year (sic) that there was no necessity to maintain separate account books, and that this being the fourth year of production the period of gestation was already over, so that the new unit went into full production. According, to him, profits were available to justify the claim of the exemption. He directed the Income-tax Officer to examine the arithmetical accuracy of the computation furnished by the assessee and then allow the appropriate relief. The department filed an appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the profits of its Ambattur unit ? " On behalf of the revenue, Mr. Suhas Sen submitted before us that the meaning of the question is whether relief can be given to the assessee under sections 84 and 101 on estimated figure. He developed his point thus : The onus of proving facts entitling the assessee to claim exemption under sections 84 and 101 lies on the assessee. In order to get relief under section 84 capital will have to be computed in the manner laid down in rule 19 of the Income-tax Rules, 1962, and profits and gains must be computed in the manner laid down in sub-section (5) of section 84. If the profit so computed exceeds 6% of the capital in the prescribed manner, then the assessee becomes entitled to exemption up to 6%. Mr. Sen contended that relief cannot be given on an estimated figure, but the assessee must prove that there are profits and gains derived from the new industrial undertaking in the relevant assessment year. He submitted that the profits and gains as do not exceed 6% of the capital employed in the new undertaking is entitled to exemption and for this purpose computation must be done in the manner prescribed under section 84. The particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this court. I will first read the relevant portion of section 84. " CHAPTER VII INCOMES FORMING PART OF TOTAL INCOME ON WHICH NO INCOME-TAX IS PAYABLE. 84. Income of newly established industrial undertakings or hotels.--(1) Save as otherwise hereinafter provided, income-tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking or hotel to which this section applies as do not exceed six per cent. per annum on the capital employed in the undertaking or hotel, computed in the prescribed manner. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :...... (5) The profits or gains of an industrial undertaking or hotel to which this section applies shall be computed in accordance with the provisions contained in Chapter IV-D........ " It is not necessary to read section 101 of the Income-tax Act, 1961. Under that section the assessee shall be entitled to deduction of the amount of super-tax to which he is chargeable on his total income on profits and gains derived from industrial undertaking to the extent to which income-tax is not payable on such profits and gains u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... six per cent. per annum on the capital employed in the undertaking or hotel to which this section applies. In order to attract section 84, the industrial undertaking must fulfil the conditions laid down in sub-section (2) and must make profit. As to the extent of six per cent. per annum up to which the assessee will get exemption, sub-section (1) of section 84 says that computation of capital should be made in the prescribed manner. Rule 19 of the Income-tax Rules relates to the manner of computation of capital employed in the industrial undertaking. Rule 19 has nothing to do with the profits or gains derived from any industrial undertaking. The profits or gains of the industrial undertaking should be computed in accordance with the provisions of Chapter IV-D of the Act as provided in sub-section (5) of section 84. The words " as do not exceed six per cent. per annum on the capital employed " in section 84, sub-section (1), refer to the quantification of the relief. Now, what is the meaning of the question ? As I read the question it seems to me that it means whether the assessee is entitled to the relief under sections 84 and 101 in respect of the profits of its Ambattur unit. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso to this section says that where the method employed is such that in the opinion of the Income-tax Officer, the income cannot be properly deduced therefrom then the computation shall be made on such basis and in such manner as the Income-tax Officer may determine. Therefore, denial of the relief to the assessee by the Income-tax Officer was clearly wrong. With regard to this aspect of the matter, the Appellate Tribunal said : " If the method adopted by the assessee is found to be wrong or did not commend itself to the Income-tax Officer, the Income-tax Officer should have suggested a more rational and more appropriate method. But he cannot deny the exemption altogether on that account. " I agree with the view of the Appellate Tribunal in this respect. I look back to the question again. I have to. In view of the further submission of the counsel for the assessee that the question may be read : " Whether the assessee was entitled to the relief claimed under sections 84 and 101 of the Income-tax Act, 1961, in respect of the profits of its Ambattur unit ? ", meaning thereby whether the assessee was entitled to the particular relief claimed by it, I will consider what sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied on by the learned counsel. Mr. Sen relied on Pr. Al. M. Muthukaruppan Chettiar v. Commissioner of Income-tax [1939] 7 ITR 76 (Mad) [FB]. In that case one of the questions referred to the Madras High Court was whether the assessee was entitled in law to a deduction of Rs. 1,875 in respect of depreciation of machinery in a particular mill, he having leased the mill. It was held by Leach C.J. at pages 89-90 of the report : " When claiming a deduction an assessee must give the particulars required by proviso (a) of section 10(2). This he admittedly failed to do and, therefore, he was not in a position to claim the deduction. The answer to the second question is that in the circumstances the assessee is not entitled in law to the deduction. " The decision of the court was made on construction of proviso (a) to section 10(2) of the Indian Income-tax Act, 1922, which reads as follows : Section 10(2)(vi) : " Such profits or gains shall be computed after making the following allowances, namely :--......... Provided that-- (a) the prescribed particulars have been duly furnished ;......... " The section clearly provides that unless the particulars are duly furnished the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkable, ut res magis valeat potius quam pereat. Section 84 is an exemption section. The section says that an assessee will get benefit under this section and to what extent the benefit will be given. The right to get benefit is distinguished from the amount or quantum of the benefit that the assessee will get under the section. In order to get benefit of exemption under this section the assessee must establish its right to get the benefit or its entitlement of the benefit. The law is well-settled that an assessee who claims exemption has to establish it. In Commissioner of Income-tax v. Ramakrishna Deo [1959] 35 ITR 312 (SC) the Supreme Court, while considering certain observations of Lord Somervell L.J. in Australian Mutual Provident Society v. Inland Revenue Commissioners [1946] 1 All ER 528 (CA) quoted by the Supreme Court in that judgment laid down at page 316 of the report : " These observations have, in our opinion, no bearing on the question of burden of proof. They merely lay down a rule of construction that in determining the scope of a rule, regard must be had to the exemptions engrafted thereon, and that the rule must be so construed as not to nullify those exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 10 of the Act. " This case does not help the contentions made by Mr. Sen. In any event, I will quote here the observation at page 358 of the report which is as follows--See [1970] 77 ITR 354 (SC) : " Where the company has 'nil' profits under its final assessment, the non-application of section 15C is not due to the fact that it made no profits and it was not entitled to the benefit of section 15C(1). But in view of the overall result of the assessment there is no need for the company to claim exemption under that provision, as there is no tax liability at all. " It is obvious that if there is no assessable profit there cannot be any claim for deduction under section 84, but the facts and the circumstances of the case are otherwise here as the assessee has made assessable profits. Mr. Sen then cited the case of Kedarnath Jute Manufacturing Co. Ltd. v. Commercial Tax Officer [1965] 16 STC 607 ; AIR 1966 SC 12. This is a sales tax matter and the Supreme Court considered section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act (6 of 1941) and Bengal Sales Tax Rules, 1941, rule 27A. The question before the Supreme Court was when a dealer is entitled to claim exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
