JAIPURJA SAMLA AMALGAMATED v. COJ\IMISSIONER OF INCOME TAX, WEST BENGAL

The High Court answered the questions against the assessee. The ass::ssee filed appeals to this Court after obtaining a certificate of D fitness but the same was found defective owing to want of any reasons or grounds in the order granting the certificate. Instead of getting 'the matters remitted to the High Court for giving rea sons petitions for special leave were filed before us and leave was granted. We have heard the appeals by special leave on printed record of the appeals by certificate. that this position obtains in all the appeals by certificate before us. It may be mentioned E Section 10 ( 1) of the Act provides that tax shall be payable by an assessee under the head "profits and gains of business, profes sion or vocation" in respect of the profits and gains of any business profession or vocation carried on by him. Sub-section (2) that such profits or gains shall be computed after making the F allowances set out therein. Clauses (ix) and (xv) of this sub· section are as follows : - " (ix) any sums paid on account of land revenue, local rates or municipal taxes in respect of such part of the premises as is used for the purpose of the business, profession or vocation." "(xv)any expenditure not being an allowance of the (xiv) nature described in any of the clauses inclusive, and not being.in the nature of capital expendi ture or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of such business, profession or vocation." (i) G H Sub-section ( 4) of s. 10 to the extent it is material following terms : JAIPURIA COLLIERIES v. C.I.T., WEST BENGAL (Grover, I.) 513 A ( 4) Nothing in clause (ix) or clause (xv) of sub section ( 2) shall be deemed to authorise· the allowance of any sum paid on account of any cess, rate or levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherwise on the basis of any such profits or gains .......... " B The essential question that has to be determined is whether cesses levied under the aforesaid Bengal Acts fell within the mis chief of s. 10 ( 4) of the Act. cesses are not Jevied on the profits or gains of any business, pro fession or vocation but it has been claimed on behalf of Revenue and that contention was accepted throughout C ccsses are assessed on the basis of such profits or gains and there It is common ground fore they would be covered by the said provision. 0 E tramways, According to the preamble to the Bengal Cess Act 1880, the road and works cesses were levied on immovable property i1Cter alia to provide for the construction and maintenance of roadi and other works of public utility. Under s. 5 all immovable property with certain exceptions was to be liable to the payment of road cess and public works cess. Section 6 laid down that thC!ie cesses were to be assessed on the annual value of lands and until provi sion to the contrary was made by the Parliament on the annual net profits from mines, quarries, railways and other immovable property on such rates as were to be detennined the manner irescribed. Under s. 72 the Collector of the district the owner etc. of every mine, had to serve a notice upon quarry . . . . . . . . . . . . and immovable property requiring him to lodge a return of the net annual profits of such property cal culated on the average of the annual net profits thereof for tho last three years for which accounts had been made up. Section 75 F provided for a contingency where a return was not furnished with in the prescribed period. The Collector in that case or if he found that the return made was untrue or incorrect was to proceed to ascertain and determine by such ways or means as seemed expe dient the annual net profits of such property calculated as afore If the Collector was unable to ascertain the annual net said. G profits he could ascertain and determine the value of the property and thereupon determine 6 % of such value to be the annual net (Rural) profits thereon ( s. 7 6) . The scheme of the Bengal to. The Primary Education Act 1930 may next be referred preamble to that Act was as follows : - H "Whereas it is expedient to make better provision for the progressive expansion and for the management and control of primary education in Bengal so as to make it available to all children and with a view to make it compulsory within ten years ..••.• rural areas 514 SUPREME COURT REPORTS [1972] 1 s.c.R. According to s. 29 all immovable property on which and public works cesses were assessed were to be liable to payment of primary education cess. The rates on which education cess was to be levied varied according as the property consisted of mines and quarries or of tramways, railways and other immovable property. As regards mines and quarries it was be levied at the rate of three and a half pice on each rupee of B annual net profits. road A Now it is quite clear that the aforesaid cesses would be allow able deductions either under clause (ix) or clause (xv) of sub-s. (2) of s. IO unless they fell withins. I0(4). We have already referred to the provisions of both Acts under which the cesses are levied which show that their assessment is not made at a propor- C tion of the profits of the assessee's business. What has to be determined is whether the assessment of the cesses is made on the basis of any such profits. The words "profits and gains of any business, profession or vocation" which are employed in s. IO( 4) can, in the context, have reference only to profits or gains as determined under s. IO and cannot cover the net profits or gains D arrived at or determined in a manner other than that provided by s. l 0. The whole purpose of enacting sub-s. ( 4) of s. IO appears to be to exclude from the permissible deductions under clauses (ix) and (xv) of sub-s. ( 2) such cess, rate or tax which is levied on 'the profits or gains of any business, profession or vocation or is assessed at a proportion of or on the basis of such profits or gains. cess or rate the assessment of which would follow the determina tion or assessment of profits or gains of any business, profession or vocation in accordance with the provisions of s. 10 of Act. In other words sub-s. ( 4) was meant to excluee a tax or a E .The road cess and public works cess are to be assessed on the F annual net profits under ss. 72 to 76 of the Cess Act 1880. The net annual profits have to be calculated on the average of the net pNfits for the last three years of the mine or the quarry and if the annual net profits of the property cannot be ascertained in aforesaid manner then it is left to the Collector to determine the value of the property first in such maner as he considers expedient and determine 6 per cent on that value which would be deemed to G be the annual net profits. The Cess Act of 1930 follows the same pattern so far as the ascertainment of annual net profits is con cerned. These profits arrived at according to the provisions of the t_wo Cess Acts can by no stretch of reasoning be equated to the It is not profits which are determined under s. 10 of the Act. possible to see, therefore, how s. IO( 4) could be applicable at all H in the.presynt case. Thus on the language of the provisions both of the Act and the two Cess Acts the applicability of s. IO( 4) cannot be attracted. But even according to the decided cases • A B c D E F G H JA!PURJA COLLIERIES v. C.I.T., WEST BENGAL (Grover,!.) 515 such cesses cannot fall within s. 10( 4). The Privy Council Commissio1u>r of Income tax, Bengal v. Gurupada Dutta & Others(1) had to consider whether the rate imposed under provisions of the Bengal Village Self Government Act 1919 on a person occupying a building and using the same for the purpose of business was an allowable deduction in computing the profits of the business under s. 10 of the Act. Their Lordships laid down the law in the following words : ''It will be noted that, in the absence of the neces sary powers and machinery, which are not provided by the Act, the estimate of the annual income from business can only proceed on a rough guess, which is in no way comparable with the ascertainment of profits and gains under the Income-tax Act, and, in the opinion of their Lordships, the inclusion of this element of business income as part of the "circumstances" of the assessee with a view to the imposition of the union rate does not fall within sub-section (4) of Section 10 of the Income tax Act. is not "levied on the profits or gains", which clearly implies an ascertainment of such profits and gains, and the words "assessed .......... on the basis of any such profits or gains" in the later part of the sub-section must also be so limited. No such ascertainment of the profits and gains of the busjness can be undertaken for the purposes of the uniou rate. The main argument for the Crown, therefore fails." It is conceded that the union It has been followed by In our judgment this decision is quite apposite and fully covers the points under consideration. Allahabad High Court in Simbholi Sugar Mills Ltd. v. Commis sioner of Income tax, U.P. & V.P.( 2 ) in which the question related to the deductibility of tax payable under the U.P. District Boards Act 1922 which was imposed on persons assessed accord ing to their circumstances and property. in Com missioner of Income tax, Delhi and Rajasthan v. Banarsi Dass & Sons('), the Punjab High Court held that a tax imposed under the U.P. District Boards Act on circumstances and property could be legitimately claimed as an allowance and the above decision of the Privy Council was followed. In the Income tax Act 1961, s. 28 relates to the income which shall be chargeable to income tax under the head "profits and gains of business or profession". Section 30(b) (ii) is equivalent to cl. (ix) of s. 10(2) of the Act. Section 40(a)(ii) corresponds to s. 10(4) of the Act. It significant that in spite of the decision of the Privy Council Similarly (!) 14 l.T.R. JOO. (2) 45 1.1'.R. 125; · (3) 61 1.T.R. 414. 516 SUPREME COURT REPORTS [19 72] l S.C.R. Gurupada Dutta's case(') the Parliam~nt did not make any A change in the language of the provisions corresponding s. It can, therefore, legitimately be said that the view of the 10 ( 4). Privy Council with regard to the true scope .and ambit of s. 10( 4) of the Act was accepted. We are unable to concur in the reason- ing or the conclusion of the Calcutta High Court in Commissioner of Income tax, West Bengal, v. West Bengal Mining Co.(") in B which it was held that the two cesses being related to profits would attracts. 10( 4) of the Act. In the result Civil Appeals Nos. 1102 to 1105 of 1971 which ,1 re by special leave are allowed and the answers returned by the . The questions referred shall stand High Court are discharged. answered in favour of the assessees and against the Revenue. The c assessee shall be entitled to their costs in this Court. Civil Appeals Nos. 1910 to 1912 of 1968 and 2112 of 1968 in which the certificates are defective and have to be revoked shall stand dismissed G.C. Ordered accordingly. (I) 14 I. T. R. 100. (2) 67 l.T.R. 29~.