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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3880 OF 2003

RAJASTHAN R.S.S. & GINNING MILLS FED. LTD.             …APPELLANT

        VERSUS

DY. COMMISSIONER OF INCOME TAX, JAIPUR.            ....RESPONDENT

J U D G M E N T

ANIL R. DAVE, J.

1. Being  aggrieved  by  the  judgment  delivered  on  19th  

September, 2002 in Income Tax Appeal No.19 of 2001 by  

the High Court of Judicature of Rajasthan, Jaipur Bench,  this  

appeal has been filed by the assessee, which is a co-operative  

society.  When the appeal was called out for hearing, none  

had appeared for the appellant co-operative society.   Upon  

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perusal of the record, we found that the learned advocate who  

had appeared earlier  had become a senior  counsel.   In the  

circumstances, we had requested his colleague to appear in  

the matter but he had shown his reluctance to appear for the  

appellant society, especially in view of the fact that though  

more  than two letters  had been addressed to  the  appellant  

society for sending vakalatnama or for making appropriate  

arrangement  for its  appearance in  this  Court,  the  appellant  

society had not even cared to reply to the said letters.  As the  

appellant society is a society wherein the State of Rajasthan  

has substantial  interest,  we had requested learned advocate  

Mr.  Puneet  Jain  to  assist  the  court  by  appearing  for  the  

appellant  society   and  in  pursuance  of  the  request  of  this  

Court, he had rendered his valuable assistance by appearing  

for the appellant society.

2. The facts giving rise to the present appeal in a nut-shell are as  

under:

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There  were  four  co-operative  societies  in  the  State  of  

Rajasthan  wherein  the  Government  of  Rajasthan  had  

substantial  share  holding,  namely  -   (i)  Rajasthan  Co-

operative Spinning Mills  Ltd.;  (ii)   Gangapur Co-operative  

Spinning Mills Ltd.; (iii) Ganganagar Co-operative Spinning  

Mills  Ltd.;  and (iv) Gulabpura Cotton Ginning & Pressing  

Sahkari Samiti Ltd.  An administrative decision was taken by  

the  Government  of   Rajasthan  to  amalgamate  all  the  

aforestated  co-operative  societies  into  the  appellant  co-

operative society, namely Rajasthan Rajya Sahkari Spinning  

& Ginning Mills Federation Ltd w.e.f. 01.01.1993.

Upon amalgamation of the said societies into the appellant  

society, the registration of the said four co-operative societies  

had been cancelled and all the assets and liabilities of the said  

four societies had been taken over by the appellant society by  

virtue of the aforestated amalgamation. The aforestated four  

societies were not sound  financially and they had substantial  

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accumulative losses.  After the amalgamation of the four co-

operative societies into the appellant society, when Income-

Tax returns for the assessment years 1994-95 and 1995-96  

were  filed  by  the  appellant  society,  the  appellant  society  

wanted  to  get  the  accumulated  losses  of  the  aforestated  

societies, of about Rs.2,68,39,504/-, carried forward, so that  

the same could be set off against the profits of the appellant  

society under the provisions of Section 72 of the Income Tax  

Act, 1961 (hereinafter referred to as ‘the Act’).

The assessing officer negatived the appellant’s claim for the  

reason that the said societies were not in existence after their  

amalgamation into the appellant  society.   As the said four  

societies  were  not  in  existence,  according to  the  assessing  

officer, their accumulated losses could not have been carried  

forward  or  adjusted  against  the  profits  of  the  appellant  

society. Assessment orders were passed accordingly.

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3. Being  aggrieved  by  the  above  stated  assessment  orders,  

appeals  were  filed  before  the  CIT  (Appeals)  and  the  CIT  

(Appeals) dismissed the said appeals.  Further appeals were  

filed  before  the  Income  Tax  Appellate  Tribunal  but  the  

Tribunal also dismissed the appeals.

4. Being  aggrieved  by  the  common  order  passed  by  the  

Tribunal,  the  appellant  filed  Income Tax Appeal  No.19 of  

2001 before the High Court of Rajasthan and the said Income  

Tax Appeal was also dismissed and therefore, the appellant  

has approached this Court by way of the present appeal.

5. The learned counsel appearing for the appellant society had  

submitted that the assessing officer and the authorities below,  

confirming the view taken by the assessing officer, are not  

correct  for  the  reason  that  upon  amalgamation  of  the  

aforestated  four  co-operative  societies  into  the  appellant  

society, by virtue of the provisions of Section 16(8) of the  

Rajasthan Co-operative Societies Act, rights and obligations  

of the societies so amalgamated would not be affected and  

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therefore, all the rights which the societies had with regard to  

carrying forward of their losses would continue, and as the  

said  societies  had  been  amalgamated  into  the  appellant  

society, the appellant society ought to have been permitted to  

set off the losses suffered by the amalgamated societies.  The  

learned counsel had relied upon Section 16(8) of Rajasthan  

Co-operative  Societies  Act,  1965  which  is  reproduced  

hereinbelow:

“16(8)  The  amalgamation,  transfer  or  division  made  under  this  section  shall  not  affect  any  rights  or  obligations of the societies so amalgamated, or of the  society  so  divided  or  of  the  transferee,  or  render  defective any legal proceedings which might have been  continued  or  commenced  by  or  against  the  societies  which  have  been  amalgamated  or  divided  or  the  transferee; and accordingly such legal proceedings may  be  continued  or  commenced  by  or  against  the  amalgamated  society,  the  new  societies  or  the  transferee, as the case may be.”

6. The  learned  counsel  had  further  submitted  that  reading  

Section 72(1) of the Act with Section 16(8) of the Rajasthan  

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Co-operative  Societies  Act,  1965  clearly  denotes  that  the  

appellant assessee had a right to carry forward losses incurred  

by the amalgamating societies and set off the business losses  

of  the  said  societies  against  the  profits  and  gains  of  the  

appellant society.

7. He had further submitted that the word ‘company’ used in  

Section 72(A)  of the Act should be given wide interpretation  

so as to include societies in the term ‘company’ because like  

companies, societies also have a distinct legal personality and  

there is no reason for the authorities under the Act to give  

different treatment to co-operative societies.

8. It had further been submitted that the appellant society had a  

vested right to get the accumulated losses of the amalgamated  

societies adjusted against the profits of the appellant society  

and the said vested right could not have been taken away by  

the assessing officer. So as to substantiate his submission, he  

had  relied  upon  the  judgment  delivered  in  the  case  of  

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Commissioner  of  Income  Tax v. M/s.  Shah  Sadiq  and  

Sons  1987(3) SCC 516.

9. He had, therefore, submitted that the appeal deserved to be  

allowed and the appellant society should be permitted to set  

off accumulated losses of the amalgamating societies against  

the profits of the appellant society.

10. On the  other  hand,  the  learned  counsel  appearing  for  the  

authorities of the Income Tax Department had submitted that  

the concurrent findings of the fact, and the views expressed  

by  all  the  authorities  below  and  the  High  Court  were  

absolutely correct and therefore, the impugned judgment did  

not require any interference.  It had been submitted by him  

that the registration of the amalgamating societies had been  

cancelled  upon the  amalgamation and as  they were  not  in  

existence  at  the  time  when  the  appellant  society  was  

assessed,  there  was  no  question  of  carrying  forward  

accumulated  losses  of  the  amalgamating  societies  and  

adjusting them against the profits of the appellant society.

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11. He had drawn our attention to the provisions of Section 72  

and 72A of  the  Act.   He had further  submitted  that  upon  

conjoint reading of Section 72 and 72A of the Act, it is clear  

that  the  co-operative  societies  cannot  get  the  benefit  of  

carrying  forward  and setting  off  accumulated  losses  if  the  

said  societies  were  not  in  existence.   Only  in  case  of  a  

‘company’,  the  benefit  of  set  off  could  be  availed  by  an  

amalgamated  company,  if  the  amalgamating  company  had  

accumulated losses which could have been carried forward  

and adjusted against the profits of the amalgamated company  

in accordance with the provisions of  the Act.

12. So  as  to  substantiate  his  submissions,  he  had  relied  upon  

judgments delivered in the case of  The Commissioner of  

Income Tax, Lucknow v. Sh. Madho Pd. Jatia      1976(4)  

SCC  92  and   M/s.  Baidyanath  Ayurved  Bhawan  (Pvt.)  

Ltd.,  Jhansi  v.   The  Excise  Commissioner,  U.P.  and  

others  1971(1)  SCC  4.   He  had  also  relied  upon  the  

judgment delivered in the case of   Commissioner of Income  

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Tax, Bombay v.  Maharashtra Sugar Mills Ltd., Bombay  

1971  (3)  SCC  543.     Upon  perusal  of  the  aforestated  

judgments, which support the learned counsel appearing for  

the  Income  Tax  authorities,  it  is  clear  that  the  tax  statute  

should be interpreted very strictly as there is no equity in tax  

matters and nothing can be read which is not in the section.

13. Thus,  the  learned  counsel  appearing  for  the  respondent  

authorities had submitted that the impugned judgment is just  

and  correct  and  therefore,  the  appeal  deserved  to  be  

dismissed.

14. We  had  heard  the  learned  counsel  and  had  also  perused  

records pertaining to the case and had also gone through the  

judgments referred to by them, and upon hearing them we are  

of the view that the judgment delivered by the High Court is  

absolutely just and proper.

15. The main submission of the learned counsel appearing for the  

appellant  society  was  that  the  appellant  society,  being  an  

amalgamated society, must get benefit of setting off  losses of  

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the co-operative societies which had been amalgamated into  

the  appellant  society.   According  to  him by  virtue  of  the  

provisions  of  Section  16(8)  of  the  Rajasthan  Co-operative  

Societies Act, 1965, read with Sections 72 and 72(A) of the  

Act,  the  accumulated  losses  of  the  amalgamating  societies  

should have been permitted to be adjusted or set off against  

the profits of the appellant society.  His main submission was  

that by virtue of Section 16(8) of the Rajasthan Co-operative  

Societies Act, 1965 all legal proceedings initiated against or  

by the amalgamating co-operative societies would continue  

and therefore, right of the amalgamating societies with regard  

to getting their losses carried forward and set off against the  

profits of the amalgamated society would continue.

16. We are not in agreement with the submissions made by the  

learned counsel appearing for the appellant for the reason that  

for the purpose of getting carried forward losses adjusted or  

set off against the profits of subsequent years,  there must be  

some  provision  in  the  Act.  If  there  is  no  provision,  the  

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societies which are not in existence cannot get any benefit.  

The  losses  were  suffered  by  the  societies  which  were  in  

existence  at  the  relevant  time  and  their  existence  or  legal  

personality had come to an end upon being amalgamated into  

another society.

17. The normal principle is that a non-existent person cannot file  

an income tax return and therefore, cannot carry forward its  

losses  after  its  existence comes to an end.   All  those four  

societies, upon their amalgamation into the appellant society,  

had ceased to  exist  and registration  of  those  societies  had  

been cancelled.  In the circumstances, those societies had no  

right under the provisions of the Act to file a return to get  

their earlier losses adjusted against the income of a different  

legal personality i.e. the appellant society.

18. So  far  as  companies  are  concerned,  there  is  a  specific  

provision in the Act that upon amalgamation of one company  

with another, losses of the amalgamating companies can be  

carried forward and the amalgamated company can get those  

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losses set off against its profits subject to the provisions of  

the Act.  This is permissible by virtue of Section 72 A of the  

Act but there is no such provision in the case of co-operative  

societies.

19. It is pertinent to note that such a provision has been made  

only with regard to amalgamation of companies and later on  

similar provisions were made with regard to banks, etc., but  

at the relevant time there was no such provision which would  

permit  the  amalgamating  co-operative  society  to  carry  

forward  and  adjust  such  losses  against  the  profits  of  the  

amalgamated co-operative society.

20. The submission made by the learned counsel appearing for  

the appellant with regard to discrimination and violation of  

Article 14 of the Constitution of India would also not help the  

appellant, as in our opinion, there is no discrimination.   The  

societies  and  companies  belong  to  different  classes  and  

simply  because  both  have  a  distinct  legal  personality,  it  

cannot be said that both must be given the same treatment.   

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21. We agree with the view expressed by the High Court that as  

there  is  no  provision  under  the  Act  for  setting  off  

accumulated losses of the amalgamating societies against the  

profits  of  the  amalgamated  society,  the  appellant  society  

could not have got the benefit of carrying forward losses of  

the erstwhile societies which were not in existence during the  

relevant Assessment Year.  

22. We are also of the view that in all the tax matters one has to  

interpret taxation statute strictly. Simply because one class of  

legal  entities  are  given  some  benefit  which  is  specifically  

stated in the Act  does not mean that  the legal  entities  not  

referred to in the Act would also get the same benefit.  As  

stated by this Court on several occasions, there is no equity in  

matters of taxation. One cannot read into a section which has  

not been specifically provided for and therefore, we do not  

agree with the submissions of the learned counsel appearing  

for the appellant and we are not prepared to read something  

in  the  section  which  has  not  been  provided  for.   The  

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judgments  referred  to  hereinabove support  the view which  

we have expressed here.

23. For the reasons stated hereinabove, the appeal is dismissed  

with no order as to costs.                                       

   …………………………….,J.                          (Anil R. Dave)

                                       …………………………….,J.         (Shiva Kirti Singh)

New Delhi; April 29, 2014

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