RAJASTHAN R.S.S. & GINNING MILLS FED.LTD Vs DY. COMMNR. OF INCOME TAX, JAIPUR
Bench: ANIL R. DAVE,SHIVA KIRTI SINGH
Case number: C.A. No.-003880-003880 / 2003
Diary number: 7095 / 2003
Advocates: SUSHIL KUMAR JAIN Vs
RR-EX-PARTE
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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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