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Saturday, May 10, 2014

Sec.72 of Income Tax - Amalgamation of four co-operative societies - accumulated losses of four societies carried forward - Set off against the profits of appellant society as per section 72 of INCOME TAX- not accepted from assessing officer to all lower tribunals - Apex court held that sec.72 apply only to company but not to society and held 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. - Dismissed the appeal = RAJASTHAN R.S.S. & GINNING MILLS FED. LTD. …APPELLANT VERSUS DY. COMMISSIONER OF INCOME TAX, JAIPUR. ....RESPONDENT = RAJASTHAN R.S.S. & GINNING MILLS FED. LTD. …APPELLANT= 2014 ( April.Part) http://judis.nic.in/supremecourt/filename=41495

Sec.72 of Income Tax - Amalgamation of four co-operative societies - accumulated losses of four societies carried forward - Set off against the profits of  appellant society as per section 72 of INCOME TAX- not accepted from assessing officer to all lower tribunals - Apex court held that sec.72 apply only to company but not to society and held 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. - Dismissed the appeal =

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.
the  appellant  society,  being  an
        amalgamated society, must get benefit of setting off  losses  of
        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  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 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.
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.
 2014 ( April.Part) http://judis.nic.in/supremecourt/filename=41495
ANIL R. DAVE, SHIVA KIRTI SINGH
                                                    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




                              1 J U D G M E N T



1 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 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:


        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 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.


     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  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  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  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.
    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 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
        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  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 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.
    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 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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