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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
———————–
12

 

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