Britannia Industries Ltd v. Commissioner Of Income Tax, West Bengal, Kolkata And Anr

BRITANNIA INDUSTRIES LTD. COMMISSIONER OF INCOME TAX, WEST BENGAL, KOLKATA AND ANR. OCTOBER 5, 2005 (B.P. SINGH, TARUN CHATTERJEE AND AL TAMAS KABIR, JJ.] Income Tax Act, 1961-Sections 30-36, Section 37-Benefit of allowing expenditure incurred in respect of buildings and furniture used for business C of profession of assessee-Held, does not extend to expenditure incurred in respect of guest houses. The appellant sought for benefit of exemption of expenditure incurred in respect of guest houses which was not allowed by the authorities. The claim was rejected by High Court based on other D judgments by same High Court. On appeal, appellant contended that Sections 30 to 32 deal with specific types of expenditure which are allowable in terms of the said provisions, whereas Section 37 deals with all other expenditure, not being expenditure described in Sections 30 to 36 of the Act, subject to the conditions; that Section 37 contains general provisions allowing deductions in respect of expenditure not included E within Sections 30 to 36 of the Act; that since expenditure incurred by the assessee towards payment of rent, rates, taxes, repairs and insurance of premises, buildings and furniture used for the purposes of the business or profession has been provided for specifically under sections 30, 31 and 32 of the Act, by virtue of the non-obstante clause used in Sub-section (1) p of Section 37 such expenses could not again be referable to Section 37 and the different provisions thereof; that in other words, since the aforesaid expenses had been specifically allowed to be deducted the said benefit could not be taken away by the word "including" in the expression "residential accommodation including any accommodation in the nature of a guest house" in Sub-section (3) of the said Act; that having allowed a partial G benefit, it could not have been the intention of the Legislature to take away the entire benefit by incorporating Sub-section (4) with effect from lst April, 1970; that such a view would be borne out from the fact that the provisions relating to the restrictions imposed with regard to expenses 2 SUPREME COURT REPORTS [2005) SUPP. 4 S.C.R. A incurred towards the maintenance and other expenditure of guest houses run by companies, were sought to be omitted with effect from 1st April, 1998; Section 37(4) of the Act is a non-obstante clause in relation to Sub-section (I) and Sub-section (3) of Section 37 and if any expenditure or allowance was made allowable in other sections of the Act, the same could B not be withdrawn or denied to the assessee because of the prohibitory provisions of Section 37(4); that the uniform decision of most of the High Courts appears to be that since the expenditure incurred for rents, rates, taxes, repairs and insurance of buildings and premises and furniture used for the purposes of business or profession, have been specifically provided for in Sections 30, 31and32 of the Act, benefits thereof could not be denied C to the assessee under the relevant provisions of Section 37 of the Act; and that the judgment under appeal did not give any independent reasoning but was rendered following the decision of the Calcutta High Court and could not therefore be sustained. Respondent contended that the provisions of Section 37 would have D to be read in isolation from the provisions of Sections 30 to 36 of th•~· Act as contemplated by the non-obstante clause in Section 37(1); that the provisions of Section 37 had been correctly interpreted in the two decisions of the Calcutta High Court; that it was the clear intention of the Legislature to exclude the benefit of deduction in respect of guest houses E which were being run and maintained by companies in a lavish manner; that while premises and buildings had been referred to in general terms in Sections 30, 31 and 32 of the Act, guest houses had been separately categorized for the purposes of Section 37 which would be quite evident from the manner in which expenses, including rent and maintenance, were sought to be withdrawn in respect of such guest houses; that the intention F of the Legislature would be further clear from the insertion of Sub-section (5) which brought within the scope and ambit of Section 37(4) all accommodation by whatever name called in the nature of a guest house. Dismissing the Appeal, the Court G HELD : 1. The intention of the Legislature appears to be clear and unambiguous and was intended to exclude the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purposes of a guest house of the nature indicated in Section 37(4). When the language of a statute is clear and unambiguous, the courts are to H interpret the same in its literal sense and not to give it a meaning which would cause violence to the provisions of the statute. [15-G, H; 16-A[ 2. If the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodations used for the purposes of business or profession, then it would not have felt the need to amend the provisions of Section 37 so as to make a definite distinction with regard to buildings used as guest houses as defined in Section 37(5) and the B provisions of Sections 31 and 32 would have been sufficient for the said purpose. It is another matter that at a subsequent point of time, the Legislature felt it necessary to omit the said provisions, but they were in the statute book at the relevant point of time. The rigours of the same cannot be avoided in the instant case. [16-A, B; D) C Commissioner of Income Tax v. Biswanath Tea Co. Ltd., (2003) 264 ITR 166, approved. Commissioner of Income Tax v. Chase Bright Steel Ltd., (1989) 1771TR 124; Century Spinning and Manufacturing Co. Ltd. v. Commissioner of Income D Tax, (1991) 189 ITR 660; Commissioner of Income Tax v. Ahmedabad Manufacturing and Calico Printing Co. Ltd., (1992) 197 ITR 538; Commissioner of Income Tax v. Travancore Cements ltd., (1999) 240 ITR 816; Commissioner of Income Tax v. South India Viscose Ltd., (2003) 259 ITR 107; Kesoram Industries and Colton Mills Ltd. v. Commissioner of Income Tax, (1991) 191 ITR 518 and Commissioner of Income Tax v. Upper Ganges E Sugar Mills Ltd., (1994) 206 ITR 215, distinguished. Commissioner of Income Tax v. Instrumentation Ltd., (2002) 258 ITR 513 and Commissioner of Income Tax v. Mathurantakam Co-operative Sugar Mills ltd., (2000) 241 ITR 817, referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 24 I 5 of 2004. From the Judgment and Order dated 13.8.2002 of the Calcutta High Court in LT.A. No. 46 of 2002. Dr. Debi Prasad Pal, S.S. Ray, Shibashish Misra and Ms. Rakhi Ray G for the Appellant. Rajeev Dutta, V. Ramasubramanian, S. Beno Bencigar and B.V. Balaram Das for the Respondents. The Judgment of the Court was delivered by SUPREME COURT REPORTS (2005] SUPP. 4 S.C.R. ALT AMAS KABIR, J. The question which has been raised in this Civil Appeal appears to have been considered by different High Courts which have expressed divergent views in the matter. The said question has come up before this Court for consideration to resolve the anomalous situation. The dispute in the instant case is with regard to disallowance of a sum B of Rs.31,38,017 for the Assessment Year 1994-1995, which sum was claimed by the assessee as expenses towards rent, repairs, depreciation and maintenance of a guest house which was purportedly used in connection with the business of the company. Chapter IV of the Income Tax Act, 1961 (hereinafter referred to as 'the c Act'), deals with computation of total income and is divided into several parts. Part 'D', beginning with Section 28, deals with profits and gains of business or profession. Sections 30 to 36 relate to certain deductions which are allowed inter a/ia, on account of rent, rates, taxes, repairs and insurance in respect of premises and buildings used for the purposes of business or D profession and includes (a) where the premises are occupied by the assessee- (i) as a tenant the rent paid for such premises; and further if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs; (ii) otherwise than as a tenant, the amount paid by him on account of current repairs to the premises; (b) any sums paid on account of rent, rates, local rates, municipal taxes; ( c) the amount of any premises paid in respect of insurance against risk of damage destruction of the premises paid in respect of insurance against risk of damage destruction of the premises. In the explanation to Section 30, it has been indicated that the amounts paid G on account of the items indicated above shall not include any expenditure in the nature of capital expenditure. Sections 31 and 32 deal with the amounts which are allowable in respect of repairs and insurance of machinery, plant and furniture used for the purposes of the business or profession and in respect of depreciation of buildings, H machinery, plant or furniture, being tangible assets along with other intangible assets. The facts involved in this case do not attract the provisions of Sections 30 to 36 of the Act, but have been referred to on account of reference made thereto under Section 37 of the Act which is important for our purpose. Jn order to appreciate the arguments advanced on behalf of the appellant, the provisions of Section 3 7 as they stood during the relevant assessment year B are set out herein below :- General. "37(1) Any expenditure (not being expenditure of the nature described in Sections 30 to 36 and not being in the nature of capital C expenditure or personal expenses of the assessee ), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "profits and gains of business or profession". (2) Notwithstanding anything contained in sub-section (I), no expenditure in the nature of entertainment expenditure shall be allowed D in the case of a company, which exceeds the aggregate amount computed as hereunder:- (2A) Notwithstanding anything contained in sub-Section (I) or sub-section (2), no allowance shall be made in respect of so much of the expenditure in the nature of entertainment expenditure incurred by · any assessee during any previous year which expires after the 30th day of September, 1967, as is in excess of the aggregate amount computed as hereunder:- So, however, that the allowance shall in no case exceed Rs. 50,000. Provided that where the previous year of any assessee falls partly before and partly after the 30th day of September, 1967, the allowance in respect of such expenditure incurred during the previous year shall not exceed- (a) In the case of a company- (i) in respect of such expenditure incurred before the l st day of October, 1967, the sum which bears to the aggregate amount computer · at the rate or rates specified in sub-Section (2), the same proportion as the number of days comprised in the period commencing on the I st day of such previous year and ending with the 30th day of September, 1967, bears to the total number of days in the previous year; (ii) in respect of such expenditure incurred after the 30th day of A September, 1967, the sum which bears to the aggregate amount computed at the rate or rates specified in this sub-section, the same proportion as the number of days comprised in the period commencing on the !st day of October, 1967, and ending with the last day of the previous year bears to the total number of days in the previous year; B .. (b) in any other case- (i) in respect of such expenditure incurred before the I st day of October, I 967, the amount admissible under sub-section (I); (ii) in respect of such expenditure incurred after the 30th day of C September, 1967, the sum which bears to the aggregate amount computed at the rate or rates specified in this sub-section, the same proportion as the number of days comprised i