National Dairy Development Board v. Addl. Commissioner Of Income Tax

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 1087 of 2008 =============================================NATIONAL DAIRY DEVELOPMENT BOARD VersusADDL. COMMISSIONER OF INCOME TAX ============================================= Appearance: MR SN SOPARKAR, SENIOR ADVOCATE WITH MR BANDISH SOPARKAR FOR MRS SWATI SOPARKAR(870) for Appellant No. 1MR VARUN K PATEL for Opponent No.1============================================= CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMARand HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI Date : 12/10/2022ORAL ORDER (PER : HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR) 1. This Court while admitting the appeal had formulated the following substantial questions of law : “(B) Whether, on the facts and in thecircumstances of the case, the ITAT was right inlaw in confirming disallowance of deduction u/s.36(1)(viii) for Rs.9,90,00,000? (C) Whether, on the facts and in thecircumstances of the case, the ITAT was right inlaw in holding that `dairying' is not industry oragricultural development or development ofindustrial facility for the purpose of Section36(1)(iii) of the Income Tax Act, 1961? (D) Whether, on the facts and in thecircumstances of the case, the ITAT was right inlaw in holding that in absence of share capital, deduction u/s. 36(1)(viii) cannot be allowed? (E) Whether, on the facts and in thecircumstances of the case, the ITAT was right inlaw in concluding that grant given to variouscooperative societies is not deductibleexpenditure u/s.36(1)(xii) of the Act and holdingthat the same are not in the nature ofexpenditure? (F) Whether, on the facts and in thecircumstances of the case, the ITAT was right inlaw in holding that in absence of approval todeed of variation the payment ofRs.5,61,56,408/- being contribution made toNational Dairy Development Board EmployeesGroup Gratuity Funds cannot be allowed?” 2. The assessee is a corporate body created by an Act of Parliament called National Dairy Development Act,1987. Assessee claims the status of a company as per thedefinition of company under the provisions of the IncomeTax Act. The assessee does not have authorized, issued orpaid up share capital. It has not been incorporated as acompany under the Companies Act, 1956. The assesseehas no shareholders either in the Government sector or inthe banking/institutional sector. 3. The issue involved in this appeal is relatable tothe assessment year 2003-04. The return of income filed by the assessee discloses that it had declared taxableincome of Rs.81,03,26,249/-, which came to be processedunder Section 143(1) of the Act and refund ofRs.15,26,18,119/- came to be issued to the assessee.Subsequently, further refund of Rs.16,13,021/- wasissued. After issuance of notice under Section 143(2) ofthe Act, the scrutiny assessment proceeding wascommenced and assessment order came to be passed on31.03.2003. The deduction claimed under section 36(1)(viii) of the Act for Rs. 9,90,00,000/- was disallowed onthe ground that assessee was notified as a PublicFinancial Institution (for short ‘PFI’) on 23.02.2004namely it falls in the subsequent year; the activity of dairybusiness cannot be termed as agricultural activity;finances advanced to dairy cooperatives could not becovered under the category of ‘milk food’ as classifiedunder Clause 27 of the of the First Schedule of theIndustrial (Development and Regulation) Act, 1951(hereinafter referred to as ‘the Industrial Act’ for short);the mandate of the provision required that the aggregate of the amount carried to special reserve account createdfor the purpose should not exceed twice the amount ofthe paid up share capital, it could not create any reserveas there is no paid up share capital and therefore, thelimit upto which special reserve can be created wasindeterminable vide assessment order dated 15.06.2005(Annexure ‘A’). The assessee being aggrieved by the saidorder filed an appeal before CIT (Appeals), who dismissedthe same by order dated 18.01.2006 affirming the orderof the Assessing Officer. Further appeal before theTribunal did not yield any result to the appellant –assessee and the claim of the appellant came to benegatived by the ITAT vide order dated 08.08.2007(Annexure C) by affirming the order of the AssessingOfficer and CIT (Appeals). However, the Tribunal heldthat claim of the assessee as regards status of PublicFinancial Institution, it had applied on 10.07.2002 i.e.within the year of assessment order under considerationand the notification granting status of PFI was on23.02.2004, which relates back to the date of application and the time taken by the Department of Company LawAffairs was not attributable to the assessee. Hence, theITAT did not agree with the view expressed by CIT(Appeals) on the issue of status of the assessee as PFI.However, it held that conditions prescribed under section36(1)(viii) were not complied by the assessee and held assuch it would not be entitled to the deduction. Hence,this Appeal. RE: SUBSTANTIAL QUESTION OF LAW (E) : 4.This substantial question of law (E) is taken upat first for adjudication and it is being held that it wouldnot arise, inasmuch as against the order of the Tribunaldated 08.08.2007, present appeal has been filed andduring the pendency of the present appeal, assessee hadfiled a miscellaneous application before the ITAT in MA214/AHD/2007, which came to be allowed vide orderdated 28.08.2009, whereunder Tribunal has recalled itsearlier order on this issue and remitted the matter to theAssessing Officer in ITA No.454/AHD/2006 on 21.04.2011 and as a result of the same, Assessing Officer undertookthe exercise of redoing the assessment on this issuenamely disallowance of Rs.10,31,34,920/- given to variouscooperative societies which was claimed as deductibleexpenditure under Section 36(1)(xii) of the Income TaxAct, 1961 (for short ‘the Act’), and it came to be restrictedor in other words the disallowance was retained to theextent of Rs.61,08,550/- which triggered the second roundof litigation and ultimately landed before the ITAT in ITANo.2098/AHD/2014 and Tribunal by order dated31.05.2017 upheld the contention of the assessee and thedisallowance made by the AO came to be set aside. TheRevenue has not filed any appeal against the said order ofthe Tribunal and thereby the finding recorded by the ITATin ITA No.2098/AHD/2014 dated 31.05.2017 has attainedfinality. In that view of the matter, examining,adjudicating and answering the substantial question oflaw No.’E’ would only be academic in nature and as such,we do not propose to examine the same in the teeth ofsubsequent development that has taken place. 5.We have heard the arguments of Mr. S.N.Soparkar, learned Senior Advocate assisted by Mr.Bandish Soparkar, learned advocate appearing for theappellant and Mr. Varun K. Patel, learned StandingCounsel appearing for the respondents on substantialquestions of law ‘B’ to ‘D’ and ‘F’. We have heard the arguments of Mr. S.N. 5.We have heard the arguments of Mr. S.N.Soparkar, learned Senior Advocate assisted by Mr.Bandish Soparkar, learned advocate appearing for theappellant and Mr. Varun K. Patel, learned StandingCounsel appearing for the respondents on substantialquestions of law ‘B’ to ‘D’ and ‘F’. We have heard the arguments of Mr. S.N. 6. It is the contention of Mr. Soparkar, learnedadvocate appearing for the assessee that Tribunal havingaccepted that assessee is a specified entity as definedunder clause (a)(i) of Explanation to Section 36(1)(viii), itought to have further held that activities carried on bythe assessee would be an activity of agriculturaldevelopment and as such it would fall within thedefinition of eligible business as defined under clause (b)to Explanation to section 36(1)(viii) of the Act. He wouldfurther contend that meaning of agricultural developmentas defined under the then existing section 35C of the Actis identical to the words or expression found in sub-clause(A) of clause (b) to Explanation to section 36(1)(viii) and as such denying the claim for deduction forRs.9,90,00,000/- by disallowing the claim is erroneousand liable to be quashed. Hence, they have prayed foranswering the substantial questions of law in favour ofthe assessee. 6.1They would contend that as long as thebusiness entity namely recipients carry on the activity ofagricultural development for which the finance is beingprovided by the assessee, AO could not have disallowedthe deduction claimed in that regard by the assessee asrecipients are carrying on the agricultural activity. Hewould contend that AO, CIT (Appeals) and ITAT havecompletely misunderstood the activity of “agriculturaldevelopment” to “agricultural activity” which areseparate, distinct and independent and have no bearingand would have no nexus while interpreting the eligiblebusiness as defined under clause (b) to Explanation ofsection 36(1)(viii). He would also submit that Tribunal hasnot given any finding on this issue at all though CIT(Appeals) has extensively dealt with and disagreed with the contention of the assessee by referring to the findings recorded by the CIT (Appeals) on the issue ofinterpretation of words “agricultural development” asdefined in clause (b) for the purposes of assessee beingdeclared as carrying on “eligible business”. 6.2He would submit that finding recorded by theCIT (Appeals) by referring to the propositions of law arecitations relied upon are all relating to agriculturalactivity vis-a-vis with reference to section 10 of the Actwhich provides for exemption of agricultural income fromthe purview of Income-Tax Act, 1961 by virtue of Entry 46in List 2 of Schedule VII of the Constitution of India andthe businesses which are eligible or in other words to beconstrued as “specified entity” to be an “eligiblebusiness”, and such entity should be carrying on theactivity of “agricultural development” and not“agricultural activity” and as such he assails the findingsof CIT (Appeals). He further contends this finding of CIT(Appeals) which had been urged before the Tribunal as being erroneous has not at all been considered,adjudicated and answered by the Tribunal and as suchsubstantial question of law – C requires to be answered infavour of the assessee as the agricultural activity of thebeneficiary to whom the assesssee has financed havingcarried on the business of agricultural developmentwould be entitled to the benefit of allowance aspermissible under section 36(1)(viii) of the Act. being erroneous has not at all been considered,adjudicated and answered by the Tribunal and as suchsubstantial question of law – C requires to be answered infavour of the assessee as the agricultural activity of thebeneficiary to whom the assesssee has financed havingcarried on the business of agricultural developmentwould be entitled to the benefit of allowance aspermissible under section 36(1)(viii) of the Act. 6.3He would further contend that as long as“specified entity”, carrying on “eligible business” viz.carrying on the activity of industrial development, therecannot be any disallowance of the claim under section36(1)(viii). He would draw the attention of the Court tosection 3(bb) of the Industries (Development andRegulation) Act, 1951 to contend industries specified inFirst Schedule to the said enactment is to be construed asan existing industrial undertaking as defined under clause(i) of section 3 and he specifically refers to Entry 27 of theFirst Schedule which defines different industries of thefood processing industries to be construed as an industrial undertaking, which includes the industryengaged in the “milk foods” manufacturing as anindustry and as such the authorities erred in arriving at aconclusion that end product of those industriesmanufacturing the “milk foods” are not turning out anynew product and as such the entity to whom the assesseehas advanced finances, cannot be brought under thedefinition of eligible business is an erroneous finding. 6.4He would contend that own funds availablewith the assessee is to be understood and construed asthe expression ‘Share Capital’ and ‘General Reserves’ asindicated under the proviso to Sub-section (viii) of Section36 of the Income Tax Act, 1961. He would contend that own funds available 6.5 He would contend that once the authorities have held that assessee would fall under the specifiedentity as indicated in the Explanation by virtue of proviso,the benefits flowing from Section 36(1)(viii) cannot bedenied, as it is not the intention of the legislation but on the other hand it is for extending the benefit flowing tothe specified entities and as such, the authorities ought tohave allowed the deduction even in the absence of theShare Capital of assessee not being there. On thesegrounds, he has prayed for answering the substantialquestions of law No.(B), (C),(D) and (E) in favour of theassessee and against the Revenue. Per contra, Shri VarunPatel has supported the order of the Tribunal. 7.Now, coming down to substantial question oflaw No.(F), Mr. Bandish Soparkar, learned advocateappearing for the appellant assessee has submitted thatconclusion arrived at by the authorities below and findingrecorded in respect of contribution made to NationalDairy Development Board Employees Group GratuityFunds disallowed to the extent of Rs.5,61,56,408/- isconcerned, is not only erroneous but also contrary to theprovision itself. It has been submitted that it is not indispute that no contribution has been made and further,it is also not in dispute that approval for the said GratuityFund Scheme, namely ‘National Diary Development 7.Now, coming down to substantial question oflaw No.(F), Mr. Bandish Soparkar, learned advocateappearing for the appellant assessee has submitted thatconclusion arrived at by the authorities below and findingrecorded in respect of contribution made to NationalDairy Development Board Employees Group GratuityFunds disallowed to the extent of Rs.5,61,56,408/- isconcerned, is not only erroneous but also contrary to theprovision itself. It has been submitted that it is not indispute that no contribution has been made and further,it is also not in dispute that approval for the said GratuityFund Scheme, namely ‘National Diary Development Board Employees Group -cum Life Insurance Scheme wasalready granted on 19.10.1972 and it was merely a deedof variation to the said scheme, which was to be informedto the authority and same has already been done by theappellant assessee. On the contrary, law does not requireto seek any approval, once it had already been granted onearlier occasion. If any variation is to be made, same is tobe put to the notice of Income Tax Authorities and samehaving been done, finding which has been recorded to thecontrary on this issue being erroneous is liable to be setaside by answering the substantial question of law infavour of assessee. To substantiate this contention, Mr.Soparkar has drawn our attention to the relevantprovisions of the Act, namely Section 40A sub-section (7)to contend any contribution made towards Gratuity fundis allowable for deduction. It has further been submittedthat it is also not in dispute that actual payment has beenmade and therefore, on account of there being noinformation/ approval during the intervening period, it isnot open for the authorities to misconstrue the provision and disallow the deduction. 7.1Learned advocate Mr. Soparkar has furtherdrawn our attention to yet another provision from 4[th]Schedule of the Income Tax Act, 1961 and by referring toRule 4 contained in Part-C thereof, it has been contendedthat earlier approval which was granted in 1972 wasnever withdrawn at any point of time and for the purposeof arriving at a conclusion, as has been done byauthorities below, first of all, there has to be withdrawalof earlier approval of scheme, which is not the case of theauthority also. By referring to Rule 4 and 6 of Part-C ofschedule-IV, which relates to application for approval,Mr. Soparkar has submitted that if any alteration in therules, constitution, object or conditions of fund is made atany point of time after date of application for approval,trustees of fund are required to forthwith communicatesuch alteration to the assessing authority and in default,the consequences narrated in sub-rule of Rule 4 wouldfollow, and as such, by drawing our attention to thecommunication dated 23.9.2003, he would contend that such variation of scheme in the form of deed of variationhaving been intimated to the authorities and it was dutyacknowledged by them, would demonstrate that revivalhas taken place and it relates back to original approvaland therefore, contribution which has been made in theinterregnum period deserves to be allowed and same hasresulted in a serious error committed by the originalauthority and successively, the authorities havecommitted an error. As a result of this, substantialquestion of law No.(F) deserves to be answered in favourof assessee. 7.2Learned advocate Mr. Soparkar has drawn ourattention to the finding which has been arrived at by theAppellate Tribunal in paragraphs 66 and 68 of theappellate order, which is impugned in the present appeal,and has contended that this breach by an authority isclearly in contrast to the provisions of the Act. Hence, hehas prayed for answering the substantial question of lawin favour of the assessee. 7.3 As against this, learned advocate Mr. Varun K. 7.2Learned advocate Mr. Soparkar has drawn ourattention to the finding which has been arrived at by theAppellate Tribunal in paragraphs 66 and 68 of theappellate order, which is impugned in the present appeal,and has contended that this breach by an authority isclearly in contrast to the provisions of the Act. Hence, hehas prayed for answering the substantial question of lawin favour of the assessee. 7.3 As against this, learned advocate Mr. Varun K. Patel appearing on behalf of revenue has vehementlycontended that on the basis of material on record,concurrent finding of fact is arrived at by all theauthorities below against the assessee in respect ofsubstantial question No.(F). It has been contended thatsubmission made on this issue by learned advocate forassessee is quite innocuous and not in conformity withthe relevant provisions of the Act. On the contrary,authorities have clearly found that Gratuity Trust of theassessee which was accorded original approval underIncome Tax Act way back on 19.10.1972 by CIT- Gujarat,had lapsed and has never been renewed nor sought anyapproval for long period of 15 years and record revealedthat during relevant period as on 31.3.2003, appellateGratuity Trust had undisputedly no approval. As a resultof this, by a specific letter dated 17.8.2004, the assesseewas required to explain as to how the claim of deductionin respect of contribution of Rs.5,61,56,408/- is allowable.Mr. Patel has specifically drawn our attention to the fact finding authority’s conclusion that original approval hadalready lapsed and pursuant to amendemnt to GratuityAct, monetary ceiling limit was revised from Rs.1 lakh toRs.3.5 lakh and accordingly, assessee was under anobligation to seek approval and was required to submit adeed of variation for approval and it was only pursuant toletter dated 23.9.2003, i.e. much after close of financialyear 2002-03, Trust moved a deed of variation forapproval. 7.4He has further submitted that it is anundisputed position prevailing on record that deed ofvariation was made on 27.3.2003 and relevant provisionsmandate that any contribution to gratuity fund isallowable on actual payment basis and pending approvalof deed of variation does not make the fund unrecognized.When this was the stand taken by the assessee, whichwas examined by the authorities below and upon scrutinyfound that it was only at the fag-end of current financialyear, i.e. on 31.3.2003, assessee had moved an application to revive the said gratuity policy and as such,the Trust gratuity Policy remained inoperative for longperiod of 15 years. It was also found by authority thatdeed of variation which was submitted was almost a newdeed with new terms and conditions and therefore, whensuch are the terms, same would require specific approvalof CIT and until then, it remained unrecognized fund andconsequently, no contribution could be allowed to theassessee as a deduction in computing the income of theassessee. The assessee on the contrary has committed abreach of trust reposed in it by allowing the GratuityPolicy to lapse and remained dormant for 15 years. Thatbeing the situation, according to Mr. Patel, the conclusionarrived at by the authorities below is justified in thebackground of aforesaid undisputed fact. To strengthenhis submission, learned advocate Mr. Patel has drawn ourattention to the communications dated 23.9.2003,1.4.2004, 12.4.2004 as well as 17.8.2004, to contend thatit was not merely an intimation which was required to begiven but it was a specific approval of an authority. As a result of this, authorities have rightly come to conclusionagainst the assessee. 7.5 Learned advocate Mr. Patel to strengthen his result of this, authorities have rightly come to conclusionagainst the assessee. 7.5 Learned advocate Mr. Patel to strengthen his submission has made a reference to the decisiondelivered by Punjab & Haryana High Court almost on asimilar issue, i.e. reported in 275 ITR 570 and byreferring to paragraph 1, 8, 14 and 15 of said judgmenthas submitted that almost in similar situation, afteranalyzing the relevant provisions, High Court held thatordering deduction of such contribution was not justifiedand as such, view is taken against the assessee in respectof this issue. 7.6Further it has been brought to the notice of thisCourt that by virtue of Section 40A (7)(a) and (b), standtaken by assessee is impermissible. He would furthersubmit that a conjoint reading of said clause wouldclearly indicate that contribution must be towards anapproval to gratuity fund and same having not been done,authorities have rightly disallowed such deduction. Yet, Further it has been brought to the notice of this another provision has been shown which is contained inSection 43B which also indicates deduction has to be onlyon the basis of actual payment and by referring toexplanation, he would contend sum contributed ofprevious year shall not be entitled to any deduction sinceat relevant point of time, approval of schemeundisputedly was not available. Hence, he has prayed forsubstantial question of law being answered against theassessee and in favour of revenue. 8. In order to answer the substantial questions of law at (B), (C), (D) and (F), we are of the considered viewrelevant provision of Income Tax Act, 1961, which hasbeen pressed into service by both parties and relevant forresolving the issue in question, requires to be extractedand accordingly they are extracted hereinbelow : “Other deductions. 36. (1) The deductions provided for in the followingclauses shall be allowed in respect of the matters dealtwith therein, in computing the income referred to insection 28- (i) to (vii) xxxxxxx (viii) in respect of any special reserve created by afinancial corporation which is engaged in providing long-term finance for industrial or agricultural developmentin India or by a public company formed and registered inIndia with the main object of carrying on the business ofproviding long- term finance for construction orpurchase of houses in India for residential purposes, anamount not exceeding forty per cent of the total income(computed before making any deduction under thisclause and] Chapter VIA) carried to such reserveaccount:]]] Provided that the corporation or, as the case may be, thecompany] is for the time being approved by the CentralGovernment for the purposes of this clause: Providedfurther that where the aggregate of the amounts carriedto such reserve account from time to time exceeds twicethe amount of] the paid- up share capital (excluding theamounts capitalised from reserves) of the corporationor, as the case may be, the company], no allowanceunder this clause shall be made in respect of suchexcess. Explanation.- In this clause,- " (a) ―”specified entity” means,— (i) a financial corporation specified in section 4A of theCompanies Act, 1956 (1 of 1956); (ii) a financialcorporation which is a public sector company; (iii) a banking company; (iv) a co-operative bank other than a primaryagricultural credit society or a primary co-operativeagricultural and rural development bank; (v) a housing finance company; and (vi) any other financial corporation including a publiccompany; (b) “eligible business” means,— [(i) in respect of the specified entity referred to in sub-clause (i) or sub-clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for— (A) industrial or agricultural development; (B) development of infrastructure facility in India;or (C) development of housing in India;] (i) a financial corporation specified in section 4A of theCompanies Act, 1956 (1 of 1956); (ii) a financialcorporation which is a public sector company; (iii) a banking company; (iv) a co-operative bank other than a primaryagricultural credit society or a primary co-operativeagricultural and rural development bank; (v) a housing finance company; and (vi) any other financial corporation including a publiccompany; (b) “eligible business” means,— [(i) in respect of the specified entity referred to in sub-clause (i) or sub-clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for— (A) industrial or agricultural development; (B) development of infrastructure facility in India;or (C) development of housing in India;] (ii) in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of housesin India for residential purposes; and (iii) in respect of the specified entity referred to in sub-clause (vi) of clause (a), the business of providing long-term finance for development of infrastructure facility inIndia; (c) to (h) xxxxxxx” RE : SUBSTANTIAL QUESTION OF LAW (B) : 9.The assessee claimed deduction of Rs.9.90Crores under Section 36(1)(viii) of the Act. The assesseecontended before the AO and reiterated before theappellate authority and also before the Tribunal that as aprovider of long term finance for agricultural andindustrial development it is entitled to claim deduction ofRs.9.90 Crores, which amount was equivalent to thereserve created for the purpose. The assessing officerdeclined to allow the deduction on the ground that assessee notification declaring theas a financialinstitution was issued on 23.02.2004, which fell in thesubsequent year. It was also held that finances advancedto dairy cooperatives which basically are producing and marketing milk could not be covered under item milk foodwhich is classified as a food processing industry underClause 27 of the Industrial Regulation Development Act,1951. The assessing officer further held that provisionmandates that aggregate of the amounts carried tospecial reserve account created for the purpose shouldnot exceed twice the amount of paid up share capital; itcould not create any reserve as there is no paid up sharecapital and the special reserve being not determinable,such exemption cannot be granted. The claim fordeduction was also disallowed on the ground that theassessee was not a public financial institution – PFIduring the year. This order of CIT was upheld by the CIT(Appeals) and affirmed by the ITAT. 10.A plain reading of the Section 36 would indicatethat deductions provided in clauses enumerated thereinwould be allowed in respect of the matters dealt withtherein, while computing income as referred to in Section28 of the Act. 11.A Taxing Statute is to be strictly considered. In the classic passage, Lord Cairns stated the principlethus : “if the person sought to be taxed comeswithin the letter of the law he must be taxed,however, great the hardship may appear tothe judicial mind to be. On the other hand, ifthe Crown seeking to recover the tax, cannotbring the subject within the letter of the law,the subject is free, however, apparentlywithin the spirit of law the case mightotherwise appear to be.” 12. In other words, if there be admissible in any statute, what is called an equitable, construction,certainly, such a construction is not admissible in aTaxing Statute, where you can simply adhere to thewords of the Statute, vide Partington v AG (1869) LR 4 HL 100 at page 122 – referred to in IRC versus Duke of Westminster - (1936) A.C. 1 P. 24 (HL). “if the person sought to be taxed comeswithin the letter of the law he must be taxed,however, great the hardship may appear tothe judicial mind to be. On the other hand, ifthe Crown seeking to recover the tax, cannotbring the subject within the letter of the law,the subject is free, however, apparentlywithin the spirit of law the case mightotherwise appear to be.” 12. In other words, if there be admissible in any statute, what is called an equitable, construction,certainly, such a construction is not admissible in aTaxing Statute, where you can simply adhere to thewords of the Statute, vide Partington v AG (1869) LR 4 HL 100 at page 122 – referred to in IRC versus Duke of Westminster - (1936) A.C. 1 P. 24 (HL). “In a Taxing Act, one has to look merely at what isclearly said. there is no room for any intendment.There is no equity about a tax. There is nopresumption as to tax. Nothing is to be read in,nothing is to be implied. One can only look fairly atthe language used.” 13. In IRC versus Duke of Westminster, (1936) A.C. 1 p. 24 (HL), Lord Tomlin while refuting doctrine of “the substance of the matter”, observed : “It is said that in revenue cases there is adoctrine that the Court may ignore the legalposition and regard what is called ‘the substanceof the matter’. This supposed doctrine seems torest for its support upon a misunderstanding oflanguage used in some earlier cases. The soonerthis misunderstanding is dispelled, and thesupposed doctrine given its quietus, the better itwill be for all concerned, for the doctrine seemsto involve substituting ‘the uncertain and crookedcord of discretion’ for ‘the golden and straightmetwand of the law.” 14. The Hon’ble Apex Court in the case of M/s Geo Miller & Co. Pvt. Ltd. & Ors. versus State of M.P. &Ors., reported in AIR 2004 SC 3552 : (2004) 5 SCC 209, has observed : “30. It is a well settled position of law that ininterpreting taxing statutes, one must have regardto the strict letter of the law. If the person/entitysought to be taxed comes within the letter of thelaw he must be taxed.” 15.In determining the liability of a subject to tax, regard must be had to the strict letter of law and if therevenue would satisfy the Court that case falls strictlywithin the provisions of the law, necessarily the assessee has to be taxed. In interpreting the Taxing Statute,equitable construction are entirely out of place. TheCourt would look into the words of Statute and interpretthem. Taxing Statute cannot be interpreted on anypresumption or assumptions. It cannot import theprovisions in the Statute so as to supply any assumeddeficiency. The Hon’ble Apex Court in the matter of Martand Dairy and Farm versus UOI reported in AIR1975 SC 1492, observed : - “Taxationconsiderationmaystemfromadministrative experience and other factors of lifeand not artistic visualisation or neat logic and so theliteral, though pedestrian interpretation mustprevail.” 16. Keeping the aforesaid principle in mind whenClause (viii) of subsection (1) of Section 36 is perused, itwould clearly indicate that deductions would be allowedto an assessee as provided in the clauses enumerated inrespect of the matters dealt with therein or enumeratedtherein, in promoting the income referred to in section28. In other words, there cannot be any scope for adding, deducting or adopting interpretative process to define orexplain the words. 17. In the instant case, the assessee in computation of the income has claimed deduction of Rs. 9.90 crorescontending that it has provided long term financing foragricultural development and therefore eligible fordeduction under section 36(1)(viii) of the Act to the extentof profit derived from such activities subject to creation ofspecial reserve. The assessee to become eligible forclaiming deduction has to be - deducting or adopting interpretative process to define orexplain the words. 17. In the instant case, the assessee in computation of the income has claimed deduction of Rs. 9.90 crorescontending that it has provided long term financing foragricultural development and therefore eligible fordeduction under section 36(1)(viii) of the Act to the extentof profit derived from such activities subject to creation ofspecial reserve. The assessee to become eligible forclaiming deduction has to be - “(i)a financial corporation engaged inproviding long term finance for industrial oragricultural development or development ofinfrastructural facility; or (ii)a public company registered inIndia, engaged in providing long termfinance for construction or purchase ofhouses in India for residential purposes anyamount not exceeding 40% of the totalincome.” 18. The conditions precedent is, such assessee : - “(a) should create and maintain a special reserve; (b) aggregate of the amount carried to special reserve account from time to time exceeds twicethe amount of the paid up share capital excludingthe amounts capitalised from reserves and noallowance under said clause would be made inrespect of such expenses.” 19. Tribunal accepted the contention of assessee though negatived by Assessing Officer and CIT (Appeals)since the assesee had applied for status of PublicFinancial Institution on 10.07.2002 i.e. within theassessment year 2003-04 and by applying the principleslaid down by the Hon’ble Apex Court in the case ofMarshall Sons & Co. versus ITO. reported in (1996)88 Taxman 619, held that it would relate back to thedate of application. 20.The activity of dairy business cannot beconstrued as agricultural activity. At this juncture, itwould be apt and appropriate to note the contention ofthe assessee which is to the effect that section 3(bb) ofIndustrial Act, defines an industrial undertaking specifiedin the First Schedule of the said enactment to be anexisting industrial undertaking and as such when Clause 27 of the First Schedule is perused, it would indicate that“milk foods” activity is construed as “food processingindustry”, and therefore, the activity of the petitioner is tobe construed as an industrial development or in otherwords, it is to be accepted that agricultural developmentwould also be an industrial activity. While interpretingthe provisions of Fiscal Statute, the meaning attached inother Statutes cannot be imported. In the absence ofinterpretation by reference, it would be improper tointerpret the words in accordance with its definitionfound in another Statute and more particuarly when suchother Statute is not dealing with any cognate subject. 21.In the matter of Maheshwari Fish Seed Farm versus Tamilnadu State Electricity Board reported in2004 (4) SCC 705, it has been held to the followingeffect : - “16.The learned senior counsel for theappellants invited our attention to the definitionof term 'agriculture' as given in definitionsections or interpretation clauses of severalother enactments such as sub-section (2) ofSection 2 of Tamil Nadu Agricultural Produce 21.In the matter of Maheshwari Fish Seed Farm versus Tamilnadu State Electricity Board reported in2004 (4) SCC 705, it has been held to the followingeffect : - “16.The learned senior counsel for theappellants invited our attention to the definitionof term 'agriculture' as given in definitionsections or interpretation clauses of severalother enactments such as sub-section (2) ofSection 2 of Tamil Nadu Agricultural Produce Marketing (Regulation) Act, 1987, clause (b) ofSection 2 of Tamil Nadu Agricultural UniversityAct, 1971, clause (a) ofSection 2ofAgricultural and Rural Debt Relief Scheme,1990, so defining the term 'agriculture' as toinclude therein 'pisciculture'. These definitionswere pressed in service by Shri Iyer, thelearned senior counsel, to support hissubmission for a similar meaning beingassigned in the present case. Suffice it toobserve that the common parlance meaning ofthe term 'agriculture', in the context in which ithas been used and is arising for determinationbefore us, cannot be determined by referenceto definition given in other statutes. This we sayfor more reasons than one. Firstly, none of thestatutes reffered to by Shri Iyer, the learnedsenior counsel, can be called statutes in parimateria. Secondly, it is common knowledge thatthe definition coined by the Legislature for thepurpose of a particular enactment is often anextended or artificial meaning so assigned as tofulfill the object of that enactment. Suchdefinitions given in other enactments cannot befreely used for finding out meaning to beassigned to a term of common parlance used inan altogether different setting. And lastly, asJustice G.P. Singh points out in "Principles ofStatutory Interpretation" (9[th] Edition, 2004, atpage 163): "[I]t is hazardous to interpret a statute inaccordance with a definition in anotherstatute and more so when such statute is notdealing with any cognate subject or thestatutes are not in pari materia." The same view has been taken in the decisionof this court inCIT v. Benoy Kumarwhich we have extensively referred to earlier in thisjudgment.” 22. In Jagatram Ahuja versus Commissioner of Gift Tax reported in AIR 2000 SC 3195, it has beenheld that Statutes which are not in para materia cannotbe looked into. 23. It is trite law that exemption notification is tobe read strictly and burden is on the assessee to provethat item falls within the four corners of such exemptionnotification. An exemption notification should be given aliberal meaning. Recourse to other principles or cannonsof interpretation of Statute would be resorted to only inthe event of the same giving rise to anomaly or absurdity.The exemption given under the notification or Statutemust be construed having regard to the purpose andobject sought to be achieved. The Hon’ble Apex Court inthe case of Krishi Upaj Mandi Samiti, New MandiYard, Alwar versus Commissioner of Central Exciseand Service Tax, Alwar reported in (2022) 5 SCC 62, has held : - “8. The exemption notification should not be liberallyconstrued and beneficiary must fall within the ambitof the exemption and fulfill the conditions thereof. Incase such conditions are not fulfilled, the issue ofapplication of the notification does not arise at all byimplication. 8.1 It is settled law that the notification has to be readas a whole. If any of the conditions laid down in thenotification is not fulfilled, the party is not entitled tothe benefit of that notification. An exception and/or anexempting provision in a taxing statute should beconstrued strictly and it is not open to the court toignore the conditions prescribed in the relevant policyand the exemption notifications issued in that regard. has held : - “8. The exemption notification should not be liberallyconstrued and beneficiary must fall within the ambitof the exemption and fulfill the conditions thereof. Incase such conditions are not fulfilled, the issue ofapplication of the notification does not arise at all byimplication. 8.1 It is settled law that the notification has to be readas a whole. If any of the conditions laid down in thenotification is not fulfilled, the party is not entitled tothe benefit of that notification. An exception and/or anexempting provision in a taxing statute should beconstrued strictly and it is not open to the court toignore the conditions prescribed in the relevant policyand the exemption notifications issued in that regard. 8.2 The exemption notification should be strictlyconstrued and given a meaning according tolegislative intendment. The Statutory provisionsproviding for exemption have to be interpreted in lightof the words employed in them and there cannot beany addition or subtraction from the statutoryprovisions. 8.3 As per the law laid down by this Court in a catenaof decisions, in a taxing statute, it is the plainlanguage of the provision that has to be preferred,where language is plain and is capable of determininga defined meaning. Strict interpretation of theprovision is to be accorded to each case on hand.Purposive interpretation can be given only when thereis an ambiguity in the statutory provision or it resultsin absurdity, which is so not found in the present case. 8.4 Now, so far as the submission on behalf of therespondent that in the event of ambiguity in aprovision in a fiscal statute, a construction favourableto the assessee should be adopted is concerned, thesaid principle shall not be applicable to constructionof an exemption notification, when it is clear and not ambiguous. Thus, it will be for the assessee to showthat he comes within the purview of the notification.Eligibility clause, it is well settled, in relation toexemption notification must be given effect to as perthe language and not to expand its scope deviatingfrom its language. Thus, there is a vast difference anddistinction between a charging provision in a fiscalstatute and an exemption notification.” 24.It is in the teeth of the above authoritativepronouncements of the Hon’ble Apex Court, the findingsrecorded by the Assessing Officer disallowing thecontention that the dairy activity is covered within thedefinition of Industry necessarily has to be upheld byextracting the said finding. It reads : “9.5 Further to the above xxxxxxxxx. However,during the course of proceedings, it is claimed thatDairy activity is covered within the definition ofIndustry under clause 27 of First Schedule toIndustrial Development Regulation Act. The claim ofthe assessee that it is engaged in providing long termfinance for industrial development is considered basedon its claim that dairy activity is covered within thedefinition of industry as per clause 27 of the firstschedule of Industrial Development Regulation Act.However, on going through the aforesaid clause 27 ofthe First Schedule of IDR Act, it is seen that dairyindustry is not covered within its ambit. Clause 27classified for food processing industries includetherein the following : 1) Canned fruits and fruit product. 2) Milk Food 3) Malted Foods 4) Flour 5) Other processed food 1) Canned fruits and fruit product. 2) Milk Food 3) Malted Foods 4) Flour 5) Other processed food Clearly the case of the assessee does not fall in any ofthe categories mentioned in Cl. 27 of the FirstSchedule of IDR Act. The assessee has not specified inany of the submissions as to under which of thecategories in Cl. 27, the dairy cooperatives etc wouldfall. At best it may claim that the dairy, dairycooperatives would fall in the categories of milk food.The word “Milk Food” generally means value additionmade to plain milk so as to bring the value addedproduct as a food. Therefore, it is apparent that thedairy cooperatives / unions will not be covered withinthe definition of Industry. In view of the above andalso in view of the facts that the assessee itself hasnot identified the specific category in Cl. 27 of theSchedule to which milk cooperatives / unions could beequated, the claim that the assessee is engaged inproviding long term finance for industrial oragricultural development remains unsubstantiatedand hence fails.” 25.Insofar as th