The Assistant Commissioner Of Income-Tax, Company Cirlce -I (1), Aakayar Bhavan - New Block Sixth Floor, 121 Mahatma Gandhi Road, Chennai v. Apollo Hospitals Enterprises Limited

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10.3.2008 CORAM: THE HONOURABLE MR.JUSTICE ELIPE DHARMA RAOANDTHE HONOURABLE MR.JUSTICE S.R.SINGHARAVELU Writ Appeal No.1041 of 2006 The Assistant Commissioner of Income-tax,Company Cirlce -I (1),Aakayar Bhavan - New Blocksixth floor,121 Mahatma Gandhi Road,Chennai-600034.... AppellantVs. Apollo Hospitals Enterprises Limited,represented by Mr.S.K.Venkataraman,Company Secretary-cumChief Financial Officer,Ali Towers, Fourth Floor,55 Greams Road,Chennai-600006. ... Respondent * * * Writ Appeal preferred under Clause 15 of the Letters Patentas against the order of the learned single Judge, dated 8.6.2006made in W.P.No.4991 of 2006. Writ Petition filed under Article 226of the Constitution of India to issue a writ of Certiorari to callfor the records on the files of the respondent herein in AX1/015/2000-01 dated 30.03.2005 under Section 148 of the Income TaxAct 1961. * * *For appellant: Mrs.Pushya Sitharaman For respondent : Mr.N.Inbarajan * * * JUDGMENT ELIPE DHARMA RAO, J. This Writ Appeal is directed against the order passed by alearned single Judge of this Court in W.P.No.4991 of 2006 dated8.6.2006. 2. The respondent herein is running hospitals in differentparts of the country and by an order of amalgamation dated18.4.2000, a Scheme was approved to amalgamate M/s.Deccan HospitalCorporation Limited (in short 'DHCL'), running a Hospital atJubilee Hills, Hyderabad with the respondent and consequent to theamalgamation, the said hospital vested with the respondent. As on31.3.1999, the said DHCL had an unabsorbed depreciation ofRs.11,60,29,077/=, which vested with the respondent under theScheme of Amalgamation. For the assessment year 2000-2001, therespondent submitted returns and claimed the benefit of Section72A of the Income-tax Act (hereinafter referred to as the Act) tohave the said unabsorbed depreciation of DHCL as the depreciationof the respondent. By letter in G.I.No.AX1-015/2000-01, dated7.3.2003, certain particulars were called for from the respondentby the Department and thereupon, the assessment was completed bythe Deputy Commissioner of Income-tax, Company Circle-I(1)(thethen Assessing Officer), vide assessment order dated 28.3.2003under Section 143(3) of the Act and the benefit of Section 72-A ofthe Act was availed by the respondent. It is seen that therespondent has preferred an appeal against certain issuespertaining to set-off of the minimum alternate tax, before theCommissioner of Income-tax (Appeals) III, Chennai under Section246-A of the Act, and the same was disposed on 21.8.2003 inITA.No.99/03-04/A.III and further appeal is pending before theIncome-tax Appellate Tribunal, Chennai. 3. While such is the position, the appellants herein issued anotice under Section 148 of the Act in PAN.AX.1/015/2000-01, dated30.3.2005, stating that they have reason to believe that theincome of the respondent, chargeable to tax for the assessmentyear 2000-01 has escaped assessment within the meaning of Section147 of the Act and therefore, proposed to assess the income forthe said assessment year and required the respondent to submit areturn in the prescribed form. For the said notice, therespondent submitted a reply on 18.4.2005, requesting to providethe reasons that their income escaped assessment and after manycommunications and personal hearings, ultimately, the appellantshave held that the respondent is not entitled to the set-off theyhave availed. This action of the appellants was challenged by the respondent herein by filing Writ Petition No.4991 of 2006. Thelearned single Judge of this Court, by the order dated 8.6.2006,has allowed the said writ petition filed by the respondent herein,relying on the judgments of the Honourable Apex Court in C.I.T.vs. RAO THAKUR NARAYAN SINGH [(1965) 56 I.T.R. 234] and PHOOLCHAND BAJRANG LAL [(1993) 203 I.T.R. 456] wherein it was held thatthe Department cannot reopen the assessment order passed by merechange of opinion or by drawing a different inference from thesame facts as were earlier available. Aggrieved, this appeal ispreferred by the Department. 4. It is to be mentioned that while the first judgmentdelivered by the Honourable Apex Court in C.I.T. vs. RAO THAKURNARAYAN SINGH [(1965) 56 I.T.R. 234] relied on by the learnedsingle Judge is of the year 1965, the second judgment in PHOOLCHAND BAJRANG LAL [(1993) 203 I.T.R. 456] is pertaining to theassessment year 1963-64. In both the cases, no misapplication oflaw, as is the case in hand, was the subject matter. Further, itcannot be said that the assessing officer has no power at all toassess or reassess any income chargeable to tax which has escapedassessment since the assessing officer is entitled to assess orreassess any income chargeable to tax, which has escapedassessment for any assessment year. Such power of the AssessingOfficer is traceable to Section 147 of the Income-tax Act, whichreads as follows: "147. If the Assessing Officer has reason to believethat any income chargeable to tax has escaped assessmentfor any assessment year, he may, subject to theprovisions of Sections 148 to 153, assess or reassesssuch income and also any other income chargeable to taxwhich has escaped assessment and which comes to hisnotice subsequently in the course of the proceedingsunder this section, or recompute the loss or thedepreciation allowance or any other allowance, as thecase may be, for the assessment year concerned(heareafter in this section and in sections 148 to 153referred to as the relevant assessment year):Provided that where an assessment under sub-section (3)of section 143 or this section has been made for therelevant assessment year, no action shall be taken underthis section after the expiry of four years from the endof the relevant assessment year, unless any incomechargeable to tax has escaped assessment for suchassessment year by reason of the failure on the part ofthe assessee to make a return under section 139 or inresponse to a notice issued under sub-section (1) ofsection 142 or section 148 or to disclose fully andtruly all material facts necessary for his assessment,for that assessment year...." 5. Further, under Section 149 of the Act, the time limit fornotice has been prescribed as follows:"Section 149: No notice under Section 148 shall beissued for the relevant assessment year, -(a) if four years have elapsed from the end of therelevant assessment year, unless the case falls underclause (b);(b) if four years, but not more than six years, haveelapsed from the end of the relevant assessment yearunless the income chargeable to tax which has escapedassessment amounts to or is likely to amount to one lakhrupees or more for that year." 5. Further, under Section 149 of the Act, the time limit fornotice has been prescribed as follows:"Section 149: No notice under Section 148 shall beissued for the relevant assessment year, -(a) if four years have elapsed from the end of therelevant assessment year, unless the case falls underclause (b);(b) if four years, but not more than six years, haveelapsed from the end of the relevant assessment yearunless the income chargeable to tax which has escapedassessment amounts to or is likely to amount to one lakhrupees or more for that year." 6. The relevant assessment year in the case on hand is 2000-2001 and the impugned action of reassessment has been initiated bythe appellant by issuing the notice under Section 148 of the Acton 30.3.2005. It is seen that the said notice was issued by theAssistant Commissioner of Income-tax, who is the AssessingOfficer. Therefore, it cannot be said that the impugned actionwas initiated by a person who has no jurisdiction at all, as hasbeen wrongly argued on behalf of the respondent. Therefore, thejudgment of the Division Bench of the Delhi High Court inCONSOLIDATED PHOTO AND FINVEST LTD. vs. ASSISTANT COMMISSIONER OFINCOME-TAX [(2006) 281 ITR 394 (DELHI)] relied on by the learnedcounsel for the respondent, wherein the notice was issued afterthe limitation period, has no application to the case on hand. 7. Now, let us scrutinise the case regarding the plea takenby the Department to reassess the income. It is no doubt a truethat DHCL has amalgamated with the respondent and as on 31.3.1999,the said DHCL had an unabsorbed depreciation of Rs.11,60,29,077/=which vested with the respondent hospital, subsequent to theamalgamation and for the assessment year 2000-2001, therespondents submitted their returns and claimed the benefit ofSection 72A of the Act, and the assessment was completed by theDeputy Commissioner, vide assessment order dated 28.3.2003 underSection 143(3) of the Act. The entire reading of the saidassessment order dated 28.3.2003 would show that the assessingofficer has not at all discussed anything regarding the set-offunder Section 72A. When this fact came to the knowledge of theDepartment, they have initiated the impugned action ofreassessment, wherein we cannot find any illegality. Furthermore, when the Department has a reason to believe that the set-offwas claimed and availed on a wrong notion by the respondent, sincethe hospital was not an 'industrial undertaking', we cannot findfault with the impugned action of the appellant. 8. Section 72A of the Act deals regarding the 'carry forwardand set off of accumulated loss and unabsorbed depreciationallowance in amalgamation or demerger, etc.' For the sake ofbetter appreciation, we extract hereunder the said Section:"72A: (1) where there has been an amalgamation of acompany owning an industrial undertaking or a ship or ahotel with another company or an amalgamation of abanking company referred to in clause (c) of section 5of the Banking Regulation Act, 1949 (10 of 1949) with aspecified bank, then, notwithstanding anything containedin any other provision of this Act, the accumulated lossand the unabsorbed depreciation of the amalgamatingcompany shall be deemed to be the loss or, as the casemay be, allowance for depreciation of the amalgamatedcompany for the previous year in which the amalgamationwas effected, and other provisions of this Act relatingto set off and carry forward of loss and allowance fordepreciation shall apply accordingly...." 9. Therefore, the prime condition for claiming set-off underthis Section is that the company amalgamating must be owning an'industrial undertaking' or a ship or a hotel. In the case onhand, both the DHCL and the respondent are hospitals and nothaving any industrial undertaking or a ship or a hotel. 9. Therefore, the prime condition for claiming set-off underthis Section is that the company amalgamating must be owning an'industrial undertaking' or a ship or a hotel. In the case onhand, both the DHCL and the respondent are hospitals and nothaving any industrial undertaking or a ship or a hotel. 10. The contention of the respondents is that by a longseries of decisions rendered under Sections 32A and 33 of the Act,'hospitals' have been considered to be engaged in protection orprocessing of thing or article and as such entitled to be lookedupon as 'industrial undertakings'. It is also submitted that intheir own case, in respect of the assessment year 1989-90, theCommissioner of Income-tax (Appeals), by its order inI.T.A.113/1992-93, dated 28.2.1995 it was held that therespondents are entitled to investment allowance under Section 32Aof the Act as an industrial undertaking, which was upheld by theTribunal in I.T.A.1440(MDS)/1995, dated 20.4.2004 and the appealis pending before this Court in T.C.A.(TC) A.No.955 of 2004. 11. In support of his contentions, the learned counsel forthe respondent relied on the following judgments of various HighCourts: (1) COMMISSIONER OF INCOME TAX, TAMIL NADU-IV vs. DR.V.K.RAMACHANDRAN [128 ITR 727 (MADRAS)], (2)COMMISSIONER OF INCOME TAX vs. TRINITY HOPSITAL [225 ITR 178(RAJASTHAN)],(3)COMMISSIONER OF INCOME TAX vs. UPASANA HOSPITAL [225 ITR 845(KERALA)] and (4)NATVARLAL AMBALAL DAVE vs. COMMISSIONER OF INCOME TAX [225 ITR936 (GUJARAT)]12. All these judgments pertain to investment allowance andother allowances like development rebate wherein the assesses wereallowed to avail such allowances or rebates by various Courts,proceeding on the basis that hospital is an industrial undertakingunder the provisions of the Industrial Disputes Act. But, allthese judgments relied on by the respondent in this regard,including that of their own case, are all the matters before1.4.2000 i.e. prior to introduction of Finance Act, 2001whereunder clause (aa) to sub-section (7) of Section 72A wasinserted with retrospective effect from 1.4.2000 to the Income-taxAct, whereunder the 'industrial undertaking' is defined asfollows:"(aa) 'industrial undertaking' means any undertakingwhich is engaged in -(i)the manufacture or processing of goods; or(ii)the manufacture of computer software; or(iii)the business of generation or distribution ofelectricity or any other form of power; or (iiia) the business of providing telecommunicationservices, whether basic or cellular, including radiopaging, domestic satellite service, network oftrunking, broadband network and internet services; or(iv) mining; or (v)the construction of ships, aircrafts or rail systems.(clause (iiia) was inserted by Finance Act, 2002w.e.f. 1.4.2003) (v)the construction of ships, aircrafts or rail systems.(clause (iiia) was inserted by Finance Act, 2002w.e.f. 1.4.2003) 13. Thus, the legislature has designedly used the expressionsand the expression has been so widely defined as not to leaveanything necessary out of its comprehension and purview and thereis no ambiguity. In the case on hand, there is no disputeregarding the fact that the amalgamation was approved on 18.4.2000and the amalgamation took place in the assessment year 2000-2001and that the set-off was claimed by the respondent in theassessment year 2000-2001. Therefore, the above amendment ofSection 72A(7)(aa) of the Act is very well applicable to the caseon hand. Thus, when the term 'industrial undertaking' has beenwell defined in the Income-tax Act, which is the matter on hand,the contentions of the respondent based on the judgments deliveredprior to the introduction of such amendment to the Income-tax Actand the definition rendered for the same term under the IndustrialDisputes Act, 1947, cannot be accepted. If the Act which is thesubject matter of the issue involved does not contain anydefinition for a disputed term, then only, for appreciation of thecase, we can resort to other Acts, which bears the definition forthe same term. But, in the case on hand, no such position hasarisen and much has been argued on behalf of the respondents that since being a 'hospital', it is an industrial undertaking withinthe meaning of the Industrial Disputes Act, which is not at allthe subject matter. Since admittedly, both the DHCL and therespondent are only 'hospitals', and when hospitals are notbrought into the folder of 'industrial undertakings' by Section72A(7)(aa), neither the DHCL nor the respondent, which are onlyhospitals can be termed as 'industrial undertakings', so as tomake them eligible to claim the benefits under Section 72A of theAct. Therefore, it cannot be said that the appellant hasinitiated the impugned action of reassessment merely on ground ofchange of opinion or by drawing a different inference, as was thecases before the Honourable Apex Court in the judgments relied onby the learned single Judge. In the case on hand, thereassessment was necessitated since the respondent has availedset-off, quoting and applying a law, which is not at allapplicable to them. When the respondent and the DHCL are not atall the industrial undertakings, as has been mandated by Section72A, the set off availed by the respondent is totally illegal andthe same needs to be reviewed, which has been properly done by theappellants. Therefore, in view of the amending provision ofSection 72A(7)(aa) of the Act, the above judgments relied on bythe learned counsel for the respondent are no longer a good lawand therefore, they cannot be made applicable to the facts of thecase on hand. 14. When at the earlier instance, the relief was availed bythe respondent under a wrong perception of law and when clearlythe provisions of Section 72A do not at all applicable to the'hospital', so as to term it an 'industrial undertaking', itcannot be said that the appellant has no right or power to reviewthe earlier erroneous exemption availed by the respondent. It isnot the case of the respondent that without giving any opportunityto them, the set-off availed by them was reviewed. In fact, theappellant has given notice to the respondent to explain regardingthe set-off availed on an erroneous perception of law earlier. Ifsuch wrong claims availed by the assessees, particularly quotingwrong application of law are not allowed to be reviewed, a chaoticsituation will arise, putting a big dent to the exchequer, havingnegative repercussions on the developmental activities of thecountry. In this factual backdrop of the case, where thereassessment has been ordered not because of a change of opinion,but having found out the illegal gain made by the respondent, thejudgment of the Division Bench of the Madhya Pradesh High Court inBADRI PRASAD RAMESHWAR PRASAD vs. COMMISSIONER OF INCOME-TAX[VOL.219 ITR PAGE 441] relied on by the learned counsel for therespondent also has no application to the facts of the case onhand. 15. It has been argued on behalf of the appellant Departmentthat as against certain issues pertaining to set-off of theminimum alternate tax, the respondent preferred an appeal beforethe Commissioner of Income-tax (Appeals) III, Chennai underSection 246-A of the Act and the same was disposed on 21.8.2003 inI.T.A.No.99/03-04/A.III, whereupon an appeal is pending before theIncome-tax Appellate Tribunal, Chennai and would submit thatparallel proceedings were initiated by the respondent for the samecause of action and hence the claim of the respondent has to bedismissed on this sole ground. But, on a perusal of the entirematerials placed on record and in the light of our abovediscussion, we are able to find that as against the set-offavailed by the respondent regarding the loss of the amalgamatingcompany, the impugned actions have been initiated by theappellants herein and claiming set-off under some other heads, therespondent has filed the said appeal, which are totally ondifferent issues and therefore, it cannot be said that parallelproceedings are initiated for the same cause of action. 16. The learned single Judge has not at all considered thescope of application of Section 72A and definition for the term'industrial undertaking' enunciated under Section 72A(7)(aa) ofthe Act and relying on the judgments pronounced by the HonourableApex Court totally on a different circumstances, has allowed thewrit petition filed by the respondent herein. 17. For all the above discussions we hold that neither therespondent nor the DHCL are the 'industrial undertakings' withinthe meaning of Section 72A(7)(aa) of the Act and hence the set-offavailed by the respondent for the assessment year 2000-2001 isillegal; that the impugned action initiated by the appellant isvery well within the stipulated time of limitation prescribedunder Section 147 of the Act and the appellant being the AssessingOfficer has got jurisdiction to reassess such set-off illegallyavailed by the respondent. 17. For all the above discussions we hold that neither therespondent nor the DHCL are the 'industrial undertakings' withinthe meaning of Section 72A(7)(aa) of the Act and hence the set-offavailed by the respondent for the assessment year 2000-2001 isillegal; that the impugned action initiated by the appellant isvery well within the stipulated time of limitation prescribedunder Section 147 of the Act and the appellant being the AssessingOfficer has got jurisdiction to reassess such set-off illegallyavailed by the respondent. This Court wonders as to how such a huge claim ofRs.11,60,29,077/= has 'escaped' the assessment of the Department,leading to illegal availing of set-off by the respondent for thesaid amount that too when there is no order permitting therespondent to avail such set-off, causing loss of revenue to theState. Therefore, the officers of the appellant at the helm ofaffairs at the relevant point of time shall be made responsiblefor their lethargic attitude in discharging their official dutiesand for their dereliction in duty. Therefore, we direct theappellants to initiate necessary disciplinary proceedings againstthe officers who are responsible for availing of such illegal set-off by the respondent leading to loss of revenue to the State and report compliance to this Court, within twelve weeks from the dateof receipt of a copy of this judgment. In the result, this writ appeal is allowed and the orderpassed by the learned single Judge is set aside. No costs.Rao Sd/Asst.Registrar /true copy/Sub Asst.RegistrarTo1. The Commissioner of Income Tax, Madras 34.2. The Assistant Commissioner of Income-tax,Company Cirlce -I (1),121 Mahatma Gandhi Road,Chennai-600034.3. The Section Officer (Judicial) High Court, Madras.+ 1 cc to Mr. N. Inbarajan, Advocate, SR No.13250+ 1 cc to Mr. Pushya Sitharaman, Advocate, SR No.13303judgment in W.A.1041/2006SJI(CO)SR/18.3.2008