Case Law Details
National Dairy Development Board Vs ACIT (Gujarat High Court)
Conclusion: Gujarat High Court held that the activity of dairy business cannot be construed as agricultural activity under Section 36 of the Income Tax Act, 1961.
Facts: The assessee is a corporate body created by an Act of Parliament called National Dairy Development Act, Assessee claims the status of a company as per the definition of company under the provisions of the Income Tax Act. The assessee does not have authorized, issued or paid up share capital. It has not been incorporated as a company under the Companies Act, 1956. The assessee has no shareholders either in the Government sector or in the banking/institutional sector.
The issue involved in the present appeal is relatable to the assessment year 2003-04. The return of income filed by the assessee discloses that it had declared taxable income of Rs.81,03,26,249/, which came to be processed under Section 143(1) of the Act and refund of Rs.15,26,18,119/- came to be issued to the assessee. Subsequently, further refund of Rs.16,13,021/- was issued. After issuance of notice under Section 143(2) of the Act, the scrutiny assessment proceeding was commenced and assessment order came to be passed on 31.03.2003. The deduction claimed under section 36(1) (viii) of the Act for Rs. 9,90,00,000/- was disallowed on the ground that assessee was notified as a Public Financial Institution (for short ‘PFI’) on 23.02.2004 namely it falls in the subsequent year; the activity of dairy business cannot be termed as agricultural activity; finances advanced to dairy cooperatives could not be covered under the category of ‘milk food’ as classified under Clause 27 of the of the First Schedule of the Industrial (Development and Regulation) Act, 1951, the mandate of the provision required that the aggregate of the amount carried to special reserve account created for the purpose should not exceed twice the amount of the paid up share capital, it could not create any reserve as there is no paid up share capital and therefore, the limit upto which special reserve can be created was indeterminable vide assessment order dated 15.06.2005. The assessee being aggrieved by the said order filed an appeal before CIT (Appeals), who dismissed the same by order dated 18.01.2006 affirming the order of the Assessing Officer. Further appeal before the Tribunal did not yield any result to the appellant. Hence, this Appeal.
The Hon’ble High Court observed that a plain reading of the Section 36 would indicate that deductions provided in clauses enumerated therein would be allowed in respect of the matters dealt with therein, while computing income as referred to in Section 28 of the Act. When Clause (viii) of subsection (1) of Section 36 is perused, it would clearly indicate that deductions would be allowed to an assessee as provided in the clauses enumerated in respect of the matters dealt with therein or enumerated therein, in promoting the income referred to in section. In other words, there cannot be any scope for adding, deducting or adopting interpretative process to define or explain the words.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
