2018 (12) TMI 836

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....evity "the Act"] and the other from an assessment carried out under Section 143 read with Section 263 of the Act. In the year 2006-07, there are two appeals [I.T.A.Nos.126 & 116 of 2012]; one from the order of the Tribunal rejecting the appeal of the Department and the other from the order of the Tribunal allowing the appeal of the assessee. 2. In the years 1997-98 [I.T.A.No.1108/2009], 1998-99 [I.T.A.No.651/2009], 1999-2000 [I.T.A.No.1691/2009] and 2000-01 [I.T.A.No.717/2009] one of the questions is with respect to the dis-allowance of bad debts written off under Section 36(1)(vii). The specific contention of the assessee was that having debited the sums in the separate assessment years, in the P&L account and netted the same from the total advances outstanding in the balance sheet, there is a complete write off and there is no warrant to look into whether there has been a credit made to the specific account. The assessee had raised the contention before the Assessing Officer [for brevity "AO"] on the basis of a decision of the Gujarat High Court in Vithaldas H.Dhanjibhai Bardanwala v. C.I.T. [(1981) 130 ITR 95 (Guj.)]. We have in I.T.A.No.264 of 2009 [South Indian Bank Ltd. v.....

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....the assessee and in favour of the Revenue, affirming the order of the Tribunal to that extent. 6. For the years 2005-06 and 2006-07 in I.T.A.Nos.148 of 2012 and 126 of 2012, there is a question of dis-allowance of bad debts of non-rural Banks written off under Section 36(1)(vii). The AO declined the same. The Tribunal relied on a Full Bench decision of this Court in Commissioner of Income Tax v. The South Indian Bank Ltd. [ (2010) 326 ITR 174 (Ker)] to uphold the dis-allowance. However, the Hon'ble Supreme Court reversed the Full Bench decision of this Court in Catholic Syrian Bank Ltd. v. Commissioner of Income Tax [(2012) 343 ITR 270 (SC)]. In considering the allowance of deduction of actual written off debts under sub-clause (vii) of Section 36(1) with respect to urban bad debts as distinguished from rural bad debts, for which provision is allowable under sub-clause (viia), the same cannot be with reference to the provision under sub-clause (viia). The write off of non-rural bad debts under sub-clause (vii) has been found by the Hon'ble Supreme Court to be independent of the provision for rural bad debts made under sub-clause (viia). In such circumstances, the questio....

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....terating an absurdity or bringing it in consonance with any other law or the Constitution...". Hence, the intention definitely was to extend the benefit to all undertakings. 9. The learned Standing Counsel for Government of India (Taxes), however, takes us through the Notes on Clauses of Finance Bill, 2008 and the Memorandum Explaining the Provisions in the Finance Bill, 2008. Clause 6 in the Notes on Clauses seeking to amend Section 35D specifically says so: "The proposed amendment seeks to substitute the words "industrial undertaking" with the word "undertaking" and the words "industrial unit" with the word "unit", wherever they occur in the said section. This is intended to provide benefit of amortisation of specified post commencement preliminary expenses to all sectors for the extension of an undertaking or the setting up of a new unit. This amendment will take effect from 1st April, 2009 and will accordingly apply in relation to the assessment year 2009-10 and subsequent assessment years". The Memorandum also indicates so: "With a view to providing a level playing field to the services sector, it is necessary to extend to the service sector, t....

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....the running of a lodge would be an industrial undertaking within the meaning of Section 54D. 12. In Shankar Construction Co., the Karnataka High Court was considering the meaning of "industrial undertaking" under Section 32A. The Karnataka High Court reiterated the principle that when a taxing statute is construed and there are two views possible, the view that favours the assessee has to be adopted. It was also held that in construing words in the absence of a statutory definition, it would be open to look for the meaning by reference to definitions in sister legislation. The High Court, looking at the various definition clauses as also the definition under the Industrial Disputes Act, 1947, found the construction activities carried on by the assessee to be possible of being termed an "industrial undertaking". 13. In Computerised Accounting and Management Service Pvt. Ltd., the question came to be considered was as to whether "manufacture or production of an article or thing" would extend to a business in computerised accounting and management services. The assessee therein was engaged in preparing information, through mechanical process; with the aid of computers, to be sup....

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....xing statute. We also notice that the Division Bench of the High Court of Delhi had also construed the words "industrial undertaking" on the common parlance test. The Division Bench of this Court in Alikunju, M.A.Nazeer Cashew Industries also considered the issue on the very same principle, as can be seen from the following extracts: "What then is an "industrial undertaking"? The Income-tax Act does not define what is "an undertaking" or what is an "industrial undertaking". It has, therefore, become necessary to construe these words. Words used in a statute dealing with matters relating to the general public are presumed to have been used in their popular rather than their narrow, legal or technical sense. Loquitur ut vulgus, that is, according to the common understanding and acceptation of the terms, is the doctrine that should be applied in construing the words used in statutes dealing with matters relating to the public in general. In short, if an "Act is directed to dealings with matters affecting everybody generally, the words used have the meaning attached to them in the common and ordinary use of language." (Vide Unwin v. Hanson [1891] 2 QB 115 (CA), per Lord Esher ....