TaxTMI 
TaxTMI 
1954 (10) TMI 3
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of a business during any chargeable accounting period would be inequitable, owing to any of the following circumstances, namely----- (b) the provisions of buildings, plant or machinery which will not be required for the purposes of the business after the termination of the present hostilities ; The Central Board of Revenue may direct that such allowances shall be made in computing the profits of the business during that chargeable accounting period as the Central Board of Revenue thinks just : Provided that in making such direction the Central Board of Revenue may impose such conditions as it deems appropriate." In their application under section 26(3) under the heading " Buildings, Plant and Machinery provided for the production of War Materials, which will not be required for the purposes of the business after the termination of the present hostilities ", the assessees stated that the production of khaki textiles for war purposes had " necessitated additional plant in the company's dye works "; that the requirements as to canvas had " necessitated additional textile machinery for the various doubling processes and additional winding machinery for the canvas. waft "; tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mination of the hostilities. He therefore decided to take action under section 15 of the Act, and issued the requisite notices thereunder to them for reopening the assessments for the years 1941, 1942 and 1943. That was resisted by them on the ground that the facts discovered did not relate to the years of account, and could not therefore form the basis for reopening the assessments for those years. By his order dated 28th December, 1948, the Excess Profits Tax Officer overruled this contention, and revised the assessments for the periods in question on the footing that there were no grounds for granting relief to the assessees under section 26(3) of the Act. This order was confirmed on appeal by the Appellate Assistant Commissioner, but was reversed by the Appellate Tribunal, which held by a majority that it was not open to the Officer to take action under section 15 of the Act on the basis of facts, which had come into existence subsequently. The respondent thereupon applied for reference under section 66(1) of the Income-tax Act, and section 21 of the Act, and on that application, the Tribunal referred the following question of law for the decision of the High Court : " Whethe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f under section 26(3) of the Act were that the buildings, plant and machinery would not be fit for use after the war. It was only on that ground that relief could be granted under that provision And when the appellant continued to use the machinery in business after the termination of the war, the very basis on which relief had been granted to it had disappeared, and the result was that the assessable profits for the chargeable accounting periods had been the subject of excessive relief. The controversy is thus limited to the question whether on the facts found the Excess Profits Tax Officer could be held to have discovered that there was grant of excessive relief. The contention of Mr. Kolah on behalf of the appellant was that discovery for the purpose of section 15 of the Act must be of facts which were in existence during the chargeable accounting period, and that facts which came into existence subsequent to the chargeable accounting period could under no circumstances be made the basis for reassessment of the profits of that period. On behalf of the respondent, the learned Attorney-General contended that the words " If the Excess Profits Tax Officer discovers " in section 15....
X X X X Extracts X X X X
X X X X Extracts X X X X
....end the assessment, when it is found that the relief granted is in excess of what the law allows. One of the sections under which relief could be granted under the Act is section 26(3), and therefore section 15 must be so interpreted as to confer a power on the Excess Profits Tax Officer to revise the assessment when relief had been erroneously granted under that section. Now, section 26(3) provides for relief being granted when the buildings, plant or machinery would not be required by the assessee for his business after the war. And when it is found that after obtaining a relief under that section, the assessee uses buildings, plant and machinery in his business after the war, and that he has in consequence obtained a relief to which he was not entitled under the Act, where is the machinery set up by the Act for imposing the correct charge, unless it be under section 15 ? And how is that section to be invoked if " discovery " is to be limited to facts, which were in existence during the chargeable accounting period? The relief to be granted under section 26(3) is by its very nature with reference to a state of affairs in futuro; and a finding that it has been erroneously granted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to wipe out the past and to undo what had been done, and that under section 18(1) of the Finance Act, the basis of relief was a de facto marriage. Then follow certain observations on which the appellant relies : "There is, however, another difficulty in the way of the Crown. In my opinion it is not lawful for an additional assessment or an original assessment to be made by reference to facts which arise after the year of assessment. In my view that is the reasoning of the decision of Rowlatt, J., in Anderton & Halstead Ltd. v. Birrell ................... In my view it is incompetent to the revenue authorities to make a fresh assessment on him by reason of a fact, which is a real fact, which arose after the year of assessment." Though these observations appear at first sight to support the contention of Mr. Kolah, when examined closely it will be seen that that is not their true effect. The assessee had been granted relief for the years 1928 to 1932, because he was in fact living with his wife or maintaining her during that period. The decree passed in 1933 could not alter that fact. If on that fact the assessee was entitled to relief for those years under section 18(1) of the F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in 1934. The Commissioner held that the assessments for 1930 to 1933 could not be reopened on the basis of the receipt in 1934, as that was an event subsequent to the period of assessment, one of the cases relied on by him in support of his conclusion being Dodworth v. Dak. Finlay, J., disagreed with this view. He held firstly that the amount could be treated as a business receipt and added : "If I felt any difficulty about that, which I do not, I should be prepared to say that there is nothing in the authorities which prevents that re-opening which manifestly ought to be made, if necessary, and that if necessary the previous years ought to be re-opened." Then there is the decision in Anderton & Halstead Ltd. v. Birrells referred to in Dodworth v. Dale, and relied on by Mr. Kolah. There the assessees had written off certain debts as irrecoverable in 1921 and 1922. The Inspector of Taxes had, on a consideration of all the facts, agreed to this, and assessments were made on the footing that they were bad debts. Thereafter, the assessees continued to have dealings with those debtors, and gave them further credit in subsequent years. On this, the Inspector sought to review the as....