Swatanter Kumar, J.
1. A simple but an interesting question of law arises in the present writ petition is to the meaning of the expression 'made' appearing in proviso to Section 80MM of the Income Tax Act (hereinafter referred to as the 'Act'). The Petitioner is a private limited company having its registered office at Nilhat House, 11, R.N. Mukherjee Road, Calcutta and is carrying on its business of providing technical services in connection with the plantation and manufacture of tea. For this purpose, it had entered into various agreements for acquiring technical know-how and consultancy with other persons as well.
The fee is payable to the Petitioner in lieu of those services and normal tenure of the agreement is usually one year amount payable in quarterly installments. During the accounting year corresponding to the assessment year 1978-79 an income of Rs.5,42,365/- accrued from the technical know-how provided by the Petitioner to others. In this regard, 16 agreements had been entered into by the Petitioner with 14 different companies, the details of which have duly been spelled out in the petition. On the basis of these averments, the Petitioner sent by post an application for seeking concessions if the same were approved by the Central Board for Direct Taxes in that behalf. The application sent on 29.9.88 which was subsequently received by the Board.
The Petitioner claim these benefits under Section 80MM of the Act. The letter was sent by registered post and the Petitioner has placed on record the photocopy of the postal receipt duly issued by the post office at Calcutta as Annexure B to the writ petition. In furtherance to his application, the Petitioner was called by the Board, respondent No. 4 in the petition for hearing on 27.3.79 vide its letter dated 1.3.79. After hearing the Petitioner, the Petitioner vide letter dated 16.3.79 was informed that the Board has approved the agreements for the purposes of benefit under Section 80MM of the Act. However, the benefit was made effective from the assessment year 1979-80 and thus denying the benefit to the assessee for the year 1978-79. The Petitioner entered into correspondence with the Respondents and wrote various letters and finally vide his representation dated 24.4.81 in continuation to the previous correspondence gave detailed facts for seeking approval of the Board even in relation to that period. It was stated in the application that the application had been submitted in time and if there was any delay the same could be condoned and Petitioner be granted benefit for the year 1978-79. This request of the Petitioner was declined by the Board vide its order dated 14.5.81 giving rise to the present petition.
2. It is contended that the Petitioner was entitled to the benefit for the year 1978-79 as they had dispatched the application for the benefit before the cut-off date and even if it was received beyond the cut-off date by the Board the Petitioner cannot be made to suffer for consequences thereof. According to the Petitioner, the expression 'made' would mean 'dispatch'. Even if there was delay the Petitioner has made a specific prayer for condonation of such delay before the Board which the Board in exercise of its powers could grant. Non-consideration of this request is arbitrary and the impugned order is liable to be set aside.
3. Counter affidavit on behalf of the Respondents had been filed. The petitioner was under obligation to ensure that the application should be received in the office of the Board prior to the cut off date of 1st October of the relevant assessment year . According to the Respondents, the expression 'made' must be construed as submitted and preferably received by the office of the Board. The petition should be dismissed for want of proper conduct on the part of the petitioner in as much as he had admittedly sent his application by post on 29.9.78 knowing fully well that 1st October was last date for receipt of such application. It is not disputed that the application of the assessee was received by the Office of the Board on 4.10.78. On this premises, it is argued that the rejection order passed by the Board is correct in law and assessee was not entitled to the benefit for the assessment year 1978-79.
4. In order to examine the merit of these rival contentions, reference to the provisions of Section 80MM can be appropriately made at this stage itself as it existed in the relevant assessment year: -
80MM. Deduction in the case of an Indian company in respect of royalties, etc., received from any concern in India :-
(1) Where the gross total income of an assessee, being an Indian company includes any income by way of royalty, commission, fees or any other payment (not being income chargeable under the head Capital gains received by the assessee from any person carrying on a business in India in consideration for
(i) the provision of technical know-how which is likely to assist in the manufacture or processing of goods or materials or in the instalation or erection of machinery or plant for such manufacture or processing, or in the working of a mine, oil well or other source of mineral deposits, or in the search for, or discovery or testing of, mineral deposits or the winning of access to them, or in carrying out any operation relating to agriculture, animal husbandry, dairy or poultry farming, forestry or fishin, or
(ii) rendering services in connection with the provision of such technical know-how under an agreement entered into by the assessee with such person on or after the 1st day of April, 1969, and approved by the Board in this behalf, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction from such income of an amount equal to forty per cent, thereof, in computing the total income of the assessee: Provided that the application for such approval is made to the Board before the 1st day of October of the relevant assessment year:
Provided further that approval of the Board shall not be necessary in the case of any such agreement which has been approved for the purposes of the deduction under the sub-section by the Central Government before the 1st day of April, 1972, and every application for such approval of any such agreement pending with the Central Government immediately before the date shall stand transferred to the Board for disposal.
5. There is no doubt that the grant or denial of relief to the Petitioner would primarily dependent on the meaning of expression 'made'. The Section 80MM is a beneficial provision. It provides that certain income would be deducted from the income of an assessee in proportion to the percentage provided in the Section subject to the condition that there was an agreed services of technical know-how, were rendered in terms of the agreement which was approved by the Board in accordance with the provisions of the Section. The intent of the provision is to grant benefit to an assessee subject to the satisfaction of the conditions stipulated in the provisions.
Thus, an approach or interpretation which would be favourable to an assessee should be adopted where it is possible to take two views in relation to such interpretation. The proviso to Section 80MM (1)(ii) requires that the application for such approval should be made to the Board before 1st day of October of the relevant assessment year. The expression 'made' should be given its normal meaning and there is hardly any scope for giving it a restricted meaning or substitute the same by the expression 'received'.
If the intent of the Legislature was that the application would be entertained by the Board as valid and in time only if it was received before 1st day of October of the relevant assessment year then it was expected to use the word 'received' or at least 'submitted' in place of the word 'made'. This only indicates that an act which is within the control of the assessee should be completed and he should not be able to exercise any control or tamper with the required documents after the cut-off date. Once the application is sent by the assessee by registered post through the post office he obviously loses control over the applications and cannot in any way interject or interfere with the delivery of the documents to the addressee.
6. The expression 'made' has been explained and illustratively discussed in regard to its different connotations, particularly, in relation to the contest for which the word has been used, in the Stroud's Judicial Dictionary, Fifth Edition. It refers to the observation of Lord Macnaghten, who said that such a security was 'made' when and where 'the finishing touch' was given to it. The date when a scheme was 'made' under section 18 of the Town and Country Planning Act 1932 (c.48), was the date when became a binding scheme having effect as if enacted by the Act. Markham V. Derby Corporation 1935 Ch 320. Made (Taxes Management Act 1970 (c.9), s.40(2). An assessment to tax is 'made' for the purposes of this section on the day when the inspector of taxes signs a certificate that is entered into the assessment books of his district.
The 'making' of an assessment is not dependent on its service (Honig and Others vs. Sarsfield (1984) T.C. Leaflet No.2994. $ (Emphasis supplied) Application...... is made (Road Traffic (Drivers' ages and Hours of Work) Act 1976 (c.3), Sched. 2, para 3(3)(a). An application for the grant of a licence to drive a heavy goods vehicle was 'made' at the time it was posted (Brady v. Licensing Authority for the North West Traffic Area 1981 Cri 407).
Made or issued, see ISSUED.
Artistic work Made: see PRODUCED. Matter or thing begun or made: see BEGIN. Made to appear : see APPEAR. Made binding : see REQUIRED; OBLIGATORY; BIND Document made evidence by loss. See DOCUMENT Made and kept safe. See KEEP (Emphasis supplied).
7.The expression 'made' thus has to be given its true meaning, while being read in conjunction to the provisions of the Section 80 MM. The intent of the Section, as already noticed, is to grant benefit to the assessee by allowing certain exemptions.
What the assessee can do within his means and powers, is to make the application before the prescribed date. The assessee is expected to 'cause to exist' or, 'to do in form of law' or 'to perform with due formalities', would be the part of the obligation which he is required to perform under the provisions of the Section. Once, he prepares an application, posts it by registered post and delivers it to the post office, he would loose control over this act or obligation, for all purposes and intents of law. In the event, an application sent by post, received by the Board in time, but was lacking particulars or was not inconfirmity with the rules, it will be liable to be rejected and the assessee would have no chance to correct the same.
The inevitable conclusion of the above discussion would be that on posting of the application seeking benefit under the provisions of 80MM to the Board, he would have substantially comply with the requirements of the Section i.e. 'made to the Board'. The concept of beyond the control of a party was also discussed by the Kerala High Court in the case of Commissioner of Agricultural Income-Tax Vs. Kappumalai Estate 1998 (234) ITR 187 where the Court while referring to section 35 of the Act stated that the expression 'made' would mean authoring the order and issuing the same and as the orders were not dispatched within the described period, the orders for the relevant assessment years were held to be barred by time. In the present case, the application of the petitioner was received by the Board, but on 4th October, 1998.
Thereafter the Board has admittedly granted benefit to the petitioner for all subsequent years which obviously means that the application submitted by the petitioner was inconfirmity to the requirements of the section and the petitioner had no control over the application which was correctly addressed through registered post to the Board. It will be unfair to permit the Board to act to the prejudice of the assessee particularly when the assesse has acted as per practice adopted in the previous years. It is nowhere notified that such applications would not be accepted, if sent by post or the application received beyond the period and the same would be liable to be rejected as they would amount to having not been made in time.
The date of 1st October of the relevant assessment year appears to us to be carrying no magic. It is a cut off date of convenience and has to be considered alongwith the return filed by the assessee for the relevant asessment year. In a case titled CIT Vs. Birla Brothers Pvt. Ltd. 1992 (133) ITR 373, the Court took the view that assessee having done what he could within the time and approval was not given by the Central Government within the time, the assessee was entitled to the benefit of section 80-O and held as under:-
"The assessee could not do anything more than to apply within the time and if in a case the conditions were fulfilled and sanction was accorded subsequent to the period with retrospective effect, the conditions would be fulfilled. Having regard to the purpose of the section, both on a strict construction as well as on the well-settled principles of construction of a statute, the Tribunal was justified in giving effect to the purpose of the legislation. Therefore, the assessee was entitled to the relief under section 80-O although the approval of the Central Government was not accorded before the 1st day of October of the relevant assessment year."
8. This aspect of the case can also be examined from another point of view. The applications to the Board to be submitted by different persons/assessees from all over the country. It would be impracticable to expect every assessee to travel from various parts of the country and deliver the documents by hand to the office of the Board. It is not disputed before us that practice of the Board in the past has been to receive such applications by post. Practice which has prevailed over a long period and has been accepted by all concerned without violation of any specific provision would be a good 'practice'. A good practice in law can be a ground for providing protection to the person who has acted as per the practice. Learned counsel appearing for the petitioner also relied upon the judgment of the Supreme Court in the case of Indore Malwa United Mills Ltd. Vs. Commissioner of Income Tax 1996 (Vol. 1963 (49) ITR 738 to argue that the post office was acting as an agent of the Board in view of the practice and he petitioner having delivered the documents to the post office which in its normal course was liable to deliver the documents to the addressee, the post office would have even acted as an agent of the party for performance of the act. In view of what have already held, it is not necessary for us to dwell upon the merits of this contention.
9. It is rightly contended on behalf of the Petitioner that their request for condonation of delay in view of the circumstances beyond the control and power of the Petitioner has not been dealt with at all by the authorities concerned. Once the authorities are exercising the power vested in them under a statute which is capable of adversely effecting the rights of a party and could deny certain concessions which would be available to such party under the terms of the same statute, then it is expected of the authority concerned to deal with the would be with the prayers made by the assessee/party in accordance with law. While dealing with the such requests they may not pass detailed reasoned order but the order passed by them must show that there has bee application of mind by the authorities in regard to the prayers made by them. In the present case the Petitioner in his representation dated 24.4.81 (Annexure H) had made a specific averment that there were in precedent floods in Calcutta between 26.9.78 to 1.10.78 and despite due diligence the applicant could not sent the applications earlier and if there was delay in the application reaching the Board, the same may be condoned in exercise of powers vested in the Board. In this regard, the reference was also made to the judgment of the Gujarat High Court reported as Narandas Vallabhram Parmar and Anr. Vs. The Union of India and Ors. 1978 ELT (J.695).
We have already noticed that nothing has been said by the official Respondents in regard to the prayer of the Respondents. Still we would consider it appropriate to deal with the alternative submissions that the delay if any in the submission of the applicants could be condoned by the authorities. There is no provision in Section 80MM which empowers the authorities to entertain the applications received beyond the specified period of 1st October of the assessing year. We have already held that the applicant had made the application to the Board in time by sending the same by registered post on 29.9.88.other provisions of the Act clearly show that power to condone the delay in compliance to the procedural matters is vested in the Board under Section 119(2).
The Board is fully competent to admit an application of this kind after the expiry of the periods specified in Section 80MM of the Act. The power under Section 119(2) is a general power or a residual power vested in the Board and the basis for exercise of such a power is referable to the concept of hardship as spelled out in the Section itself. There cannot be any straight jacket formula in relation to condonation of delay or entertainment of application beyond the prescribed period because it would depend on the facts and circumstances of each case. The circumstances referred by the assessee in the present case were certainly not within his control. There were floods still at least 3 days in advance to the prescribed date, the applicant had dispatched the application by post thus loosing control over the document as well as doing everything reasonable within the power and means of the applicant. The Board received this application on 4.10.98 and it is not even the case of the department before us that prior thereto the Board had already taken a decision on the application of the applicant. The use of expression 'expedient so to do for avoiding genuine hardship in any case or class of cases, again by general or special order authorise to Income Tax Authority 'to deal with such application on merits and in accordance with law beyond the period prescribed', shows that intent of the provision is to vest the authority concerned with wide powers to decide every case on its own merit and circumstance.
It is not necessary for us to deal with this contention in any greater detail particularly in view of the view expressed by a Full Bench of Punjab and Haryana High Court in Jaswant Singh Bambha v. Central Board of Direct Taxes, Vol.142 2005, Taxman - Tax Reports, 528, where the Bench while dealing with condonation of delay in filing an application for refund under Section 239 of the Act held as under :-The Court also referred to its earlier decisions in K.P. Varghese v. ITO 1981 (131) ITR 597 (SC) and Ellerman Lines Ltd. vs. CIT 1971 (82) ITR 913 (SC) to observe that the circulars and instructions issued by the Board in exercise of power under section 119 were binding on the authorities administering the tax department even if they be found not in accordance with the correct interpretation of sub-section (2) and they debar or deviate from such construction. Reference was also made to its decision in CCE v. Dhiren Chemical Industries 2002 (254) ITR 554. The Supreme Court in that case was dealing with the interpretation of the phrase appropriate.
However, after having given the interpretation, it observed that if the Central Board of Excise and Customs had issued circulars placing a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue. In other words, the circulars issued by the Board under its statutory power were held to be binding on the income-tax authorities if it was based on an interpretation of a particular phrase or provision which was in conflict with the interpretation of a particular phrase or provision which was in conflict with the interpretation made even by the Apex Court. The supreme Court also placed reliance on the following observations (at page 896) made in UCO Bank's case (supra): Such instructions may be by way of relaxation of any of the provisions of the sections specified there or otherwise. The Board thus has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers under section 119 of the Income-tax Act which are binding on the authorities in the administration of the Act. Under section 119(2) (a), however, the circulars as contemplated therein cannot be adverse to the assessee. Thus, the authority which wields the power for its own advantage under the Act is given the right to forgo the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in section 119.
The power is given for the purpose of just, proper and efficient management of the work of assessment and in public interest. It is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. Hard cases which can be properly categorised as belonging to a class, can thus be given the benefit of relaxation of law by issuing circulars binding on the taxing authorities. (Emphasis supplied) (p.729)
The Supreme Court, ultimately held that the only restriction on the power of the Board under section 119 of the Act is to prevent it from interfering during the course of assessment of any particular assessee or the discretion of the Commissioner of Income-tax (Appeals).
It is true that the aforementioned observations have been made in the context of clause (1) of section 119(2) of the Act but we are of the view that the same shall apply in full force even to clause (b) of the said provision clause (a) deals with the power to grant relaxation from the provisions of several sections enumerated therein.
The matter can be looked at from another angle as well. Section 5 of the Limitation Act, 1963, permits the admission of an application beyond the period of limitation if the applicant satisfies the court that he had sufficient cause for not making the application within such period. This provision has general application. However, a departure to this general rule is made in section 29(2) of the said Act, which reads as under: -
"(2) Where any special or local law prescribes for any suit, appeal or application a period of limitation differen
Please Login To View The Full Judgment!
t from the period prescribed by the Schedule, the provisions of section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law. The above provision clearly shows that section 5 of the Limitation Act shall apply in cases of special or local laws to the extent to which they are not expressly excluded by such special or local laws. In other words, section 5 of the Limitation Act cannot be resorted to only when it is expressly excluded by a special or local law. Section 239 of the Act has not expressly excluded the application of section 5 of the Limitation Act. In fact, a conjoint reading of sections 239 and 119(2) of the Act clearly shows that the application of section 5 of the Limitation Act to the claims of refund has been specifically included in the Act. Thus, in our view, the power given to the Board under section 119(2) of the Act to entertain a belated claim is nothing but incorporation of the provisions of section 5 of the Limitation Act, 1963. In view of the above, we are satisfied that by virtue of power conferred on the Board under section 119(2) of the Act, it is fully competent to admit an application for refund even after the expiry of the period prescribed under section 239 of the Act for avoiding genuine hardship in any case or class of cases." 10.The circumstances stated by the applicant in his representation dated 24.4.81 clearly demonstrate case of hardship which would justly and fairly invite the application of the power vested in the Board under Section 119(2) read with 80 MM of the Act in consonance with the principles afore-stated. For the reasons afore-recorded, we would set aside the orders passed by the Board dated 11.4.1980 and 14.5.1981 issued by and on behalf of Director, Central Board of Direct Taxes holding that the approval cannot be made effective from assessment year 1978-79 instead of 1979-80 and that the Board has no power to condone the delay respectively. We hold that the petitioner was entitled to have the benefit effective from financial year 1978-79 which has already been granted by the Board w.e.f. 1979-80. The writ petition is allowed while leaving the parties to bear their own costs.