COMMISSIONER OF INCOME TAX, CALCUTTA versus BRAITHWAITE AND CO. LTD.

Citation: [1993] 2 S.C.R. 187 · Decided: 03-03-1993 · Supreme Court of India · Bench: KULDIP SINGH · Disposal: Appeal(s) allowed
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Judgment (excerpt)

COMMISSIONER OF INCOME TAX, CALCUTTA 
A 
v. 
BRAITHWAITE AND CO. LTD. 
11;1ARCH 3, 1993 
[KULDIP SINGH AND N.M. KASLIWAL, JJ.] 
Companies (Profits) Surtax Act, 1964: 
Second Schedule Rule l(v)-Term Loan from Bank-Repayment 
during a period of seven years-Whether amounts to "repayment during a C 
period of not less than seven years''-Wliether the repayment qualifies for 
inclusion in the capital base. 
The respondent-company obtained a Term Loan of Rs. 50,00,000 
repayable within a period of seven years. The company included propor-
tionate amount of the said Term Loan in its capital base and claimed the D 
statutory 10% deduction in the calculation of its chargeable profits for the 
assessment year 1965-66. The Income-tax Officer rejected the claim of the 
respondent company on the ground that the repayment of the Term Loan 
was not during a period of not less than 7 years as contemplated in Rule 
l(v) of the Second Schedule to the Companies (Profits) Surtax Act, 1964. E 
On appeal, the Appellate Assistant Commissioner reversed the findings of 
the Income-tax Officer. Revenue preferred further appeal to the Tribunal 
which held that only the last instalment of Rs. 16,00,000 satisfied the 
requirements of Rule l(v); but in respect of the other four instalments 
aggregating to Rs. 34,00,000 the Tribunal allowed the appeal of the Depart-
ment and rejected the claim of the respondent-company. However at the F 
instance of the respondent-company, Tribunal referred to the High Court 
the question whether the Tribunal was right in holding that only Rs. 
16,00,000 out of the loan of Rs. 50,00,000 taken from Bank qualified for 
inclusion in the capital base under Rule 1 (v). The High Court answered 
the question in the negative and in favour of the respondent-company. G 
Against this, Revenue has come in appeal. 
Allowing the appeal, this Court, 
HELD : 1. On a plain reading of the proviso to Rule l(v) of Second 
Schedule to the Companies (Profits) Surtax Act, 1964, it is clear that in H 
187 
188 
SUPREME COURT REPORTS 
(1993] 2 S.C.R. 
A 
order to claim benefit of the said provision the borrowed money has to be 
repaid during the period of more than seven years. The only interpretation 
which can be given to the expression "during a period of not less than seven 
years' is that the said period should go beyond seven years. The reasoning 
is simple. The period of seven years would not complete till the last 
B 'minute' or even the last 'second' of the said period is counted. The period 
of 'not less than seven years" can only mean till after the completion of 
seven years. Therefore the repayment of borrowed amount during the 
period of seven years does not mean repayment 'during a period of not 
less than seven years". To claim the benefit under Rule l(v) of the Second 
Schedule to the Act the repayment of the borrowed money must be during 
C a period which is more than seven years. [191D·G) 
2. In the instant case, the entire term loan of Rs. 50,00,000 taken 
from the bank does not qualify for inclusion in the capital base under Rule 
l(v) of the Second Schedule to the Act but in view of the fact that the order 
of the Tribunal granting relief to the respondent-company to the extent of 
D Rs. 16 lacs has not been challenged by the department, the Revenue shall 
be entitled to relief to the extent of Rs.34 lacs only as not qualified for 
inclusion in the capital base. [192E-F) 
CIVIL APPELLATE JURISDICTION 
Civil Appeal No. 1034 
E 
(NT) of 1977. 
From the Judgment and Order dated 18.7.75 of the Calcutta High 
Court in I.T.R. No. 44 of 1972. 
J. Ramamurthi, R. Ayyam Perumal and Ms. A Subhashini (N.P.) for 
F 
the Appellant. 
K.C. Dua for the Respondent. 
The Judgment of the Court was delivered by 
G 
KULDIP SINGH, J. The respondent-company obtained a Term 
Loan of Rs. 50,00,000 from the National Grindlays Bank Ltd. The agree-
ment dated August 1, 19(\4 provided for repayment of the loan in five 
instalments. The last instalment was to be paid on July 31, 1971. Thus the 
loan was to be paid back within the period of seven years from the date of 
H 
the agreement. The question for our consideration is whether the repay-
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C.l.T. v. BRAITiiWAITE [KULDIP SINGH, J.] 
189 
ment under the agreement was "during a period of not less than seven A 
years" within the proviso to Rule l(v) of the Second Schedule to the 
Companies (Profits) Surtax Act, 1964 (the Act). 
The Act imposed a surtax on so much of the chargeable profits of 
ever
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