LexHINDUSTAN CONSTRUCTION CO. LTD. versus INCOME TAX OFFICER (COMPANIES CIRCLE) BOMBAY & ANR.
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HINDUSTAN CONSTRUCTION CO. LTD.
v.
INCOME TAX OFFICER (COMPANIES CIRCLE) BOMBAY
&ANR.
A
December 10, 1964
B
{P. B. GAJENDRAGADKAR, C. ]., M. HIDAYATULLAH, J. C. SHAH,
S. M. SIKRI and R. S. BACHAWAT, JJ.J
lr.dian Income-tax, 1922 (11 of 1922), s. 49E-Claim of Set-<>ff-
Prior adjudication of amount of refund due whether necessary-"found to
be due", meaning of-"Jn lieu of payment", meaning of-Set-off can
be given only when there is subsisting obligation to make refund.
C
The appellant company made a claim under s. 5 of the Incomo-tax
(Double Taxation Relief) (Indian States) Rules, 1939, for refund of the
income-tax paid by it in an Indian State. The claim was rejected by the
Income-tax Officer as time-barred. The Commissioner of Income-tax and
the Central Board of Revenue refused to interfere and the appellant sought
no further legal remedy against their orders. Subsequently on certain tax
demands being made by the Income-tax Officer, the appellant made repro-
D
sentation that the amounts in respect of which application had earlier been
made under r. 5 should be set off against the demand as pro\ided by
•· 49E of the Indian Income-tax Act, 1922. The Income-tax authoritieo
having rejected this claim also, the appellant went to the High Court under
Art. 226 of the Constitution.
The High Court held that the expression
"found to be due" in s. 49E clearly meant that there must be, prior to
the claim of set off, an adjudication whereunder an amount is found
due by way of refund to the person claiming set-off. Since there was no
E
such adjudication in the appellant's favour, the writ petition was dis-
missed. However a certificate of fitness under Art. 133(1) (c) was granted
to the appellant.
HELD : (i) It is not necessary that there should be a prior adjudication
before a claim can be allowed under s. 49E. There is nothing to debar
the Income-tax Officer from determining the question whether a refund is
due or not when an application is made to him under s. 49E. The words
F
"is found" do not necessarilv lead to the conclusion that there must be a
prior adjudication. [419 D-EJ
(ii) The set-off under s. 49E must however be "in lieu of payment"
which expression connotes that payment is outstanding I.e. there is a sub-
sisting obligation on the Income-tax Officer to pay. If a claim to refund
is barred bv a final order. it cannot be said that there is a subsisting
obligation to make the payment. [419 F-GJ
G
Slllbbs v. Director of Public Prosecutions 24 Q.B.D. 577, relied on.
(iii) In the present case the orders of the Commissioner and the
Central Board of Revenue rejecting the appellant's claim under r. 5 of the
Indi.'.1n S!zte Rules had become final.
They were not challenged even in
the petition under Art. 226. There was thus no subsisting obligation on
the part of the Income-tax Officer to make payment to the appellon!, and
the claim of the appellant under s. 49E must therefore, fail. [419 G-H]
H
CIVIL APPEI.LATE JURISDICTION: Civil Appeal No. 136 of
1964;
B
HINDUSTAN CONSTR. CO. V. I.T.O. (Sikri, /.)
415
Appeal from the judgment and order dated February 24, 1961
of the Bombay High Court in Misc. Application No. 333 of
1960.
A. V. Viswanatha Sastri, T. A. Ramachandra, I. B. Dada-
chanji, 0. C. Mathur and Ravinder Narain, for the appellant
R. Ganapathy Iyer, R. H. Dheber and ~. S. Sachthey, for the
respondent.
The Judgment of the Court was delivered by :
Sikri, J.
This is an appeal on a certificate granted by the
·C
High Court of Bombay against its judgment dated February 24,
1961, dismissing the petition filed by the appellant under Art.
226 of the Constitution of India.
This appeal raises a short
question as to the construction of s. 49E of the Indian Income-
Tax Act, 1922, hereinafter referred to as the Act.
Before we
deal with this question, it is necessary to set out the relevant
D
facts.
The appellant, at the material time, carried on business not
only in India but also outside India, i.e. Ceylon, the former States
of Kolhapur and Kapurthala and other places. It is not necessary
to give the facts relating to the income in Ceylon and Kolhapur
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because if the facts relating to the income made in Kapurthala
are stated, these will bring out the real controversy between the
appellant and the Revenue. We may mention that it is common
ground that the facts relating to Ceylon income and Kolhapur
income are substantially similar.
F
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