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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3880 OF 2003 RAJASTHAN R.S.S. & GINNING MILLS FED. LTD. APPELLANT VERSUS DY. COMMISSIONER OF INCOME TAX, JAIPUR. ....RESPONDENT

JUDGMENT ANIL R. DAVE, J. 1. Being aggrieved by the judgment delivered on 19th September, 2002 in Income Tax Appeal o!19 o" 2001 by

the #igh $ourt o" %udicature o" &aja'than, %aipur Bench, thi' appeal ha' been "iled by the a''e''ee, (hich i' a co)operative 'ociety! *hen the appeal (a' called out "or hearing, none had appeared "or the appellant co)operative 'ociety! +pon

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peru'al o" the record, (e "ound that the learned advocate (ho had appeared earlier had become a 'enior coun'el! In the circum'tance', (e had re,ue'ted hi' colleague to appear in the matter but he had 'ho(n hi' reluctance to appear "or the appellant 'ociety, e'pecially in vie( o" the "act that though more than t(o letter' had been addre''ed to the appellant 'ociety "or 'ending va-alatnama or "or ma-ing appropriate arrangement "or it' appearance in thi' $ourt, the appellant 'ociety had not even cared to reply to the 'aid letter'! A' the appellant 'ociety i' a 'ociety (herein the State o" &aja'than ha' 'ub'tantial intere't, (e had re,ue'ted learned advocate .r! /uneet %ain to a''i't the court by appearing "or the appellant 'ociety and in pur'uance o" the re,ue't o" thi' $ourt, he had rendered hi' valuable a''i'tance by appearing "or the appellant 'ociety! 2. The "act' giving ri'e to the pre'ent appeal in a nut)'hell are a' under0

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There (ere "our co)operative 'ocietie' in the State o" &aja'than (herein the 1overnment o" &aja'than had 'ub'tantial 'hare holding, namely ) 2i3 &aja'than $o)

operative Spinning .ill' 4td!5 2ii3 1angapur $o)operative Spinning .ill' 4td!5 2iii3 1anganagar $o)operative Spinning .ill' 4td!5 and 2iv3 1ulabpura $otton 1inning 6 /re''ing Sah-ari Samiti 4td! An admini'trative deci'ion (a' ta-en by the 1overnment o" &aja'than to amalgamate all the

a"ore'tated co)operative 'ocietie' into the appellant co) operative 'ociety, namely &aja'than &ajya Sah-ari Spinning 6 1inning .ill' 7ederation 4td (!e!"! 01!01!1998! +pon amalgamation o" the 'aid 'ocietie' into the appellant 'ociety, the regi'tration o" the 'aid "our co)operative 'ocietie' had been cancelled and all the a''et' and liabilitie' o" the 'aid "our 'ocietie' had been ta-en over by the appellant 'ociety by virtue o" the a"ore'tated amalgamation! The a"ore'tated "our 'ocietie' (ere not 'ound "inancially and they had 'ub'tantial

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accumulative lo''e'! A"ter the amalgamation o" the "our co) operative 'ocietie' into the appellant 'ociety, (hen Income) Tax return' "or the a''e''ment year' 1999)9: and 199:)9; (ere "iled by the appellant 'ociety, the appellant 'ociety (anted to get the accumulated lo''e' o" the a"ore'tated 'ocietie', o" about &'!2,;<,89,:09=), carried "or(ard, 'o that the 'ame could be 'et o"" again't the pro"it' o" the appellant 'ociety under the provi'ion' o" Section >2 o" the Income Tax Act, 19;1 2hereina"ter re"erred to a' ?the Act@3! The a''e''ing o""icer negatived the appellant@' claim "or the rea'on that the 'aid 'ocietie' (ere not in exi'tence a"ter their amalgamation into the appellant 'ociety! A' the 'aid "our 'ocietie' (ere not in exi'tence, according to the a''e''ing o""icer, their accumulated lo''e' could not have been carried "or(ard or adju'ted again't the pro"it' o" the appellant 'ociety! A''e''ment order' (ere pa''ed accordingly!

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3.

Being aggrieved by the above 'tated a''e''ment order', appeal' (ere "iled be"ore the $IT 2Appeal'3 and the $IT 2Appeal'3 di'mi''ed the 'aid appeal'! 7urther appeal' (ere "iled be"ore the Income Tax Appellate Tribunal but the Tribunal al'o di'mi''ed the appeal'!

4.

Being aggrieved by the common order pa''ed by the Tribunal, the appellant "iled Income Tax Appeal o!19 o"

2001 be"ore the #igh $ourt o" &aja'than and the 'aid Income Tax Appeal (a' al'o di'mi''ed and there"ore, the appellant ha' approached thi' $ourt by (ay o" the pre'ent appeal! 5. The learned coun'el appearing "or the appellant 'ociety had 'ubmitted that the a''e''ing o""icer and the authoritie' belo(, con"irming the vie( ta-en by the a''e''ing o""icer, are not correct "or the rea'on that upon amalgamation o" the a"ore'tated "our co)operative 'ocietie' into the appellant 'ociety, by virtue o" the provi'ion' o" Section 1;2<3 o" the &aja'than $o)operative Societie' Act, right' and obligation' o" the 'ocietie' 'o amalgamated (ould not be a""ected and

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there"ore, all the right' (hich the 'ocietie' had (ith regard to carrying "or(ard o" their lo''e' (ould continue, and a' the 'aid 'ocietie' had been amalgamated into the appellant 'ociety, the appellant 'ociety ought to have been permitted to 'et o"" the lo''e' 'u""ered by the amalgamated 'ocietie'! The learned coun'el had relied upon Section 1;2<3 o" &aja'than $o)operative Societie' Act, 19;: (hich i' reproduced hereinbelo(0 A1;2<3 The amalgamation, tran'"er or divi'ion made under thi' 'ection 'hall not a""ect any right' or obligation' o" the 'ocietie' 'o amalgamated, or o" the 'ociety 'o divided or o" the tran'"eree, or render de"ective any legal proceeding' (hich might have been continued or commenced by or again't the 'ocietie' (hich have been amalgamated or divided or the tran'"eree5 and accordingly 'uch legal proceeding' may be continued or commenced by or again't the amalgamated 'ociety, the ne( 'ocietie' or the tran'"eree, a' the ca'e may be!B

6.

The learned coun'el had "urther 'ubmitted that reading Section >2213 o" the Act (ith Section 1;2<3 o" the &aja'than

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$o)operative Societie' Act, 19;: clearly denote' that the appellant a''e''ee had a right to carry "or(ard lo''e' incurred by the amalgamating 'ocietie' and 'et o"" the bu'ine'' lo''e' o" the 'aid 'ocietie' again't the pro"it' and gain' o" the appellant 'ociety! 7. #e had "urther 'ubmitted that the (ord ?company@ u'ed in Section >22A3 o" the Act 'hould be given (ide interpretation 'o a' to include 'ocietie' in the term ?company@ becau'e li-e companie', 'ocietie' al'o have a di'tinct legal per'onality and there i' no rea'on "or the authoritie' under the Act to give di""erent treatment to co)operative 'ocietie'! 8. It had "urther been 'ubmitted that the appellant 'ociety had a ve'ted right to get the accumulated lo''e' o" the amalgamated 'ocietie' adju'ted again't the pro"it' o" the appellant 'ociety and the 'aid ve'ted right could not have been ta-en a(ay by the a''e''ing o""icer! So a' to 'ub'tantiate hi' 'ubmi''ion, he had relied upon the judgment delivered in the ca'e o"

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<

C !!"##" $%&

' I$( !% T)* +. M,#. S-)- S)."/ )$.

S $# 19<>283 S$$ :1;! 9. #e had, there"ore, 'ubmitted that the appeal de'erved to be allo(ed and the appellant 'ociety 'hould be permitted to 'et o"" accumulated lo''e' o" the amalgamating 'ocietie' again't the pro"it' o" the appellant 'ociety! 10. Cn the other hand, the learned coun'el appearing "or the authoritie' o" the Income Tax Department had 'ubmitted that the concurrent "inding' o" the "act, and the vie(' expre''ed by all the authoritie' belo( and the #igh $ourt (ere ab'olutely correct and there"ore, the impugned judgment did not re,uire any inter"erence! It had been 'ubmitted by him that the regi'tration o" the amalgamating 'ocietie' had been cancelled upon the amalgamation and a' they (ere not in exi'tence at the time (hen the appellant 'ociety (a' a''e''ed, there (a' no ,ue'tion o" carrying "or(ard accumulated lo''e' o" the amalgamating 'ocietie' and adju'ting them again't the pro"it' o" the appellant 'ociety!

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11. #e had dra(n our attention to the provi'ion' o" Section >2 and >2A o" the Act! #e had "urther 'ubmitted that upon conjoint reading o" Section >2 and >2A o" the Act, it i' clear that the co)operative 'ocietie' cannot get the bene"it o" carrying "or(ard and 'etting o"" accumulated lo''e' i" the 'aid 'ocietie' (ere not in exi'tence! Cnly in ca'e o" a

?company@, the bene"it o" 'et o"" could be availed by an amalgamated company, i" the amalgamating company had accumulated lo''e' (hich could have been carried "or(ard and adju'ted again't the pro"it' o" the amalgamated company in accordance (ith the provi'ion' o" the Act! 12. So a' to 'ub'tantiate hi' 'ubmi''ion', he had relied upon judgment' delivered in the ca'e o" T-% C !!"##" $%& ' I$( !% T)*, L0(1$ 2 +. S-. M).- P.. J)3") S$$ 92 and L3.., J-)$#" 3-%&# 19>;293

M,#. B)".4)$)3- A40&+%. B-)2)$ 5P+3.6 v! T-% E*("#% C !!"##" $%&, U.P. )$. #e had al'o relied upon the

19>1213 S$$ 9!

judgment delivered in the ca'e o" C !!"##" $%& ' I$( !%

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T)*, B !7)4 +. M)-)&)#-3&) S08)& M"99# L3.., B !7)4 19>1 283 S$$ :98! +pon peru'al o" the a"ore'tated

judgment', (hich 'upport the learned coun'el appearing "or the Income Tax authoritie', it i' clear that the tax 'tatute 'hould be interpreted very 'trictly a' there i' no e,uity in tax matter' and nothing can be read (hich i' not in the 'ection! 13. Thu', the learned coun'el appearing "or the re'pondent authoritie' had 'ubmitted that the impugned judgment i' ju't and correct and there"ore, the appeal de'erved to be di'mi''ed! 14. *e had heard the learned coun'el and had al'o peru'ed record' pertaining to the ca'e and had al'o gone through the judgment' re"erred to by them, and upon hearing them (e are o" the vie( that the judgment delivered by the #igh $ourt i' ab'olutely ju't and proper! 15. The main 'ubmi''ion o" the learned coun'el appearing "or the appellant 'ociety (a' that the appellant 'ociety, being an amalgamated 'ociety, mu't get bene"it o" 'etting o"" lo''e' o"

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the co)operative 'ocietie' (hich had been amalgamated into the appellant 'ociety! According to him by virtue o" the provi'ion' o" Section 1;2<3 o" the &aja'than $o)operative Societie' Act, 19;:, read (ith Section' >2 and >22A3 o" the Act, the accumulated lo''e' o" the amalgamating 'ocietie' 'hould have been permitted to be adju'ted or 'et o"" again't the pro"it' o" the appellant 'ociety! #i' main 'ubmi''ion (a' that by virtue o" Section 1;2<3 o" the &aja'than $o)operative Societie' Act, 19;: all legal proceeding' initiated again't or by the amalgamating co)operative 'ocietie' (ould continue and there"ore, right o" the amalgamating 'ocietie' (ith regard to getting their lo''e' carried "or(ard and 'et o"" again't the pro"it' o" the amalgamated 'ociety (ould continue! 16. *e are not in agreement (ith the 'ubmi''ion' made by the learned coun'el appearing "or the appellant "or the rea'on that "or the purpo'e o" getting carried "or(ard lo''e' adju'ted or 'et o"" again't the pro"it' o" 'ub'e,uent year', there mu't be 'ome provi'ion in the Act! I" there i' no provi'ion, the

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'ocietie' (hich are not in exi'tence cannot get any bene"it! The lo''e' (ere 'u""ered by the 'ocietie' (hich (ere in exi'tence at the relevant time and their exi'tence or legal per'onality had come to an end upon being amalgamated into another 'ociety! 17. The normal principle i' that a non)exi'tent per'on cannot "ile an income tax return and there"ore, cannot carry "or(ard it' lo''e' a"ter it' exi'tence come' to an end! All tho'e "our 'ocietie', upon their amalgamation into the appellant 'ociety, had cea'ed to exi't and regi'tration o" tho'e 'ocietie' had been cancelled! In the circum'tance', tho'e 'ocietie' had no right under the provi'ion' o" the Act to "ile a return to get their earlier lo''e' adju'ted again't the income o" a di""erent legal per'onality i!e! the appellant 'ociety! 18. So "ar a' companie' are concerned, there i' a 'peci"ic provi'ion in the Act that upon amalgamation o" one company (ith another, lo''e' o" the amalgamating companie' can be carried "or(ard and the amalgamated company can get tho'e

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lo''e' 'et o"" again't it' pro"it' 'ubject to the provi'ion' o" the Act! Thi' i' permi''ible by virtue o" Section >2 A o" the Act but there i' no 'uch provi'ion in the ca'e o" co)operative 'ocietie'! 19. It i' pertinent to note that 'uch a provi'ion ha' been made only (ith regard to amalgamation o" companie' and later on 'imilar provi'ion' (ere made (ith regard to ban-', etc!, but at the relevant time there (a' no 'uch provi'ion (hich (ould permit the amalgamating co)operative 'ociety to carry "or(ard and adju't 'uch lo''e' again't the pro"it' o" the amalgamated co)operative 'ociety! 20. The 'ubmi''ion made by the learned coun'el appearing "or the appellant (ith regard to di'crimination and violation o" Article 19 o" the $on'titution o" India (ould al'o not help the appellant, a' in our opinion, there i' no di'crimination! The 'ocietie' and companie' belong to di""erent cla''e' and 'imply becau'e both have a di'tinct legal per'onality, it cannot be 'aid that both mu't be given the 'ame treatment!

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21. *e agree (ith the vie( expre''ed by the #igh $ourt that a' there i' no provi'ion under the Act "or 'etting o"" accumulated lo''e' o" the amalgamating 'ocietie' again't the pro"it' o" the amalgamated 'ociety, the appellant 'ociety could not have got the bene"it o" carrying "or(ard lo''e' o" the er't(hile 'ocietie' (hich (ere not in exi'tence during the relevant A''e''ment Eear! 22. *e are al'o o" the vie( that in all the tax matter' one ha' to interpret taxation 'tatute 'trictly! Simply becau'e one cla'' o" legal entitie' are given 'ome bene"it (hich i' 'peci"ically 'tated in the Act doe' not mean that the legal entitie' not re"erred to in the Act (ould al'o get the 'ame bene"it! A' 'tated by thi' $ourt on 'everal occa'ion', there i' no e,uity in matter' o" taxation! Cne cannot read into a 'ection (hich ha' not been 'peci"ically provided "or and there"ore, (e do not agree (ith the 'ubmi''ion' o" the learned coun'el appearing "or the appellant and (e are not prepared to read 'omething in the 'ection (hich ha' not been provided "or! The

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judgment' re"erred to hereinabove 'upport the vie( (hich (e have expre''ed here!
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7or the rea'on' 'tated hereinabove, the appeal i' di'mi''ed

(ith no order a' to co't'!

.,J. (Anil R. Dave) .,J. (Shiva Kirti Sin h) !e" Delhi# A$ril 29, 2014

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