# JAIPURJA SAMLA AMALGAMATED ETC v. COLLIEIUES LTD. COJ\IMISSIONER OF INCOME TAX, WEST BENGAL Augus~ 31, 1971

- **Citation:** [1972] 1 S.C.R. 510
- **Court:** Supreme Court of India
- **Decided:** 1972
- **Case number:** Civil Appeals Nos. 1910 to c 1912 and 2112 of 1968
- **Bench:** K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jaipurja-samla-amalgamated-etc-v-collieiues-ltd-coj-imissioner-of-income-tax-5386
- **Pages:** 7

## Headnote

Income Tax Act, 1922, s. 10(4)-Cesses imposed under-Bengal Cess
Act, 1880 and Bengal (Rural) Primary Education Act, 1930 whether
fall within mischief of section-Whether based on profits c.nd gains of
business profession or vocation.
The appellant was a public limited company. It carried on the business of ruising coal from coal mines and selling the same.
It had taken
on lease several mines from the owners of the coal bearing lands.
As
lessee of the mines the, appellant incurred liability for payment of (i) Road
and Public Works cess under the Bengal Cess Act of 1880; (ii) Education Cess levied under the Bengal (Rural) Primary Education Act, 1930.
The amounts payable by the assessee on account of the aforesaid cesses
were claimed by it as a deduction under s. 10 of the Income-tax Act,
1922.
The Income-tax authorities disallowed that claim relying on
s. I 0( 4) of the Act.
The Tribunal and the High Court decided against
the appellant.
In appeal to this Court by special leave, the question for
determination was whether the cesses levied under the aforesaid Bengal
Acts fell within the mischief of s. 10( 4) of the Act. It was common
ground that these cesses were not levied on the profits or gains of any
business, profession, or vocation but it was claimed on behalf of the
Revenue that the cesses were assessed on the basis of such profits and
gains and therefore they would be covered by the said provision.
HELD : (i) The words 'profits and gains of any business, profession,
or vocation which are employed in s. 10( 4) can, in the context, have
reference only to' profits or gains as determined under s. 10 and cannot
cover the net p!rofits or gains arrived at ofcletermined in a manner other
than that provided by s. 10. The whole purpose of enacting sub-s. (4)
of s. 10 appears to be to exclude from the permissible deduction under
els. (ix) and (xv) of sub-s. (2) such cess, rate or tax which is levied
on the profits or gains of any business profession or vocation or is
assessed at a proportion of or on the basis of such profits or gains.
In
other words sub-s. ( 4) was meant to exclude a tax or -a cess or a rate
the asses·sment of which would follow the determination or assessment
of profits or gains of ariy business, profession or vocation in accordance
with s. 10 of the Act. [514 D-EJ
(iii) The road cess and public works cess are to be assessed on the
annual net profits under ss. 72 and 76 of the Cess Act 1880. The net
annual profits have to be calculated on the average of the net profits for
the last three years of the mine or the quarry and if the annual net
profits of the property cannot be ascertained in the aforesaid manner then
it is left to the Collector to determine the value of the property first in
such manner as he considers expedient and determine 6 per cent on that
\'alue which wguld be deemed to be the annual net profits.
The Cess
Act of 1930 follows the same pattern so far as the ascertainment of
annual net profits is concerned. These profits arrived at according to the
pro\isions of the two Cess Acts can by no stretch of reasoning be equated
to the profit. which are determined under s. 10 of the ~Act. It is not
possible to see, therefore, how s. 10( 4) could be applicable at all ill the
A
B
c
D
E
F
G
H
A
JAIPURIA COLLIERIES v. C.I.T., WEST BENGAL (Grover, /.)511
present case.
Thus on the language of the provisions both of the
Act and the two Cess Acts the applicability of s. 10(4) cannot be
attracted. (514 F-H]
Commissioner of Income-tax, Bengal v. Gurupada Datta 14 I.T.R. 100,
applied.
B
Simbholi Sugar Mills Ltd. v. Commissioner of Income-tax, U.P. cl Y.P.
45 l.T.R. 125 and Commissioner of Inrome-tax, Delhi & Rajasthan v.
Banarsi Dass & Sons, 61 l.T.R. 414, approved.
Commissioner of Income-tax, West Bengal v. We~ Bengal Mining Co.
67 I.T.R. 292, disapproved.

## Text

510
JAIPURJA SAMLA AMALGAMATED
ETC.
v.
COLLIEIUES LTD.
COJ\IMISSIONER OF INCOME TAX, WEST BENGAL
Augus~ 31, 1971
[K. S. HEGDE AND A. N. GROVER, JJ.]
Income Tax Act, 1922, s. 10(4)-Cesses imposed under-Bengal Cess
Act, 1880 and Bengal (Rural) Primary Education Act, 1930 whether
fall within mischief of section-Whether based on profits c.nd gains of
business profession or vocation.
The appellant was a public limited company. It carried on the business of ruising coal from coal mines and selling the same.
It had taken
on lease several mines from the owners of the coal bearing lands.
As
lessee of the mines the, appellant incurred liability for payment of (i) Road
and Public Works cess under the Bengal Cess Act of 1880; (ii) Education Cess levied under the Bengal (Rural) Primary Education Act, 1930.
The amounts payable by the assessee on account of the aforesaid cesses
were claimed by it as a deduction under s. 10 of the Income-tax Act,
1922.
The Income-tax authorities disallowed that claim relying on
s. I 0( 4) of the Act.
The Tribunal and the High Court decided against
the appellant.
In appeal to this Court by special leave, the question for
determination was whether the cesses levied under the aforesaid Bengal
Acts fell within the mischief of s. 10( 4) of the Act. It was common
ground that these cesses were not levied on the profits or gains of any
business, profession, or vocation but it was claimed on behalf of the
Revenue that the cesses were assessed on the basis of such profits and
gains and therefore they would be covered by the said provision.
HELD : (i) The words 'profits and gains of any business, profession,
or vocation which are employed in s. 10( 4) can, in the context, have
reference only to' profits or gains as determined under s. 10 and cannot
cover the net p!rofits or gains arrived at ofcletermined in a manner other
than that provided by s. 10. The whole purpose of enacting sub-s. (4)
of s. 10 appears to be to exclude from the permissible deduction under
els. (ix) and (xv) of sub-s. (2) such cess, rate or tax which is levied
on the profits or gains of any business profession or vocation or is
assessed at a proportion of or on the basis of such profits or gains.
In
other words sub-s. ( 4) was meant to exclude a tax or -a cess or a rate
the asses·sment of which would follow the determination or assessment
of profits or gains of ariy business, profession or vocation in accordance
with s. 10 of the Act. [514 D-EJ
(iii) The road cess and public works cess are to be assessed on the
annual net profits under ss. 72 and 76 of the Cess Act 1880. The net
annual profits have to be calculated on the average of the net profits for
the last three years of the mine or the quarry and if the annual net
profits of the property cannot be ascertained in the aforesaid manner then
it is left to the Collector to determine the value of the property first in
such manner as he considers expedient and determine 6 per cent on that
\'alue which wguld be deemed to be the annual net profits.
The Cess
Act of 1930 follows the same pattern so far as the ascertainment of
annual net profits is concerned. These profits arrived at according to the
pro\isions of the two Cess Acts can by no stretch of reasoning be equated
to the profit. which are determined under s. 10 of the ~Act. It is not
possible to see, therefore, how s. 10( 4) could be applicable at all ill the
A
B
c
D
E
F
G
H
A
JAIPURIA COLLIERIES v. C.I.T., WEST BENGAL (Grover, /.)511
present case.
Thus on the language of the provisions both of the
Act and the two Cess Acts the applicability of s. 10(4) cannot be
attracted. (514 F-H]
Commissioner of Income-tax, Bengal v. Gurupada Datta 14 I.T.R. 100,
applied.
B
Simbholi Sugar Mills Ltd. v. Commissioner of Income-tax, U.P. cl Y.P.
45 l.T.R. 125 and Commissioner of Inrome-tax, Delhi & Rajasthan v.
Banarsi Dass & Sons, 61 l.T.R. 414, approved.
Commissioner of Income-tax, West Bengal v. We~ Bengal Mining Co.
67 I.T.R. 292, disapproved.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1910 to
c 1912 and 2112 of 1968, amd 1102 to 1105 ot 1971.
Appeals by certificate/special leave from the judgments and
orders dated July 28, 1967, March 29, 1968, May 24, 1968 of the
Calcutta High Court in Income-tax References Nos. 170 of 1963,
40 of 1965 and 4 of 1967.
D
V. S. Desai, N. R. Khaitan, B. P. Maheshwari and Krishna Sen,
E
F
for the appellants (in all the appeals) .
B. Sen, K. S. Suri, R. N. Sachthey and B. D. Sharma, for the
respondent (in C.As. Nos. 1910 to 1912 of 1968, lllld 1102 to
1104 of 1971).
B. D. Sharma, for the respondent (in C.As. Nos. 2112 of 1968
and 1105 of 1971).
The Judgment of the Court was delivered by
Grover, l. These appeals from
judgments of the
Calcutta High Court in Income-tax References involve a common
question.
We shall refer to the facts in the batch of appeals of
Jaipuria Samia Amalgamated Collieries Ltd.
The assessee is a public limited company incorporated under
the Indian Companies Act 1913. It carried on the business of
raising coal from coal mines and selling the same to its constiG tuents.
It had taken on lease several coal mines from the owners
of the coal bearing lands.
As lessee of the mines the · assessee
incurred liability for payment of (i) Road and Public Works cess
under the Bengal Cess Act of 1880; (ii) Education cess levied
under the Bengal (Rural) Primary Education Act, 1930. The
amounts payable by the assessee on account of the aforesaid cesses
H
were claimed by it as deduction under s. 10 of the Income-tax Act,
1922, hereinafter referred to as the "Act'', in the computation of
its profits. The income tax authorities disallowed that claim relying on s. 10( 4) of the Act.
The assessee went up in appeal to the
512
SUPREME COURT REPORTS
[1972] 1 S.c.R.
Appellate Tribunal which agreed with the orders of the departA
mental authorities.
The questions which were submitted by the
Tribunal with the statement of the case relating to the assessment
years 1954-55, 1955-56 were as follows :-
" (1) Whether, on the facts and in the circumstances
of the case, the Road, the Public Works and the Education Cesses were levied either on the profits or gains of
the business or were assessed at a proportion of or otherwise on the basis of any such profits within the meaning
of s. 10( 4) of the Income tax Act, 1922?
(2) Whether, on the facts and in the circumstances
of the case, the amounts provided for or paid by the
assessee company, as Road and Public Works Cess and
the Education Cess was allowable as a deduction under
s. 10(2)(ix) or 10(2)(xv) of the Indian Income tax
Act, 1922, read with s. 10 ( 4) of the said Act ?"
B
c
The High Court answered the questions against the assessee. The
ass::ssee filed appeals to this Court after obtaining a certificate of
D
fitness but the same was found defective owing to want of any
reasons or grounds in the order granting the certificate.
Instead
of getting 'the matters remitted to the High Court for giving reasons petitions for special leave were filed before us and leave was
granted.
We have heard the appeals by special leave on the
printed record of the appeals by certificate. It may be mentioned
E
that this position obtains in all the appeals by certificate before us.
Section 10 ( 1) of the Act provides that tax shall be payable by
an assessee under the head "profits and gains of business, profession or vocation" in respect of the profits and gains of any business
profession or vocation carried on by him. Sub-section (2) says
that such profits or gains shall be computed after making the
F
allowances set out therein.
Clauses (ix) and (xv) of this sub·
section are as follows :-
" (ix) any sums paid on account of land revenue,
local rates or municipal taxes in respect of such part of
the premises as is used for the purpose of the business,
profession or vocation."
G
"(xv)any expenditure not being an allowance of the
nature described in any of the clauses
(i) to (xiv)
inclusive, and not being.in the nature of capital expenditure or personal expenses of the assessee laid out or
expended wholly and exclusively for the purpose of such
business, profession or vocation."
H
Sub-section ( 4) of s. 10 to the extent it is material is in the
following terms :
A
B
JAIPURIA COLLIERIES v. C.I.T., WEST BENGAL (Grover, I.) 513
( 4) Nothing in clause (ix) or clause (xv) of subsection ( 2) shall be deemed to authorise· the allowance
of any sum paid on account of any cess, rate or tax
levied on the profits or gains of any business, profession
or vocation or assessed at a proportion of or otherwise
on the basis of any such profits or gains .......... "
The essential question that has to be determined is whether the
cesses levied under the aforesaid Bengal Acts fell within the mischief of s. 10 ( 4) of the Act.
It is common ground that these
cesses are not Jevied on the profits or gains of any business, profession or vocation but it has been claimed on behalf of the
Revenue and that contention was accepted throughout that the
C ccsses are assessed on the basis of such profits or gains and therefore they would be covered by the said provision.
According to the preamble to the Bengal Cess Act 1880, the
road and works cesses were levied on immovable property i1Cteralia to provide for the construction and maintenance of roadi and
0
other works of public utility. Under s. 5 all immovable property
with certain exceptions was to be liable to the payment of road
cess and public works cess. Section 6 laid down that thC!ie cesses
were to be assessed on the annual value of lands and until provision to the contrary was made by the Parliament on the annual net
profits from mines, quarries,
tramways,
railways and other
immovable property on such rates as were to be detennined in
E
the manner irescribed.
Under s. 72 the Collector of the district
had to serve a notice upon the owner etc. of every mine,
quarry . . . . . . . . . . . . and immovable property requiring him
to lodge a return of the net annual profits of such property calculated on the average of the annual net profits thereof for tho last
three years for which accounts had been made up.
Section 75
F
provided for a contingency where a return was not furnished within the prescribed period. The Collector in that case or if he
found that the return made was untrue or incorrect was to proceed
to ascertain and determine by such ways or means as seemed expedient the annual net profits of such property calculated as aforesaid. If the Collector was unable to ascertain the annual net
G profits he could ascertain and determine the value of the property
and thereupon determine 6 % of such value to be the annual net
profits thereon ( s. 7 6) . The scheme of the Bengal (Rural)
Primary Education Act 1930 may next be referred to.
The
preamble to that Act was as follows :-
H
"Whereas it is expedient to make better provision
for the progressive expansion and for the management
and control of primary education in rural areas in
Bengal so as to make it available to all children and with
a view to make it compulsory within ten years ..••.•
514
SUPREME COURT REPORTS
[1972] 1 s.c.R.
According to s. 29 all immovable property on which the road A
and public works cesses were assessed were to be liable to the
payment of primary education cess.
The rates on which the
education cess was to be levied varied according as the property
consisted of mines and quarries or of tramways, railways and other
immovable property. As regards mines and quarries it was to
be levied at the rate of three and a half pice on each rupee of B
annual net profits.
Now it is quite clear that the aforesaid cesses would be allowable deductions either under clause (ix) or clause (xv) of sub-s.
(2) of s. IO unless they fell withins. I0(4). We have already
referred to the provisions of both Acts under which the cesses are
levied which show that their assessment is not made at a proporC
tion of the profits of the assessee's business.
What has to be
determined is whether the assessment of the cesses is made on the
basis of any such profits.
The words "profits and gains of any
business, profession or vocation" which are employed in s. IO( 4)
can, in the context, have reference only to profits or gains as
determined under s. IO and cannot cover the net profits or gains
D
arrived at or determined in a manner other than that provided by
s. l 0.
The whole purpose of enacting sub-s. ( 4) of s. IO appears
to be to exclude from the permissible deductions under clauses
(ix) and (xv) of sub-s. ( 2) such cess, rate or tax which is levied
on 'the profits or gains of any business, profession or vocation or
is assessed at a proportion of or on the basis of such profits or
gains.
In other words sub-s. ( 4) was meant to excluee a tax or a
E
cess or rate the assessment of which would follow the determination or assessment of profits or gains of any business, profession
or vocation in accordance with the provisions of s. 10 of the
Act.
.The road cess and public works cess are to be assessed on the
F
annual net profits under ss. 72 to 76 of the Cess Act 1880. The
net annual profits have to be calculated on the average of the net
pNfits for the last three years of the mine or the quarry and if the
annual net profits of the property cannot be ascertained in the
aforesaid manner then it is left to the Collector to determine the
value of the property first in such maner as he considers expedient
and determine 6 per cent on that value which would be deemed to
G
be the annual net profits.
The Cess Act of 1930 follows the same
pattern so far as the ascertainment of annual net profits is concerned.
These profits arrived at according to the provisions of
the t_wo Cess Acts can by no stretch of reasoning be equated to the
profits which are determined under s. 10 of the Act. It is not
possible to see, therefore, how s. IO( 4) could be applicable at all
H
in the.presynt case.
Thus on the language of the provisions both
of the Act and the two Cess Acts the applicability of s.
IO( 4)
cannot be attracted.
But even according to the decided cases
A
B
c
D
•
E
F
G
H
JA!PURJA COLLIERIES v. C.I.T., WEST BENGAL (Grover,!.) 515
such cesses cannot fall within s. 10( 4). The Privy Council in
Commissio1u>r of Income tax, Bengal v.
Gurupada Dutta &
Others(1) had to consider whether the rate imposed under the
provisions of the Bengal Village Self Government Act 1919 on a
person occupying a building and using the same for the purpose of
business was an allowable deduction in computing the profits of the
business under s. 10 of the Act.
Their Lordships laid down the
law in the following words :
''It will be noted that, in the absence of the necessary powers and machinery, which are not provided by
the Act, the estimate of the annual income from business
can only proceed on a rough guess, which is in no way
comparable with the ascertainment of profits and gains
under the Income-tax Act, and, in the opinion of their
Lordships, the inclusion of this element of business
income as part of the "circumstances" of the assessee
with a view to the imposition of the union rate does not
fall within sub-section (4) of Section 10 of the Income
tax Act.
It is conceded that the union rate is not
"levied on the profits or gains", which clearly implies
an ascertainment of such profits and gains, and the words
"assessed .......... on the basis of any such profits or
gains" in the later part of the sub-section must also be
so limited.
No such ascertainment of the profits and
gains of the busjness can be undertaken for the purposes
of the uniou rate.
The main argument for the Crown,
therefore fails."
In our judgment this decision is quite apposite and fully
covers
the points under consideration.
It has been followed by the
Allahabad High Court in Simbholi Sugar Mills Ltd. v. Commissioner of Income tax, U.P. & V.P.( 2 ) in which the question
related to the deductibility of tax payable under the U.P. District
Boards Act 1922 which was imposed on persons assessed according to their circumstances and property.
Similarly in Commissioner of Income tax, Delhi and Rajasthan v. Banarsi Dass &
Sons('), the Punjab High Court held that a tax imposed under
the U.P. District Boards Act on circumstances and property could
be legitimately claimed as an allowance and the above decision of
the Privy Council was followed.
In the Income tax Act 1961,
s. 28 relates to the income which shall be chargeable to income
tax under the head "profits and gains of business or profession".
Section 30(b) (ii) is equivalent to cl. (ix) of s. 10(2) of the Act.
Section 40(a)(ii) corresponds to s. 10(4) of the Act. It is
significant that in spite of the decision of the Privy Council in
(!) 14 l.T.R. JOO.
(2) 45 1.1'.R. 125; ·
(3) 61 1.T.R. 414.
516
SUPREME COURT REPORTS
[19 72] l S.C.R.
Gurupada Dutta's case(') the Parliam~nt did
not make any
A
change in the language of the provisions
corresponding to s.
10 ( 4). It can, therefore, legitimately be said that the view of the
Privy Council with regard to the true scope .and ambit of s. 10( 4)
of the Act was accepted.
We are unable to concur in the reasoning or the conclusion of the Calcutta High Court in Commissioner
of Income tax, West Bengal, v. West Bengal Mining Co.(") in
B
which it was held that the two cesses being related to profits would
attracts. 10( 4) of the Act.
In the result Civil Appeals Nos. 1102 to 1105 of 1971 which
,1 re by special leave are allowed and the answers returned by the
High Court are discharged. . The questions referred shall stand
answered in favour of the assessees and against the Revenue. The c
assessee shall be entitled to their costs in this Court.
Civil Appeals Nos. 1910 to 1912 of 1968 and 2112 of 1968
in which the certificates are defective and have to be revoked shall
stand dismissed
G.C.
Ordered accordingly.
(I) 14 I. T. R. 100.
(2) 67 l.T.R. 29~.