Page 1 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

J U D G M E N T

ANIL R. DAVE, J.

1.Being aggrieved by the judgment delivered on 19

th

September, 2002 in Income Tax Appeal No.19 of 2001 by

the High Court of Judicature of Rajasthan, Jaipur Bench, this

appeal has been filed by the assessee, which is a co-operative

society. When the appeal was called out for hearing, none

had appeared for the appellant co-operative society. Upon

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Page 2 perusal of the record, we found that the learned advocate who

had appeared earlier had become a senior counsel. In the

circumstances, we had requested his colleague to appear in

the matter but he had shown his reluctance to appear for the

appellant society, especially in view of the fact that though

more than two letters had been addressed to the appellant

society for sending vakalatnama or for making appropriate

arrangement for its appearance in this Court, the appellant

society had not even cared to reply to the said letters. As the

appellant society is a society wherein the State of Rajasthan

has substantial interest, we had requested learned advocate

Mr. Puneet Jain to assist the court by appearing for the

appellant society and in pursuance of the request of this

Court, he had rendered his valuable assistance by appearing

for the appellant society.

2.The facts giving rise to the present appeal in a nut-shell are as

under:

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Page 3 There were four co-operative societies in the State of

Rajasthan wherein the Government of Rajasthan had

substantial share holding, namely - (i) Rajasthan Co-

operative Spinning Mills Ltd.; (ii) Gangapur Co-operative

Spinning Mills Ltd.; (iii) Ganganagar Co-operative Spinning

Mills Ltd.; and (iv) Gulabpura Cotton Ginning & Pressing

Sahkari Samiti Ltd. An administrative decision was taken by

the Government of Rajasthan to amalgamate all the

aforestated co-operative societies into the appellant co-

operative society, namely Rajasthan Rajya Sahkari Spinning

& Ginning Mills Federation Ltd w.e.f. 01.01.1993.

Upon amalgamation of the said societies into the appellant

society, the registration of the said four co-operative societies

had been cancelled and all the assets and liabilities of the said

four societies had been taken over by the appellant society by

virtue of the aforestated amalgamation. The aforestated four

societies were not sound financially and they had substantial

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Page 4 accumulative losses. After the amalgamation of the four co-

operative societies into the appellant society, when Income-

Tax returns for the assessment years 1994-95 and 1995-96

were filed by the appellant society, the appellant society

wanted to get the accumulated losses of the aforestated

societies, of about Rs.2,68,39,504/-, carried forward, so that

the same could be set off against the profits of the appellant

society under the provisions of Section 72 of the Income Tax

Act, 1961 (hereinafter referred to as ‘the Act’).

The assessing officer negatived the appellant’s claim for the

reason that the said societies were not in existence after their

amalgamation into the appellant society. As the said four

societies were not in existence, according to the assessing

officer, their accumulated losses could not have been carried

forward or adjusted against the profits of the appellant

society. Assessment orders were passed accordingly.

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Page 5 3.Being aggrieved by the above stated assessment orders,

appeals were filed before the CIT (Appeals) and the CIT

(Appeals) dismissed the said appeals. Further appeals were

filed before the Income Tax Appellate Tribunal but the

Tribunal also dismissed the appeals.

4.Being aggrieved by the common order passed by the

Tribunal, the appellant filed Income Tax Appeal No.19 of

2001 before the High Court of Rajasthan and the said Income

Tax Appeal was also dismissed and therefore, the appellant

has approached this Court by way of the present appeal.

5.The learned counsel appearing for the appellant society had

submitted that the assessing officer and the authorities below,

confirming the view taken by the assessing officer, are not

correct for the reason that upon amalgamation of the

aforestated four co-operative societies into the appellant

society, by virtue of the provisions of Section 16(8) of the

Rajasthan Co-operative Societies Act, rights and obligations

of the societies so amalgamated would not be affected and

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Page 6 therefore, all the rights which the societies had with regard to

carrying forward of their losses would continue, and as the

said societies had been amalgamated into the appellant

society, the appellant society ought to have been permitted to

set off the losses suffered by the amalgamated societies. The

learned counsel had relied upon Section 16(8) of Rajasthan

Co-operative Societies Act, 1965 which is reproduced

hereinbelow:

“16(8) The amalgamation, transfer or division made

under this section shall not affect any rights or

obligations of the societies so amalgamated, or of the

society so divided or of the transferee, or render

defective any legal proceedings which might have been

continued or commenced by or against the societies

which have been amalgamated or divided or the

transferee; and accordingly such legal proceedings may

be continued or commenced by or against the

amalgamated society, the new societies or the

transferee, as the case may be.”

6.The learned counsel had further submitted that reading

Section 72(1) of the Act with Section 16(8) of the Rajasthan

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Page 7 Co-operative Societies Act, 1965 clearly denotes that the

appellant assessee had a right to carry forward losses incurred

by the amalgamating societies and set off the business losses

of the said societies against the profits and gains of the

appellant society.

7.He had further submitted that the word ‘company’ used in

Section 72(A) of the Act should be given wide interpretation

so as to include societies in the term ‘company’ because like

companies, societies also have a distinct legal personality and

there is no reason for the authorities under the Act to give

different treatment to co-operative societies.

8.It had further been submitted that the appellant society had a

vested right to get the accumulated losses of the amalgamated

societies adjusted against the profits of the appellant society

and the said vested right could not have been taken away by

the assessing officer. So as to substantiate his submission, he

had relied upon the judgment delivered in the case of

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Page 8 Commissioner of Income Tax v. M/s. Shah Sadiq and

Sons 1987(3) SCC 516.

9.He had, therefore, submitted that the appeal deserved to be

allowed and the appellant society should be permitted to set

off accumulated losses of the amalgamating societies against

the profits of the appellant society.

10.On the other hand, the learned counsel appearing for the

authorities of the Income Tax Department had submitted that

the concurrent findings of the fact, and the views expressed

by all the authorities below and the High Court were

absolutely correct and therefore, the impugned judgment did

not require any interference. It had been submitted by him

that the registration of the amalgamating societies had been

cancelled upon the amalgamation and as they were not in

existence at the time when the appellant society was

assessed, there was no question of carrying forward

accumulated losses of the amalgamating societies and

adjusting them against the profits of the appellant society.

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Page 9 11.He had drawn our attention to the provisions of Section 72

and 72A of the Act. He had further submitted that upon

conjoint reading of Section 72 and 72A of the Act, it is clear

that the co-operative societies cannot get the benefit of

carrying forward and setting off accumulated losses if the

said societies were not in existence. Only in case of a

‘company’, the benefit of set off could be availed by an

amalgamated company, if the amalgamating company had

accumulated losses which could have been carried forward

and adjusted against the profits of the amalgamated company

in accordance with the provisions of the Act.

12.So as to substantiate his submissions, he had relied upon

judgments delivered in the case of The Commissioner of

Income Tax, Lucknow v. Sh. Madho Pd. Jatia 1976(4)

SCC 92 and M/s. Baidyanath Ayurved Bhawan (Pvt.)

Ltd., Jhansi v. The Excise Commissioner, U.P. and

others 1971(1) SCC 4. He had also relied upon the

judgment delivered in the case of Commissioner of Income

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Page 10 Tax, Bombay v. Maharashtra Sugar Mills Ltd., Bombay

1971 (3) SCC 543. Upon perusal of the aforestated

judgments, which support the learned counsel appearing for

the Income Tax authorities, it is clear that the tax statute

should be interpreted very strictly as there is no equity in tax

matters and nothing can be read which is not in the section.

13.Thus, the learned counsel appearing for the respondent

authorities had submitted that the impugned judgment is just

and correct and therefore, the appeal deserved to be

dismissed.

14.We had heard the learned counsel and had also perused

records pertaining to the case and had also gone through the

judgments referred to by them, and upon hearing them we are

of the view that the judgment delivered by the High Court is

absolutely just and proper.

15.The main submission of the learned counsel appearing for the

appellant society was that the appellant society, being an

amalgamated society, must get benefit of setting off losses of

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Page 11 the co-operative societies which had been amalgamated into

the appellant society. According to him by virtue of the

provisions of Section 16(8) of the Rajasthan Co-operative

Societies Act, 1965, read with Sections 72 and 72(A) of the

Act, the accumulated losses of the amalgamating societies

should have been permitted to be adjusted or set off against

the profits of the appellant society. His main submission was

that by virtue of Section 16(8) of the Rajasthan Co-operative

Societies Act, 1965 all legal proceedings initiated against or

by the amalgamating co-operative societies would continue

and therefore, right of the amalgamating societies with regard

to getting their losses carried forward and set off against the

profits of the amalgamated society would continue.

16.We are not in agreement with the submissions made by the

learned counsel appearing for the appellant for the reason that

for the purpose of getting carried forward losses adjusted or

set off against the profits of subsequent years, there must be

some provision in the Act. If there is no provision, the

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Page 12 societies which are not in existence cannot get any benefit.

The losses were suffered by the societies which were in

existence at the relevant time and their existence or legal

personality had come to an end upon being amalgamated into

another society.

17.The normal principle is that a non-existent person cannot file

an income tax return and therefore, cannot carry forward its

losses after its existence comes to an end. All those four

societies, upon their amalgamation into the appellant society,

had ceased to exist and registration of those societies had

been cancelled. In the circumstances, those societies had no

right under the provisions of the Act to file a return to get

their earlier losses adjusted against the income of a different

legal personality i.e. the appellant society.

18.So far as companies are concerned, there is a specific

provision in the Act that upon amalgamation of one company

with another, losses of the amalgamating companies can be

carried forward and the amalgamated company can get those

12

Page 13 losses set off against its profits subject to the provisions of

the Act. This is permissible by virtue of Section 72 A of the

Act but there is no such provision in the case of co-operative

societies.

19.It is pertinent to note that such a provision has been made

only with regard to amalgamation of companies and later on

similar provisions were made with regard to banks, etc., but

at the relevant time there was no such provision which would

permit the amalgamating co-operative society to carry

forward and adjust such losses against the profits of the

amalgamated co-operative society.

20.The submission made by the learned counsel appearing for

the appellant with regard to discrimination and violation of

Article 14 of the Constitution of India would also not help the

appellant, as in our opinion, there is no discrimination. The

societies and companies belong to different classes and

simply because both have a distinct legal personality, it

cannot be said that both must be given the same treatment.

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Page 14 21.We agree with the view expressed by the High Court that as

there is no provision under the Act for setting off

accumulated losses of the amalgamating societies against the

profits of the amalgamated society, the appellant society

could not have got the benefit of carrying forward losses of

the erstwhile societies which were not in existence during the

relevant Assessment Year.

22.We are also of the view that in all the tax matters one has to

interpret taxation statute strictly. Simply because one class of

legal entities are given some benefit which is specifically

stated in the Act does not mean that the legal entities not

referred to in the Act would also get the same benefit. As

stated by this Court on several occasions, there is no equity in

matters of taxation. One cannot read into a section which has

not been specifically provided for and therefore, we do not

agree with the submissions of the learned counsel appearing

for the appellant and we are not prepared to read something

in the section which has not been provided for. The

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Page 15 judgments referred to hereinabove support the view which

we have expressed here.

23.For the reasons stated hereinabove, the appeal is dismissed

with no order as to costs.

…………………………… .,J.

(Anil R. Dave)

…………………………….,J.

(Shiva Kirti Singh)

New Delhi;

April 29, 2014

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