{"id":182578,"date":"2011-11-09T00:00:00","date_gmt":"2011-11-08T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011"},"modified":"2016-08-02T18:28:08","modified_gmt":"2016-08-02T12:58:08","slug":"cairn-vs-union-on-9-november-2011","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011","title":{"rendered":"Cairn vs Union on 9 November, 2011"},"content":{"rendered":"
Gujarat High Court<\/div>\n
Cairn vs Union on 9 November, 2011<\/div>\n
Author: D.A.Mehta, Ms.Justice Devani,<\/div>\n
  \n Gujarat High Court Case Information System \n    \n  \n    \n\n \n \n    \t      \n         \n\t    \n\t\t   Print\n\t\t\t\t          \n\n  \n\n\n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t \n\t\n\n\n \n\n\n\t \n\nSCA\/11581\/2008\t 41\/ 41\tJUDGMENT \n \n \n\n\t\n\n \n\nIN\nTHE HIGH COURT OF GUJARAT AT AHMEDABAD\n \n\n \n\n\n \n\nSPECIAL\nCIVIL APPLICATION No. 11581 of 2008\n \n\n \n \nFor\nApproval and Signature:  \n \nHONOURABLE\nMR.JUSTICE D.A.MEHTA  \nHONOURABLE\nMS.JUSTICE H.N.DEVANI\n \n \n=========================================\n\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n1\n\t\t\n\t\t \n\t\t\t \n\nWhether\n\t\t\tReporters of Local Papers may be allowed to see the judgment ?\n\t\t\n\t\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n2\n\t\t\n\t\t \n\t\t\t \n\nTo\n\t\t\tbe referred to the Reporter or not ?\n\t\t\n\t\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n3\n\t\t\n\t\t \n\t\t\t \n\nWhether\n\t\t\ttheir Lordships wish to see the fair copy of the judgment ?\n\t\t\n\t\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n4\n\t\t\n\t\t \n\t\t\t \n\nWhether\n\t\t\tthis case involves a substantial question of law as to the\n\t\t\tinterpretation of the constitution of India, 1950 or any order\n\t\t\tmade thereunder ?\n\t\t\n\t\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\n5\n\t\t\n\t\t \n\t\t\t \n\nWhether\n\t\t\tit is to be circulated to the civil judge ?\n\t\t\n\t\n\n \n\n \n=========================================\n\n\n \n\nCAIRN\nEXPLORATION (NO.7) LTD & 1 - Petitioner(s)\n \n\nVersus\n \n\nUNION\nOF INDIA & 2 - Respondent(s)\n \n\n=========================================\n \nAppearance : \nMR\nC.J.AGARWAL, Senior Advocate with Mr.TUSHAR P HEMANI\nfor Petitioners \nMR PS\nCHAMPANERI for Respondents : 1, \nMR MR BHATT, SR.ADVOCATE with MRS\nMAUNA M BHATT for Respondents : 2 -\n3. \n=========================================\n\n\n \n\t  \n\t \n\t  \n\t\t \n\t\t\t \n\nCORAM\n\t\t\t: \n\t\t\t\n\t\t\n\t\t \n\t\t\t \n\nHONOURABLE\n\t\t\tMR.JUSTICE D.A.MEHTA\n\t\t\n\t\n\t \n\t\t \n\t\t \n\t\t\t \n\nand\n\t\t\n\t\n\t \n\t\t \n\t\t \n\t\t\t \n\nHONOURABLE\n\t\t\tMS.JUSTICE H.N.DEVANI\n\t\t\n\t\n\n \n\n \n \n\n\n \n\nDate\n:    \/10\/2010 \n\n \n\n \n \nCAV\nJUDGMENT \n<\/pre>\n
(Per
\n: HONOURABLE MS.JUSTICE H.N.DEVANI)<\/p>\n
This
\n\tpetition under Article 226 of the Constitution of India has been
\n\tfiled with the following substantive prayers:\n<\/p>\n
“[17]\t\tThe
\npetitioner, therefore, prays that this Hon’ble Court be pleased to
\nissue a writ of mandamus or a writ in the nature of mandamus or a
\nwrit of certiorari or a writ in the nature of certiorari or any other
\nappropriate writ, direction or order and be pleased to:\n<\/p>\n
[a]\t\tdeclare
\nthe provisions of clause (iii) of Explanation 1 of section 115JB of
\nthe Act as ultra vires the Constitution and liable to be struck down;\n<\/p>\n
[b]\t\trestrain
\nthe Respondents from giving effect to the provisions of clause (iii)
\nof Explanation 1 of section 115JB of the Act;\n<\/p>\n
[c]\t\tissue
\nwrit of mandamus or an order directing the respondent No.2 & 3 to
\nallow the reduction of the brought forward losses of
\nRs.11,67,85,411\/- of the petitioner company from the net profit in
\norder to compute the book profit under the MAT provisions (i.e. 115
\nJB of the Act) of the Income Tax Act, 1961 in the absence of any
\nunabsorbed depreciation in respect of the assessment year 2008-2009;”\n<\/p>\n
The
\n\tfacts as appearing in the petition are that the petitioner is a
\n\tPrivate Company, limited by shares, incorporated in Scotland, U.K.
\n\tunder the Companies Act, 1985 and is a subsidiary of M\/s Cairn India
\n\tHoldings Ltd., a company registered in Jersey Channel Island. The
\n\tpetitioner No.1 Company is primarily engaged in the business of
\n\tprospecting, drilling, exploring, producing and generally dealing in
\n\tminerals, oils, gas and other related by-products. On 23.09.2005,
\n\tthe petitioner company, entered into a Production Sharing Contract
\n\t(PSC) with the Government of India and, Oil & Natural Gas
\n\tCorporation Ltd. (ONGC) for the exploration of natural resources.
\n\tAccording to the PSC, the petitioner had a 49% participating
\n\tinterest in the contract area and, therefore, the petitioner company
\n\tformed an Unincorporated Joint Venture (UJV) with other co-venturers
\n\tto carry out the operations under the PSC. The petitioner company
\n\thad no other business in India except the aforesaid participating
\n\tinterest in the UJV.  For the financial year ending 31.3.2006, the
\n\tpetitioner company incurred expenditure of Rs.8,17,245\/- on
\n\texploration, as its proportionate share in the UJV.  According to
\n\tthe petitioner, the business of  prospecting, drilling, exploring,
\n\tproducing and generally dealing in minerals, oils, gas and other
\n\trelated by-products is a capital intensive industry in initial years
\n\tand, therefore, the companies of this industry, in accordance with
\n\tGenerally Accepted Accounting Principles (GAAP) reflect investments
\n\tin oil well as expenditure incurred during the year in the financial
\n\tstatements. Therefore, the investments made before production of oil
\n\tis though actually work-in-progress, but the same is claimed as
\n\texpenditure for the year in accordance with Guidance Note issued by
\n\tthe Institute of Chartered Accountants of India on Accounting for
\n\tOil and Gas Producing Activities.\n<\/p>\n
Accordingly,
\n\t\twhile preparing the profit and loss account for the financial year
\n\t\tending 31.3.2006, the petitioner company, out of the above
\n\t\texploration expenditure of Rs.8,17,245\/- debited profit and loss
\n\t\taccount by a sum of Rs.7,33,264\/- apart from operating expenses of
\n\t\tRs.75,000\/-. Since there was interest income of Rs.1,509\/-, the
\n\t\tpetitioner company, for the financial year ending 31.03.2006
\n\t\trelevant to assessment year 2006-07, incurred book loss of
\n\t\tRs.8,06,755\/-, which was eligible for carry forward to the
\n\t\tsucceeding assessment year or years. Likewise for the financial
\n\t\tyear 2006-07 relevant to assessment year 2007-08, the petitioner
\n\t\tcompany incurred expenditure on exploration of Rs.11,58,51,848\/-
\n\t\tand, operating expenses of Rs.1,26,808\/-. The above aggregate
\n\t\texpenditure of Rs.11,59,78,656\/- was debited to the profit and loss
\n\t\taccount and, as there was no income, the entire loss incurred was,
\n\t\ttherefore, eligible to be carried forward to the succeeding
\n\t\tassessment year or years. In other words, at the beginning of the
\n\t\tfinancial year 2007-08 relevant to the assessment year 2008-09, the
\n\t\tpetitioner company had aggregate brought forward business loss of
\n\t\tRs.11,67,85,411\/-, comprising of business loss of Rs.8,06,755\/- for
\n\t\tassessment year 2006-07 and, business loss of Rs.11,59,78,656\/- for
\n\t\tassessment year 2007-08.\n<\/p>\n
The
\n\t\tpetitioner company had only brought forward business losses, but no
\n\t\tunabsorbed depreciation owing to the peculiar fact that it never
\n\t\tcharged any depreciation in the past\/current year since neither the
\n\t\tpetitioner nor the UJV owned any fixed assets. In fact, whenever
\n\t\tany asset was needed for carrying out the business activities by
\n\t\tthe UJV, these were taken on hire basis by the UJV.\n<\/p>\n
As
\n\t\ta part of the corporate restructuring, the petitioner company in
\n\t\tthe financial year 2007-08 relevant to assessment year 2008-09,
\n\t\tvide deed of assignment dated 23.3.2007, assigned its participating
\n\t\tinterest in the UJV to M\/s Cairn India Limited, a group company, at
\n\t\texploration cost incurred till the effective date of assignment.
\n\t\tAccording to the petitioner, as a result of the assignment, the
\n\t\tpetitioner company was only recouping the accumulated costs
\n\t\tincurred on exploration activities. Up till the date of assignment,
\n\t\tthe petitioner company had incurred aggregate expenditure of
\n\t\tRs.16,17,33,783\/- on exploration. The petitioner company on
\n\t\tassignment of its participatory interest in the UJV to M\/s Cairn
\n\t\tIndia Ltd., recouped its entire cost of Rs.16,17,33,783\/-,
\n\t\tincluding the expenditure on exploration incurred in the financial
\n\t\tyear 2007-2008 of Rs.4,50,64,691\/-. Accordingly, while preparing
\n\t\tthe profit and loss account for the financial year 2007-08 relevant
\n\t\tto assessment year 2008-09 in accordance with Part II and III of
\n\t\tSchedule VI to the Companies Act, 1956, the petitioner company
\n\t\tdisclosed the above recoupment of exploration cost of
\n\t\tRs.16,16,49,805\/- as income, and further claimed expenditure
\n\t\tincurred during the year of Rs.4,51,81,932\/- being the expenditure
\n\t\ton exploration of Rs.4,50,64,693\/- incurred during the year and
\n\t\toperating expenses of Rs.1,17,239\/-. As a result of the above,
\n\t\tthere was net profit as per the profit and loss of
\n\t\tRs.11,64,67,873\/- for the financial year 2007-08 relevant to the
\n\t\tassessment year 2008-09. According to the petitioner, the aforesaid
\n\t\tprofit is not income, as the same is nothing but recoupment of
\n\t\tcosts incurred on exploration by the petitioner company in the
\n\t\tpreceding years. Such costs as incurred in the preceding years had
\n\t\tbeen debited to the profit and loss account and brought forward as
\n\t\tbusiness loss for the assessment year 2008-09. The above assignment
\n\t\tof participating interest did not result in any taxable income in
\n\t\tthe hands of the petitioner company under the normal provisions of
\n\t\tthe Act.\n<\/p>\n
However,
\n\t\tdespite the fact that the above profit of Rs.11,64,67,873\/-
\n\t\trepresented the recoupment of exploration cost incurred on
\n\t\tassignment of participating interest, which had been also brought
\n\t\tforward as business loss of Rs.11,65,85,112\/-, on strict
\n\t\tconstruction of statutory provisions contained section 115 JB of
\n\t\tthe Act there was a book profit, when as a matter of fact, there
\n\t\twas no income. It is the case of the petitioner that as a result of
\n\t\tassignment of the participatory interest at cost, there is mere
\n\t\tartificial book profit, out of which no dividend under the
\n\t\tCompanies Act, 1956 could be declared or can be said to be
\n\t\tavailable for the purpose of distribution of dividend.\n<\/p>\n
Section
\n\t\t115JB of the Income Tax Act, 1961 (the Act) is a special provision
\n\t\tfor payment of tax by certain companies. Under the said provision,
\n\t\twhere in the case of an assessee, being a company, the income tax,
\n\t\tpayable on the total income as computed under the Act in respect of
\n\t\tany previous year relevant to the assessment year commencing on or
\n\t\tafter the 1st day of April 2007, is less than ten per
\n\t\tcent of its book profit, then notwithstanding anything contained in
\n\t\tany other provision of the Act, such book profit shall be deemed to
\n\t\tbe the total income of the assessee and the tax payable by the
\n\t\tassessee on such total income shall be the amount of income tax at
\n\t\tthe rate of ten percent.\n<\/p>\n
Sub-section
\n(2) thereof provides that, every assessee, being a company, shall,
\nfor the purpose of the section, prepare its profit and loss account
\nfor the relevant previous year in accordance with the provisions of
\nParts II and III of Schedule VI to the Companies Act, 1956.  The
\nproviso thereto provides for the manner in which annual accounts are
\nto be prepared.\n<\/p>\n
Explanation
\n1 thereto provides that, for the purpose of this section, “book
\nprofit” means the net profit as shown in the profit and loss
\naccount for the relevant previous year prepared under sub-section
\n(2), as increased by clauses (a) to (f) thereof, if any amount
\nreferred to in clauses (a) to (f) thereof is debited to the profit
\nand loss account, and as reduced by clause (i) to (vii) there of.
\nClause (iii) of the Explanation provides for reduction from the net
\nprofit of the amount of loss brought forward or unabsorbed
\ndepreciation, whichever is less as per books of account. The
\nexplanation to clause (iii) provides that (a) the loss shall not
\ninclude depreciation, and (b) the provisions of this clause shall not
\napply if the amount of loss brought forward or unabsorbed
\ndepreciation is nil.\n<\/p>\n
According
\n\t\tto the petitioner, on a strict and plain reading of the statutory
\n\t\tprovisions contained in section 115JB of the Act, it is evident
\n\t\tthat the petitioner company would be taxed on the whole amount of
\n\t\tRs.11,64,67,873\/- which is profit as per the profit and loss
\n\t\taccount of the financial year 2007-08 relevant to assessment year
\n\t\t2008-09 since clause (iii) of the Explanation 1 to section 115JB of
\n\t\tthe Act read with Explanation (b) thereto, does not enable the
\n\t\tpetitioner to set off the brought forward business loss of
\n\t\tRs.11,65,85,112\/-.  It is the case of the petitioner that as the
\n\t\tpetitioner company had no unabsorbed depreciation in its books of
\n\t\taccount, but had only brought forward losses, the set off of
\n\t\tbrought forward loss is denied by the Legislature pursuant to the
\n\t\tprovisions of clause (iii) of Explanation 1 to section 115 JB of
\n\t\tthe Act, when in fact commercially speaking, there is no income for
\n\t\tthe assessment year 2008-09. That, under the provisions, as they
\n\t\thave been enacted, it is apparent that, a set off of brought
\n\t\tforward loss can be allowed only where there is unabsorbed
\n\t\tdepreciation, in absence thereof, despite the fact that there being
\n\t\tno profit in the real sense, such companies have to suffer the tax
\n\t\tburden, which is against the basic principles of taxation. It is
\n\t\tthe case of the petitioner company that there is no income in the
\n\t\tcase of the petitioner and as such, the levy of tax under section
\n\t\t115JB of the Act is ultra vires and therefore, unconstitutional.\n<\/p>\n
It
\n\t\tis in the aforesaid factual background that the petitioner has
\n\t\tmoved the present petition challenging the provisions of clause\n<\/p>\n
\t\t(iii) of Explanation 1 to section 115 JB of the Act, as being ultra
\n\t\tvires the Constitution and seeking a direction against the
\n\t\trespondents No.2 and 3 to allow reduction of brought forward losses
\n\t\tof Rs.11,67,85,411\/- of the petitioner company from the net profit
\n\t\tin order to compute the book profit under Minimum Alternate Tax
\n\t\tprovisions (115JB of the Act), in the absence of any unabsorbed
\n\t\tdepreciation in respect of the assessment year 2008-09.\n<\/p>\n
Heard
\n\tMr. C. S. Agarwal, learned Senior Advocate with Mr. Tushar Hemani,
\n\tlearned advocate for the petitioner and Mr. M. R. Bhatt, learned
\n\tSenior Advocate for the respondents.\n<\/p>\n
Mr.\n<\/p>\n
\tAgarwal, learned Senior Advocate for the petitioner invited
\n\tattention to the provisions of section 115JB of the Act, the
\n\thistorical background leading to the enactment of the said
\n\tprovision, as well as the objects and reasons for bringing the
\n\toriginal enacted provision on the statute book. The learned Senior
\n\tAdvocate also invited attention to the budget speech of the then
\n\tFinance Minister of India made in Parliament while introducing the
\n\tsaid section to submit that the intention behind introducing the
\n\tsaid provision was to tax highly profitable companies and no more.\n<\/p>\n
It
\n\t\twas submitted that clause (iii) of Explanation 1 to section 115JB
\n\t\tof the Act read with clause (b) of the Explanation thereto are
\n\t\tcontrary to the purpose of the enactment of section 115JB of the
\n\t\tAct, which provides for levy of Minimum Alternative Tax. It was
\n\t\tfurther submitted that, the said provision was introduced to tax
\n\t\tsuch companies which were having large profits and, were
\n\t\tdistributing dividends, without paying any tax, by claiming various
\n\t\tdeductions provided in the Act like depreciation, investment
\n\t\tallowance and, other deductions as are contained in Chapter VIA of
\n\t\tthe Act. Hence, the intention of the legislature was to tax
\n\t\tcompanies with large profits and not companies who did not have any
\n\t\tprofit. According to the learned counsel the provisions contained
\n\t\tin clause (iii) of Explanation 1 to section 115JB of the Act are
\n\t\twhich provide for reduction from book profit (computed as per the
\n\t\tExplanation below the main section) of loss brought forward or
\n\t\tunabsorbed depreciation, which ever is less, and further, in case
\n\t\teither of the two is absent no reduction is allowable, despite the
\n\t\tfact that no depreciation is provided or can be provided and in
\n\t\tfact, even not debited. In the circumstances, the said provision is
\n\t\tdiscriminatory inasmuch as the same provides for distinction
\n\t\tbetween an assessee who has taken plant and machinery on hire and,
\n\t\ttherefore has only unabsorbed business loss, and an assessee who
\n\t\thas invested in acquisition of plant and machinery and therefore,
\n\t\thas both unabsorbed business losses and unabsorbed depreciation.
\n\t\tThe provision also discriminates against companies that have
\n\t\tincurred substantial expenditure on the capital assets eligible for
\n\t\tdepreciation under section 32(1) of the Act and, consequently, has
\n\t\thuge unabsorbed depreciation but has no cash loss. Likewise, the
\n\t\tprovision discriminates against companies which have huge cash loss
\n\t\tbut little depreciation or no depreciation, since the business of
\n\t\tthe company may not be capital intensive, like service industry or
\n\t\ta business where all expenditure including expenditure incurred on
\n\t\tcapital assets have been booked as revenue expenditure like
\n\t\tbusiness of oil exploration.\n<\/p>\n
It
\n\t\twas further submitted that Article 14 forbids class legislation but
\n\t\tdoes not forbid reasonable classification. Reasonable
\n\t\tclassification must satisfy the two conditions, namely, (a) the
\n\t\tclassification must be founded on an intelligible differentia which
\n\t\tdistinguishes persons or things that are grouped together from
\n\t\tother left out of the group, and (b) the differentia must have a
\n\t\trationale to the object sought to be achieved by the statute.
\n\t\tAccording to the learned counsel, the provisions of clause (iii) of
\n\t\tthe Explanation to section 115JB are violative of Article 14 of the
\n\t\tConstitution because by not allowing a reduction of loss, the
\n\t\tlegislature has not made a reasonable classification since
\n\t\tassessees who may not be owing any asset are required to pay tax
\n\t\tdespite the fact that there is no income, which has no nexus to the
\n\t\tobject sought to be achieved by the legislation, that is, to tax
\n\t\tdividend paying companies. In support of his submissions, the
\n\t\tlearned Senior Advocate for the petitioner has placed reliance upon
\n\t\tthe following decisions :\n<\/p>\n
Peerless
\n\tGeneral Finance and Investment Co. Ltd. v. Union of India,
\n\t(1987) 1 SCC 424,<\/p>\n
S.C.\n<\/p>\n
\tPrashar and Another v. Vasantsen Dwarkadas and others, (1963)
\n\t49 ITR 1 (SC),<\/p>\n
D.S.\n<\/p>\n
\tNakara v. Union of India, [1983] 1 SCC 305.\n<\/p>\n
Maneka
\n\tGandhi v. Union of India,<\/a> [1978] 1 SCC 248.\n<\/p>\n
S.K.\n<\/p>\n
\tDatta, ITO v. Lawrence Singh Ingty, 68 ITR 272 (SC).\n<\/p>\n
Star
\n\tTelevision News Ltd. v. Union of India, 317 ITR 76 (Bom).\n<\/p>\n
Next
\n\t\tit was urged that there is no rationale or valid basis to restrict
\n\t\tthe relief to unabsorbed depreciation or business loss, which ever
\n\t\tis lower, particularly when the purpose of clause (iii) to the
\n\t\tExplanation is to provide relief of losses of earlier years and not
\n\t\tto deny relief of setting off of loss or unabsorbed depreciation,
\n\t\twhich ever is lower, even when there is no income to the petitioner
\n\t\tcompany. It was reiterated that the intelligible differentia is
\n\t\tabsent in the provision denying the relief in a case where the
\n\t\tamount of ‘loss brought forward’ or ‘unabsorbed
\n\t\tdepreciation’ is nil. According to the learned counsel, there
\n\t\tmay be service industries or trading concerns which may not have
\n\t\townership of depreciable assets; thereby incurring no depreciation
\n\t\tcost in their books. Unabsorbed depreciation in such cases would
\n\t\tonly be impossibility; but they may have normal business losses.
\n\t\tSuch companies may have the same quantum of loss (with nil
\n\t\tdepreciation) as other companies (with depreciation), but could be
\n\t\tdenied the setoff only due to operation of the explanation to
\n\t\tclause (iii) of the Explanation to section 115JB of the Act. Thus,
\n\t\tthe provision creates discrimination between companies having the
\n\t\tsame quantum of losses.\n<\/p>\n
\t\tReferring
\n\t\tto the decision of the Supreme Court in the case of Garden
\n\t\tSilk Weaving Factory Pvt. Ltd. v. CIT,<\/a> 189 ITR 512, it was
\n\t\tsubmitted that there is no distinction between unabsorbed
\n\t\tdepreciation and brought forward losses in the commercial sense,
\n\t\thence while computing the commercial book profit, the distinction
\n\t\tvide clause (iii) of the Explanation to section 115JB is unfair and
\n\t\tdiscriminatory.\n<\/p>\n
It
\n\t\twas further submitted that the tax levied goes beyond the intention
\n\t\tof legislature, while enacting section 115J and section 115JA\/115JB
\n\t\tof the Act. In support of his submissions, the learned counsel
\n\t\tplaced reliance upon the decisions of the Supreme Court in the case
\n\t\tof Surana Steels (P) Ltd. v. Commissioner of Income Tax,
\n\t\t237 ITR 777 (SC), and in the case of Apollo Tyres Ltd. v.
\n\t\tCommissioner of Income Tax,<\/a> 255 ITR 273 (SC), as well as
\n\t\tthe decision of the Bombay High Court in the case of Commissioner
\n\t\tof Income Tax v. Ajanta Pharma Ltd., 318 ITR 252 (Bombay).
\n\t\tIt was further submitted that no reason emanates from the Finance
\n\t\tBill explaining the amendment and, therefore, the same is
\n\t\tunconstitutional, as has been held in the case of Exide
\n\t\tIndustries Ltd., 292 ITR 470. Reliance was also placed upon
\n\t\tthe decision of the apex court in the case of Tata Motors
\n\t\tLtd. v. State of Maharashtra, AIR<\/a> 2004 SC 3618 as well as
\n\t\tthe decision of the Madras High Court in the case of K. Jaya
\n\t\tPrakash v. The Executive Authority, AIR 1982 Madras 272.\n<\/p>\n
The
\n\t\tnext submission advanced on behalf of the petitioner was that where
\n\t\tthe plain literal interpretation of a statutory provision produces
\n\t\ta discriminatory or incongruous or manifestly absurd or unjust
\n\t\tresult which could never have been intended by the Legislature, the
\n\t\tCourt may modify the language used by the Legislature or even “do
\n\t\tsome violence” to it, so as to achieve the obvious intention
\n\t\tof the Legislature and produce a rational construction.  It was
\n\t\tsubmitted that it could never have been the intention of the
\n\t\tLegislature to tax an assessee without being in receipt of any
\n\t\tincome. It was submitted that if the provisions of clause (iii) of
\n\t\tExplanation 1 to section 115 JB of the Act are required to operate,
\n\t\tthe same would result into manifestly absurd or unjust result
\n\t\tinasmuch as the assessee despite having no income, would be
\n\t\tassessed to income merely for the reason that the assessee does not
\n\t\thave any asset so as to claim depreciation.   In support of his
\n\t\tsubmissions, the learned counsel placed reliance upon the following
\n\t\tdecisions :\n<\/p>\n
[a]\tK.P.Varghese
\nv. I.T.O., [1981] 131 ITR 597 (SC).\n<\/p>\n
[b]\tC.W.S.\n<\/p>\n
(India) Ltd. v. CIT, [1994] 208 ITR 649 (SC).\n<\/p>\n
[c]\tCalcutta
\nGujarati Education Society v. Calcutta Municipal Corporation,<\/a>
\n[2003] 10 SCC 533.\n<\/p>\n
[d]\tCommissioner
\nof Income Tax v. J.H. Gotla,<\/a> 156 ITR 323 (SC).\n<\/p>\n
[e]\tCommissioner
\nof Income Tax v. Hindustan Bulk Carriers,<\/a> 259
\nITR 449 (SC).\n<\/p>\n
[f]
\nCommissioner of Income-tax v. Ajanta Pharma Ltd., 318
\nITR 252 (Bom.) <\/p>\n
It
\n\t\twas further submitted that in the case of the petitioner, there are
\n\t\tno profits, yet, on a strict construction of statutory provisions
\n\t\tthere are taxable profits, which is an absurdity and, therefore,
\n\t\tnot in accordance with the scheme and object of the Act. It was
\n\t\tsubmitted that, in fact, as a result of assignment of the
\n\t\tparticipatory interest at cost, there is mere artificial book
\n\t\tprofit, out of which no dividend under the Companies Act, 1956
\n\t\tcould be declared nor was the said book profit available for the
\n\t\tpurpose of distribution of dividend. In the circumstances, having
\n\t\tregard to the object of the enactment, section 115JB of the Act, to
\n\t\tthe extent it provides for levy of Minimum Alternative Tax without
\n\t\tproviding any safeguard, results into absurdity and is an arbitrary
\n\t\tprovision since a provision cannot require a tax payer to pay tax
\n\t\twhen really there is no profit, much less a book profit or income.\n<\/p>\n
It
\n\t\twas pointed out that in the light of the provisions of clause (iii)
\n\t\tof the Explanation below section 115JB of the Act, if a company has
\n\t\tno depreciable assets, no deduction can be allowed despite the fact
\n\t\tthat, there are huge carried forward losses. If a business of a
\n\t\tcompany is not carried through or is based on capital intensive
\n\t\tinfrastructure, it will not be entitled to set off of loss
\n\t\tsuffered; whereas if it is based on capital asset oriented
\n\t\tinfrastructure, it would be entitled to set off, may be to the
\n\t\textent of depreciation allowable or brought forward loss, which
\n\t\tevery is lower. In the circumstances, the said provision is
\n\t\tarbitrary inasmuch as the same treats the two assessees
\n\t\tdifferently, which was not the object behind the enactment. It was
\n\t\tcontended that the right to freedom guaranteed under Article
\n\t\t19(1)(g) of the Constitution is also violated, as the impugned
\n\t\tprovision does not provide the right to practice trade or business
\n\t\tby providing level playing field and denies a citizen who may
\n\t\tsuffer a loss to set off the same after carrying forward the same
\n\t\tunless he has both a carried forward loss as well as a carried
\n\t\tforward unabsorbed depreciation. If either of them is absent, he is
\n\t\tdenied the set off by disregarding the fact that such a citizen may
\n\t\tnot have any depreciable asset and, carries the same business
\n\t\twithout a depreciable asset. Thus, by denying such a citizen the
\n\t\tright to set off loss also violates Article 19(1)(g) of the
\n\t\tConstitution of India. In support of his submissions the learned
\n\t\tcounsel placed reliance upon the following decisions:\n<\/p>\n
[a]\tThe
\ndecision of the apex court in the case of State of Kerala v.
\nHaji K. Haji Kutty Naha, AIR<\/a> 1969 SC 378, was cited for the
\nproposition that the validity of a taxing statute is open to attack
\non the ground that it infringes fundamental rights.\n<\/p>\n
[b]\tThe
\ndecision of the apex court in the case of Khandige Sham Bhatt
\nv. Agricultural ITO,<\/a> [1963] 48 ITR 21 (SC), was cited for the
\nproposition that a State cannot make any law which takes away or
\nabridges the equality clause contained in Article 14 of the
\nConstitution which enjoins a State not to deny to any person equality
\nbefore law or equal protection of law.\n<\/p>\n
Next,
\n\t\tit was submitted that no reason emanates from the Finance Bill
\n\t\texplaining the amendment and, as such, the provision is
\n\t\tunconstitutional. It was submitted that neither the objects and
\n\t\treasons nor does the affidavit in reply specify the intention
\n\t\tbehind introducing such a provision and as such, in absence of
\n\t\tproper reasons being assigned for introducing the impugned
\n\t\tprovision, the same is unconstitutional and requires to be struck
\n\t\tdown.\n<\/p>\n
In
\n\t\tconclusion, it was submitted that the provisions of clause (iii) of
\n\t\tExplanation 1 to section 115 JB of the Act are arbitrary,
\n\t\tdiscriminatory and violative of petitioner’s fundamental right
\n\t\tunder Articles 14 and 19(1) (g) of the Constitution and as such,
\n\t\tultra vires the Constitution and liable to be struck down. It was
\n\t\tsubmitted that, in the alternative, if the Court is not inclined to
\n\t\tstrike down the said provision as being unconstitutional, the
\n\t\tprovision may be read down so as to achieve the obvious intention
\n\t\tof the Legislature and produce a rational construction.\n<\/p>\n
Mr.\n<\/p>\n
\tM. R. Bhatt learned Senior Advocate appearing on behalf of the
\n\trespondents vehemently opposed the petition. It was submitted that
\n\tArticle 265 of the Constitution read with Entry 82 of the Union List
\n\tcontained in the Seventh Schedule to the Constitution empower the
\n\tUnion Government to levy tax on income other than agricultural
\n\tincome and it is by virtue of this provision and as a measure of
\n\tequity in taxation that Minimum Alternate Tax (MAT) is levied under
\n\tsection 115JB of the Act on companies having book profits under the
\n\tCompanies Act. Such companies are required to prepare their profit
\n\tand loss account in accordance with Part II and Part III of Schedule
\n\tVI to the Companies Act and are liable to pay MAT on the “book
\n\tprofit” being the net profit shown in the profit and loss
\n\taccount as adjusted according to the provisions of Explanation 1 of
\n\tsection 115JB of the Act.  Thus, MAT is essentially a tax on income
\n\tand its levy is well within the legislative competence of the Union
\n\tGovernment.\n<\/p>\n
It
\n\t\twas submitted that in the amended clause (iii), two limbs “(a)”
\n\t\tand “(b)” have been provided in the Explanation to
\n\t\tclause (iii). While limb “(a)” which states that “the
\n\t\tloss shall not include depreciation” already existed in the
\n\t\tpre-amended provision, limb “(b)” was newly inserted
\n\t\tproviding that “the provisions of this clause shall not apply
\n\t\tif the amount of loss brought forward or unabsorbed depreciation is
\n\t\tNil”. Vide CBDT’s Circular No.8 of 2002 dated 27.8.2002, it
\n\t\twas also duly explained that the amendment in clause (iii) of the
\n\t\tExplanation to section 115JB, clarifies that where the value of the
\n\t\tamount of either loss brought forward or unabsorbed depreciation is
\n\t\t“Nil”, no amount on account of such loss brought
\n\t\tforward or unabsorbed depreciation would be reduced from the book
\n\t\tprofit. It was contended that while the language of the provisions
\n\t\tof clause (iii) of Explanation 1 to section 115 JB of the Act is by
\n\t\titself quite clear and unambiguous, the explanatory circular makes
\n\t\tthe application of the provisions absolutely clear. It was
\n\t\tsubmitted that there was nothing unfair or discriminatory about the
\n\t\tprovisions of clause (iii) of Explanation 1 to section 115 JB of
\n\t\tthe Act and that, it is a well laid down judicial principle that
\n\t\thaving regard to the wide variety of diverse economic criteria that
\n\t\tgo into the formulation of fiscal policy, the legislature enjoys a
\n\t\twide latitude in the matter of selection of persons, subject
\n\t\tmatters, events etc. for taxation. The MAT provisions have
\n\t\tbasically been introduced as a measure of equity in taxation. The
\n\t\tlegislature does not have to tax everything in order to be able to
\n\t\ttax something. If there is equality and uniformity within each
\n\t\tgroup, the law would not be discriminatory. It was submitted that,
\n\t\tin the facts of the present case, within each group, there is
\n\t\tequality and uniformity insofar as the applicability of the
\n\t\timpugned provision is concerned and as such, the same cannot be
\n\t\ttermed to be discriminatory.\n<\/p>\n
Placing
\n\t\treliance upon a decision of the Supreme Court in the case of Jaipur
\n\t\tHosiery Mills (P) Ltd. v. State of Rajasthan,<\/a> (1970) 26 STC
\n\t\t341, it was submitted that the statute is not open to attack on the
\n\t\tmere ground that it taxes some persons or objects and not others,
\n\t\tit is only when within the range of its selection, the law operates
\n\t\tunequally and cannot be justified on the basis of a valid
\n\t\tclassification that there would be a violation of Article 14 of the
\n\t\tConstitution. Referring to the decision of the Supreme Court in the
\n\t\tcase of State of A.P. v. McDowell and Co.,<\/a> (1996) 3
\n\t\tSCC 709, it was submitted that no enactment can be struck down on
\n\t\tthe ground that it is unreasonable or arbitrary and that,
\n\t\ttherefore, the petition deserves to be dismissed on this ground
\n\t\talone.\n<\/p>\n
In
\n\trejoinder, the learned counsel for the petitioner submitted that the
\n\tdecision in the case of State of A.P. v. McDowell and Co.,<\/a>
\n\t(supra) has no relevance to the issue involved in the present writ
\n\tpetition. It was contended that the Supreme Court, in the said case,
\n\thas not held that an enactment cannot be struck down on the ground
\n\tthat it is arbitrary or unreasonable. It has held that Article 14
\n\tcannot be pressed into service merely on the allegation that the
\n\tstatutory provision was arbitrary or unreasonable, and that some
\n\tconstitutional infirmity has to be shown for striking down the
\n\tlegislation which, in the instant case, the petitioner, is
\n\tcontending. According to the  learned  counsel, the precise
\n\tsubmission of the petitioner is that there is constitutional
\n\tinfirmity inasmuch as the provisions enacted are contrary to the
\n\tintent and purpose of enactment of section 115JB of the Act and go
\n\tbeyond the scope and purpose of the said provisions and in fact,
\n\twhen read in context of object of enactment lead to absurd results
\n\tand this deserves to be either struck down or must necessarily be
\n\tread down. It was urged that it is more than evident that in the
\n\tpresent case where the assessee who has not earned any income and
\n\thas merely recouped the expenditure incurred in the preceding year
\n\tis being held liable to pay tax, merely because in the preceding
\n\tyear expenditure had been incurred which had resulted into book loss
\n\tand in the succeeding year, when there is such recoupment of
\n\texpenditure, the same is to be treated to be a book profit so as to
\n\tlevy the Minimum Alternate Tax which is absolutely beyond the object
\n\tand purpose of the enactment.\n<\/p>\n
The
\n\t principal and only challenge in the present petition is to the
\n\tconstitutional validity of clause (iii) of Explanation 1 of section
\n\t115JB of the Act on the ground that the same is discriminatory and
\n\tarbitrary inasmuch as while computing the book profit the same
\n\tprovides for reduction from the net profit of loss brought forward
\n\tor unabsorbed depreciation whichever is less, which means that if
\n\teither of the two are absent the assessee would not be entitled to
\n\treduction in the book profit. Thus, the provision has been
\n\tchallenged as being discriminatory towards those assessees like the
\n\tpetitioner, who do not have capital asset based infrastructure and
\n\tas such would not have any unabsorbed depreciation. Thus, despite
\n\thaving substantial brought forward loss, the petitioner in the light
\n\tof the provisions of clause (iii) of the Explanation to section
\n\t115JB of the Act is still liable to pay tax on the book profit
\n\twithout the same being reduced by the amount of brought forward
\n\tloss.\n<\/p>\n
[7.1]\t\tIt
\n\tis in the background of the aforesaid facts that the petitioner has
\n\tchallenged the constitutional validity of the provisions of clause\n<\/p>\n
\t(iii) of the Explanation to section 115 JB of the Act. Before
\n\tadverting to the facts of the case as well as to the contentions
\n\tadvanced on behalf of the respective parties, it may be pertinent to
\n\ttake note of the legislative history as well as the relevant
\n\tstatutory provisions.\n<\/p>\n
[7.2]\t\tA
\n\tnew Chapter XII-B, containing section 115J, came to be inserted by
\n\tthe Finance Act, 1987, with effect from 1st April, 1988.
\n\tThe new section made provision for levy of minimum tax on book
\n\tprofits of certain companies.  Referring to the proposed section
\n\t115J, the Minister for Finance in the Budget Speech (Finance Bill,
\n\t1987), explained the rationale behind its introduction in the
\n\tfollowing words:\n<\/p>\n
“80.\n<\/p>\n
It is only fair and proper that the prosperous should pay at least
\nsome tax.  The phenomenon of so-called `zero-tax’ highly profitable
\ncompanies deserves attention.  In 1983, a new section 80VVA was
\ninserted in the Act so that all profitable companies pay some tax.
\nThis does not seem to have helped and is being withdrawn.  I now
\npropose to introduce a provision whereby every company will have to
\npay a `minimum corporate tax’ on the profits declared by it in its
\nown accounts.  Under this new provision, a company will pay tax on at
\nleast 30 per cent of its book profit.  In other words, a domestic
\nwidely held company will pay tax of at least 15 per cent of its book
\nprofit.  This measure will yield a revenue gain of approximately
\nRs.75 crores.”\n<\/p>\n
[7.3]\t\tIn
\n\t\tthe Memorandum explaining provisions in Finance Bill, 1987 in
\n\t\trelation to “New provisions to levy minimum tax on “Book
\n\t\tprofits” of certain companies”, it has been stated
\n\t\tthus:\n<\/p>\n
“Under
\nthe existing provisions of the Income Tax Act, certain deductions are
\nallowed in the computation of profits and gains of business or
\nprofession. Various deductions are also allowed under Chapter VI-A of
\nthe Income Tax Act in computing total income. As a result of these
\nconcessions, certain companies making huge profits, are managing
\ntheir affairs in such a way as to avoid payment of income-tax.\n<\/p>\n
With
\na view to making the tax system more progressive, a new Chapter XIIB
\nis proposed to be inserted in the Income Tax Act.\n<\/p>\n
Under
\nthe proposed amendment, in the case of any company whose total income
\nas computed under the other provisions of the Income Tax Act in
\nrespect of any previous year is less than 30 per cent of its book
\nprofit, the total income of such taxpayer chargeable to tax shall be
\ndeemed to be the amount equal to 30 per cent of such book profit.\n<\/p>\n
For
\nthe purposes of the aforesaid provisions, “book profit”
\nmeans the net profit as shown in the profit and loss account in the
\nrelevant previous year prepared in accordance with the provisions of
\nParts II and III of the Sixth Schedule to the Companies Act, 1956,
\nsubject to adjustments in respect of any amount of income tax paid or
\npayable, any amount carried to any reserve set aside to meet any
\nprovision, or provision for loss of subsidiary companies or any
\namount set apart for declaration of dividends which are taken into
\nthe profit and loss account prepared in accordance with the Sixth
\nSchedule as above.\n<\/p>\n
However,
\nthe expenditure relating to income as well as the receipts relating
\nto incomes to which the provisions of Chapter III of the Income Tax
\nAct apply, will be excluded from the computation of the “book
\nprofit”. Thirty per cent of such “book profit”
\nshall be treated as total income of the company to which the
\nprovisions of this new Chapter (section 115J) apply. It has also been
\nprovided that the aforesaid provisions shall not affect determination
\nof the amount to be carried forward to the subsequent years under the
\nprovisions of section 32(2), 32A(3), 72, 73, 74, 74A and 80J relating
\nto unabsorbed depreciation, unabsorbed investment allowance,
\nunabsorbed loss and unabsorbed deduction relating to tax holiday.\n<\/p>\n
As
\na consequential amendment, Chapter VIB of the Income Tax Act relating
\nto restriction on certain deductions in the case of companies, is
\nproposed to be omitted.\n<\/p>\n
These
\namendments will take effect from 1st April
\n1988 and will, accordingly, apply in relation to the assessment year
\n1988-89 and subsequent years.”\n<\/p>\n
[7.4]\t\tThe
\n\t\tscope and effect of the provisions of section 115J had been
\n\t\telaborated in the departmental circular No.495 dated 22nd
\n\t\tSeptember, 1987. The portion of the said circular insofar as the
\n\t\tsame is relevant for the present purpose reads as under:\n<\/p>\n
“[36.3]\tSection
\n115J, therefore, involves two processes. Firstly, an assessing
\nauthority has to determine the income of the company under the
\nprovisions of the Income Tax Act. Secondly, the book profit is to be
\nworked out in accordance with the Explanation to section 115J(1) and
\nit is to be seen whether the income determined under the first
\nprocess is less than 30 per cent of the book profit.  Section 115J
\nwould be invoked if the income determined under the first process is
\nless than 30 per cent of the book profit. The Explanation to
\nsub-section (1) of section 115J gives the definition of the “book
\nprofit” by incorporating the requirement of section 205 of the
\nCompanies Act in the computation of the book profit. Brought forward
\nlosses or unabsorbed depreciation whichever is less would be reduced
\nin arriving at the book profits. Sub-section (2), however, provides
\nthat the application of this provision would not affect the carry
\nforward of unabsorbed depreciation, unabsorbed investment allowance,
\nbusiness losses to the extent not set off, and deduction under
\nsection 80J, to the extent not set off as computed under the Income
\nTax Act.”\n<\/p>\n
[7.5]\t\tThe
\n\t\tpresent petition relates to Section 115JB of the Act, which came to
\n\t\tbe inserted by Finance Act, 2000 with effect from 1.4.2000, and
\n\t\tinsofar as the same is relevant for the present purpose reads thus:\n<\/p>\n
115-JB.\n<\/p>\n
Special provision for payment of tax by certain companies.–(1)
\nNotwithstanding anything contained in any other provision of this
\nAct, where in the case of an assessee, being a company, the income
\ntax, payable on the total income as computed under this Act in
\nrespect of any previous year relevant to the assessment year
\ncommencing on or after the 1st day of April, 2007, is less than ten
\nper cent of its book profit, such book profit shall be deemed to be
\nthe total income of the assessee and the tax payable by the assessee
\non such total income shall be the amount of income tax at the rate of
\nten per cent.\n<\/p>\n
(2)<\/span><\/p>\n
Every assessee, being a company, shall, for the purposes of this
\nsection, prepare its profit and loss account for the relevant
\nprevious year in accordance with the provisions of Parts II and III
\nof Schedule VI to the Companies Act, 1956:\n<\/p>\n
Provided
\nthat while preparing the annual accounts including profit and loss
\naccount,–\n<\/p>\n
\t(i)\tthe
\naccounting policies;\n<\/p>\n
(ii)\tthe
\naccounting standards adopted for preparing such accounts  including
\nprofit and loss account;\n<\/p>\n
\t(iii)\tthe
\nmethod and rates adopted for calculating the depreciation,<\/p>\n
shall
\nbe the same as have been adopted for the purpose of preparing such
\naccounts including profit and loss account and laid before the
\ncompany at its annual general meeting in accordance with the
\nprovisions of Section 210 of the Companies Act, 1956:\n<\/p>\n
Provided
\nfurther that where the company has adopted or adopts the
\nfinancial year under the Companies Act, 1956, which is different from
\nthe previous year under this Act,–\n<\/p>\n
\t(i)\tthe
\naccounting policies;\n<\/p>\n
     (ii)\tthe
\naccounting standards adopted for preparing such accounts including
\nprofit and loss account;\n<\/p>\n
\t(iii)\tthe
\nmethod and rates adopted for calculating the depreciation,<\/p>\n
shall
\ncorrespond to the accounting policies, accounting standards and the
\nmethod and rates for calculating the depreciation which have been
\nadopted for preparing such accounts including profit and loss account
\nfor such financial year or part of such financial year falling within
\nthe relevant previous year.\n<\/p>\n
Explanation-1.–For
\nthe purposes of this section, ‘book profit’ means the net
\nprofit as shown in the profit and loss account for the relevant
\nprevious year prepared under sub-section (2), as increased by–\n<\/p>\n
\t(a)xxxx
\nto (h)xxxx<\/p>\n
if
\nany amount referred to in clauses (a) to (h) is debited to the profit
\nand loss account,  and as reduced by<\/p>\n
\t\txxxx\t<\/p>\n
   (iii)\tthe
\namount of loss brought forward or unabsorbed depreciation, whichever
\nis less as per books of account.\n<\/p>\n
\tExplanation.–For
\nthe purposes of this clause,–\n<\/p>\n
\t(a)\tthe
\nloss shall not include depreciation;\n<\/p>\n
     (b)\tthe
\nprovisions of this clause shall not apply if the amount of loss
\nbrought forward or unabsorbed depreciation, is nil; or<\/p>\n
\tExplanation.–For
\nthe purposes of this clause, the loss shall not include depreciation;
\nor<\/p>\n
xxxxx<\/p>\n
[7.6]\t\tChapter
\n\t\tXII-B came to be inserted in the Income Tax Act by the Finance Act,
\n\t\t1987 with effect from 1.4.1987. Under the provisions of the Income
\n\t\tTax Act, certain deductions are allowed in the computation of
\n\t\tprofits and gains of business or profession. Various other
\n\t\tdeductions are also allowed under Chapter VI-A of the Act in
\n\t\tcomputing total income. As a result of these concessions, certain
\n\t\tcompanies making huge profits were managing their affairs in such a
\n\t\tway as to avoid payment of income-tax. In 1983, a new section 80VVA
\n\t\twas inserted in the Act so that all profitable companies pay some
\n\t\ttax, but the same does not appear to have helped. Hence, the same
\n\t\twas withdrawn and Chapter XII-B came to be inserted introducing
\n\t\tsection 115J of the Act, a provision whereby every company would
\n\t\thave to pay “minimum corporate tax” on the profits
\n\t\tdeclared by it in its own accounts. As the number of zero tax
\n\t\tcompanies and companies paying marginal tax had grown, Minimum
\n\t\tAlternate Tax was levied from assessment year 1997-98 by virtue of
\n\t\tthe provisions of section 115JA which came to be inserted by the
\n\t\tFinance Act, 1996 with effect from 1.4.1997. However, the efficacy
\n\t\tof the said provisions had declined in view of the exclusions of
\n\t\tvarious sectors from the operation of MAT and the credit system. It
\n\t\thad also led to legal complications. Hence, in its place section
\n\t\t115JB came to be inserted by the Finance Act, 2000, with effect
\n\t\tfrom 1.4.2001, which is simpler in application. The provisions of
\n\t\tsection 115JB as originally inserted provided that all companies
\n\t\thaving book profit under the Companies Act, prepared in accordance
\n\t\twith Part-II and Part-III of Schedule-VI to the Companies Act,
\n\t\tshall be liable to pay a minimum alternate tax at a lower rate of
\n\t\t7.5%, as against the then existing effective rate of 10.5% of the
\n\t\tbook profits. These provisions were made applicable to all
\n\t\tcorporate entities without any exception.\n<\/p>\n
[7.7]\t\tThus,
\n\t\tsection 115JB of the Act provides for a Minimum Alternate Tax (MAT)
\n\t\ton companies. Under the provisions of this section, as applicable
\n\t\tto the assessment year under consideration a company is required to
\n\t\tpay at least 10% of its book profit as tax. In case the tax
\n\t\tliability of a company under the regular provisions is more than
\n\t\tthis amount, the provisions of MAT will not apply and the company
\n\t\tshall pay regular tax as per the regular scheme. Under the
\n\t\tprovisions of section 115JB of the Act, a deeming fiction has been
\n\t\tintroduced whereby in case where the tax payable by a company is
\n\t\tless than 10% of its book profit, such book profit is deemed to be
\n\t\tthe total income of the assessee and the tax payable by the
\n\t\tassessee on such income is the amount of income tax at the rate of
\n\t\t10%.  Sub-section (2) of section 115JB of the Act provides for the
\n\t\tmanner in which the profit and loss account has to be prepared. The
\n\t\tExplanation to section 115JB defines “book profit” to
\n\t\tmean the net profit as shown in the profit and loss account for the
\n\t\trelevant previous year prepared under sub-section (2), as increased
\n\t\tby clauses (a) to (g) thereunder. If any amount referred to in
\n\t\tclauses (a) to (f) is debited to the profit and loss account, and
\n\t\tas reduced by clauses (i) to (vii) thereunder.  Clause (iii) of the
\n\t\tExplanation to section 115JB of the Act provides for reducing the
\n\t\tnet profit as shown in the profit and loss account by the amount of
\n\t\tloss brought forward or unabsorbed depreciation, whichever is less,
\n\t\tas per the books of account. The explanation to clause (iii), inter
\n\t\talia, provides that the provisions of the said clause would not be
\n\t\tapplicable if the amount of loss brought forward or unabsorbed
\n\t\tdepreciation is `Nil’. In the circumstances, in the absence of
\n\t\teither brought forward loss, or unabsorbed depreciation, an
\n\t\tassessee would not be entitled to compute the book profit by
\n\t\treducing the net profit by the amount of brought forward loss or
\n\t\tunabsorbed depreciation, as the case may be. Section 115JB of the
\n\t\tAct opens with a non-obstante clause. From the scheme of the
\n\t\tsection as noted hereinabove, it is apparent that section 115JB is
\n\t\ta self contained Code and will apply notwithstanding any of the
\n\t\tprovisions of the Act.\n<\/p>\n
[7.8]\t\tIn
\n\t\tthe facts of the present case, the petitioner does not have any
\n\t\tunabsorbed depreciation as per its books of account and as such
\n\t\twhile computing its book profit, it is not entitled to the benefit
\n\t\tof reduction of the net profit under clause (iii) of the
\n\t\tExplanation to section 115JB. The petitioner has therefore,
\n\t\tchallenged the constitutional validity of the said provision
\n\t\tcontending that the policy behind the enactment is to tax zero-tax
\n\t\tpaying prosperous companies, whereas as a result of the operation
\n\t\tof the impugned provision, which does not permit reduction of the
\n\t\tnet profit by brought forward loss in the absence of unabsorbed
\n\t\tdepreciation while computing the book profit, even a company like
\n\t\tthe petitioner who has no actual income in the year under
\n\t\tconsideration, is liable to pay tax at the specified rate on its
\n\t\tbook profit. According to the petitioner, the impugned provision
\n\t\tinsofar as the same provides for reduction of the book profit in
\n\t\tcase of companies having both brought forward loss and unabsorbed
\n\t\tdepreciation to the extent of the lesser of the two, is violative
\n\t\tof Article 14 of the Constitution of India vis-\u00e0-vis those
\n\t\tcompanies who have either only brought forward loss or unabsorbed
\n\t\tdepreciation. It is accordingly contended that the classification
\n\t\tmade by the legislature by virtue of the impugned provision which
\n\t\tseeks to classify companies on the basis as to whether they have
\n\t\tboth carried forward loss as well as unabsorbed depreciation in
\n\t\ttheir books of account or only either of the two, has no nexus to
\n\t\tthe object sought to be achieved, viz., to tax prosperous
\n\t\tcompanies.\n<\/p>\n
[7.9]\t\tIn
\n\t\tthis regard it may be germane to refer to the decision of a
\n\t\tConstitution Bench of the Supreme Court in S.K. Dutta, ITO
\n\t\tv. Lawarence Singh Ingty,<\/a> (1968) 68 ITR 271,
\n\t\twherein it was held thus:\n<\/p>\n
“It
\nis not in dispute that taxation laws must also pass the test of
\nArticle 14. That has been laid down by this Court in Moopil
\nNair v. State of Kerala, [1961] 3 S.C.R. 77. But
\nas observed by this Court in East India Tobacco Co. v.
\nState of Andhra Pradesh,<\/a> [1963] 1 S.C.R. 404, 409, in
\ndeciding whether the taxation law is discriminatory or not, it is
\nnecessary to bear in mind that the State has a wide discretion in
\nselecting persons or objects it will tax, and that a statute is not
\nopen to attack on the ground that it taxes some person or objects and
\nnot others; it is only when within the range of its selection, the
\nlaw operates unequally, and that cannot be justified on the basis of
\nany valid classification, that it would be violative of Article 14.
\nIt is well settled that a State does not have to tax everything in
\norder to tax something. It is allowed to pick and choose districts,
\nobjects, persons, methods and even rates for taxation if it does so
\nreasonably.”\n<\/p>\n
[7.10]\tIf
\n\t\tone examines the impugned provision in the light of the principles
\n\t\tenunciated in the aforesaid decision, it is apparent that all
\n\t\tassessees falling within the ambit of section 115JB of the Act are
\n\t\tspecial class of assessees, viz. those companies in whose case the
\n\t\tincome tax payable upon determining their  total income under the
\n\t\tprovisions of the Income Tax Act is less than 10% of their book
\n\t\tprofit. While examining the constitutional validity of the impugned
\n\t\tprovision, what has to be seen is whether, within the class, there
\n\t\tis any discrimination. On a plain reading of clause (iii) of the
\n\t\tExplanation to section 115JB of the Act, it is apparent that the
\n\t\tsame applies uniformly and equally to all companies falling within
\n\t\tthe ambit of section 115JB, without any discrimination. The
\n\t\tprovision does not create any class within the class of assessees
\n\t\tfalling within the ambit of section 115JB. The fact that in a given
\n\t\tcase an assessee may not have any unabsorbed depreciation or any
\n\t\tbrought forward loss in its books of account, as a consequence of
\n\t\twhich the assessee would not be entitled to reduction of the book
\n\t\tprofit under the impugned provision, is a mere fortuitous
\n\t\tcircumstance. The legislature, while enacting a provision is not
\n\t\trequired to meet with or envisage every fortuitous circumstance
\n\t\tthat may arise while implementing such provision. Merely because in
\n\t\ta given circumstance, the provision may act to the disadvantage of
\n\t\ta particular assessee would not render the provision arbitrary, nor
\n\t\tcan it be said that the same violates the equality clause.\n<\/p>\n
[7.11]\tIn
\n\t\tGovernment of A.P. v. Laxmi Devi, (2008) 4 SCC 720,
\n\t\tthe Supreme Court has analyzed and explained the power of judicial
\n\t\treview of statutes.   It has been held in the said decision that
\n\t\twhile the court has the power to declare a statute to be
\n\t\tunconstitutional, it should exercise great restraint in this
\n\t\tconnection. In the opinion of the Court, there is one and only one
\n\t\tground for declaring an Act of the legislature (or a provision in
\n\t\tthe Act) to be invalid, and that is if it clearly violates some
\n\t\tprovision of the Constitution in so evident a manner as to leave no
\n\t\tmanner of doubt. It was further held that as regards fiscal or tax
\n\t\tmeasures greater latitude is given to such statutes than to other
\n\t\tstatutes. All decisions in the economic and social spheres are
\n\t\tessentially ad-hoc and experimental. Since economic matters are
\n\t\textremely complicated, this inevitably entails special treatment
\n\t\tfor special situations. The State must, therefore, be left with
\n\t\twide latitude in devising ways and means of fiscal or regulatory
\n\t\tmeasures, and the court should not, unless compelled by the statute
\n\t\tor by the Constitution, encroach into this field, or invalidate
\n\t\tsuch law. As regards economic and other regulatory legislation,
\n\t\tjudicial restraint must be observed by the court and greater
\n\t\tlatitude must be given to the legislature while adjudging the
\n\t\tconstitutionality of the statute because the court does not consist
\n\t\tof economic or administrative experts.\n<\/p>\n
[7.12]\tThe
\n\t\tCourt in the said decision was dealing with the provisions of the
\n\t\tStamp Act, 1899 (as in A.P.), and held that it is well settled that
\n\t\tstamp duty is a tax, and hardship is not relevant in construing
\n\t\ttaxing statutes which are to be construed strictly.  That there is
\n\t\tno equity in a tax. If the words used in a taxing statute are
\n\t\tclear, one cannot try to find out the intention and the object of
\n\t\tthe statute. The Court held that, the High Court, therefore, fell
\n\t\tin error in trying to go by the supposed object and intendment of
\n\t\tthe Stamp Act, and by seeking to find out the hardship which will
\n\t\tbe caused to a party by the impugned amendment of 1998.\n<\/p>\n
[7.13]\tIn
\n\t\tthe case of State of A.P. v. Nallamilli Ramli Reddi,<\/a>
\n\t\t(2001) 7 SCC 708, the Supreme Court held, what Article 14 of the
\n\t\tConstitution prohibits is “class legislation” and not
\n\t\t“classification for purpose of legislation”. If the
\n\t\tlegislature reasonably classifies persons for legislative purposes
\n\t\tso as to bring them under a well-defined class, it is not open to
\n\t\tchallenge on the ground of denial of equal treatment that the law
\n\t\tdoes not apply to other persons. The test of permissible
\n\t\tclassification is twofold: (i) that the classification must be
\n\t\tfounded on intelligible differentia which distinguishes persons
\n\t\tgrouped together from others who are left out of the group, and\n<\/p>\n
\t\t(ii) that differentia must have a rational connection with the
\n\t\tobject sought to be achieved. Article 14 does not insist upon
\n\t\tclassification, which is scientifically perfect or logically
\n\t\tcomplete. A classification would be justified unless it is patently
\n\t\tarbitrary. If there is equality and uniformity in each group, the
\n\t\tlaw will not become discriminatory, though due to some fortuitous
\n\t\tcircumstance arising out of peculiar situation some included in a
\n\t\tclass get an advantage over others so long as they are not singled
\n\t\tout for special treatment.\n<\/p>\n
[7.14]\tIn
\n\t\tthe case of D. C. Bhatia v. Union of India, (1995) 1
\n\t\tSCC 104, the Supreme Court held that if there is some nexus between
\n\t\tthe object sought to be achieved and the classification, the
\n\t\tlegislature is presumed to have acted in proper exercise of its
\n\t\tconstitutional power. The classification in practice may result in
\n\t\tsome hardship. But, a statutory discrimination cannot be set aside,
\n\t\tif there are facts on the basis of which this statutory
\n\t\tdiscrimination can be justified. The Court can only consider
\n\t\twhether the classification has been done on an understandable basis
\n\t\thaving regard to the object of the statute. The Court will not
\n\t\tquestion its validity on the ground of lack of legislative wisdom.
\n\t\tThe classification cannot be done with mathematical precision.  The
\n\t\tCourt cannot act as a super-legislature.\n<\/p>\n
[7.15]\tIn
\n\t\tthe facts of the present case, as noted hereinabove, the principal
\n\t\tgrievance ventilated is that the petitioner is put to undue
\n\t\thardship inasmuch as clause (iii) of the explanation to section
\n\t\t115JB of the Act does not permit reduction of book profit to the
\n\t\textent of brought forward loss, in case where a company does not
\n\t\thave any unabsorbed depreciation as per its books of account. The
\n\t\tconstitutional validity of the said provision is also challenged on
\n\t\tthe ground of absurdity on the ground that though the petitioner
\n\t\tdoes not have any income in the year under consideration, merely
\n\t\tbecause the petitioner has shown book profit under the Companies
\n\t\tAct, 1956, the petitioner becomes liable to pay tax under the
\n\t\tprovisions of section 115JB of the Act, without being in a position
\n\t\tto set off the brought forward losses of the earlier years, which
\n\t\tis absurd as the petitioner does not have any income in the year
\n\t\tunder consideration.\n<\/p>\n
[7.16]\tThe
\n\t\tIncome Tax Act, 1961 is indubitably a fiscal statute. The
\n\t\tlegislature has over the years been devising ways and means to
\n\t\tprevent companies from avoiding total payment of income-tax by
\n\t\tresorting to the various deductions and allowances made under the
\n\t\tAct. In its attempt to bring all companies under the tax net, the
\n\t\tlegislature has formulated a scheme as contained under section
\n\t\t115JB of the Act with a view to ensure that all companies pay at
\n\t\tleast some tax. The provision also provides for the manner of
\n\t\tcomputation of income thereunder, which is a special provision for
\n\t\tcertain companies. Section 115JB of the Act including clause (iii)
\n\t\tof the Explanation thereto, which is impugned in the present
\n\t\tpetition applies uniformly to all companies. The said provision
\n\t\tdoes not draw any distinction between companies as a class and
\n\t\tapplies to all companies which fall within its ambit; viz.
\n\t\tcompanies in whose case the income tax payable on the total income
\n\t\tas computed under the normal provisions of the Act in respect of
\n\t\tthe previous year relevant to the assessment year is less than 10%
\n\t\tof their book profits. The provision does not intend to make any
\n\t\tclassification between a capital asset infrastructure company and a
\n\t\tcapital intensive company with no capital assets. If, as a
\n\t\tconsequence of implementing the provisions of the section, some
\n\t\tcompanies are put to some hardship, it does not mean that the
\n\t\tlegislature has created a distinct class of companies. As held by
\n\t\tthe Apex Court in State of A.P. v. Nallamilli Ramli Reddi<\/a>
\n\t\t(supra), a classification would be justified unless it is
\n\t\tpatently arbitrary. If there is equality and uniformity in each
\n\t\tgroup, the law will not become discriminatory; though due to some
\n\t\tfortuitous circumstance arising out of peculiar situation some
\n\t\tincluded in a class get an advantage over others so long as they
\n\t\tare not singled out for special treatment.\n<\/p>\n
[7.17]\tUnder
\n\t\tthe Scheme of the Act, an assessee is entitled to carry forward its
\n\t\tlosses as well as unabsorbed depreciation and set off of the same
\n\t\tin its regular assessment. It is only if after determining the
\n\t\ttotal income of the company under the normal provisions, the income
\n\t\ttax payable is less than 10% of its book profit that the income of
\n\t\tsuch company is to be computed under section 115JB of the Act and
\n\t\tthe company becomes liable to pay tax at the rate of 10% of its
\n\t\tbook profit as computed under the provisions of section 115JB. The
\n\t\tcomputation includes reduction of the book profit under clause\n<\/p>\n
\t\t(iii) of the Explanation to section 115JB of the Act. Thus, it is
\n\t\tnot as if the assessee company is deprived of any right by virtue
\n\t\tof the provisions of section 115JB of the Act.\n<\/p>\n
[7.18]\tIn
\n\t\tthe case of the petitioner company, the petitioner itself had
\n\t\tdebited the expenditure incurred by it to the profit and loss
\n\t\taccount and thereafter, had assigned its participating interest in
\n\t\tthe UJV to M\/s Cairn India Ltd. before it actually started making
\n\t\tany profit in relation to the business and as such, was not in a
\n\t\tposition to set off its losses against the income earned by it. In
\n\t\tthe year under consideration, it is an admitted position, that the
\n\t\tpetitioner had a book profit of Rs.11,64,67,873\/- as per its books
\n\t\tof account as maintained in accordance with provisions of the
\n\t\tCompanies Act, 1956 and as such, became liable to pay income tax in
\n\t\trespect thereof under section 115JB of the Act. It is also not as
\n\t\tif the petitioner was not permitted to set off its brought forward
\n\t\tlosses against its income. In fact it is only after computing the
\n\t\tincome under the provisions of the Income Tax Act after allowing
\n\t\tall allowable deductions, because the income tax payable works out
\n\t\tto less than ten per cent of book profits that the petitioner has
\n\t\tbecome liable to be assessed under provisions of section 115JB of
\n\t\tthe Act on its book profits. Thus, merely because, in the peculiar
\n\t\tfacts and circumstances of the case of the petitioner, the
\n\t\tpetitioner has not been able to set off its losses against its
\n\t\tincome while computing its income under section 115JB of the Act,
\n\t\tthe same would not render the statutory provisions unconstitutional
\n\t\tor invalid. In the circumstances, the challenge to the provisions
\n\t\tof section 115JB of the Act must necessarily fail.\n<\/p>\n
[7.19]\tThough
\n\t\tnot specifically pleaded in the petition, at the time of hearing of
\n\t\tthe petition it had been urged that in case where the plain literal
\n\t\tinterpretation produces an absurd or manifestly unjust result which
\n\t\tcould never have been intended by the Legislature, the Court may
\n\t\tfine tune the language used by the Legislature and produce a
\n\t\trational result. It was submitted that since the plain and literal
\n\t\tinterpretation produces an absurd and unjust result inasmuch as the
\n\t\tpetitioner who has no income is required to pay tax, the provision
\n\t\tis required to be read down by the Court.\n<\/p>\n
[7.20]\tInsofar
\n\t\tthe prayer that the provisions may be read down is concerned, it is
\n\t\twell settled that the Doctrine of Reading Down is an internal aid
\n\t\tto construe the words or phrase in a statute to give it a
\n\t\treasonable meaning. The object of reading down is to keep the
\n\t\toperation of the statute within the purpose of the Act and
\n\t\tconstitutionally valid. Thus, in order to save a statute or a part
\n\t\tthereof from being struck down it can be suitably read down.
\n\t\tHowever, reading down is not permissible in such a manner as would
\n\t\tfly in the face of the express terms of the statutory provisions.
\n\t\tIt is a very well settled legal position, that if the Court while
\n\t\tconstruing a provision, finds that the same is ambiguous, the Court
\n\t\tinstead of striking it down, may read it down so as to save the
\n\t\tconstitutional validity. Moreover, the rule of reading down applies
\n\t\tonly where two views are possible as to the meaning of the
\n\t\tstatutory language. (See Delhi Transport Corporation v.
\n\t\tD.T.C. Mazdoor Congress,<\/a> 1991 Supp (1) SCC 600, C.B.
\n\t\tGautam v. Union of India<\/a> , (1993) 1 SCC 78,
\n\t\tand Rapti Commission Agency v. State of U.P.,<\/a> (2006)
\n\t\t6 SCC 522).\n<\/p>\n
[7.21]\tIn
\n\t\tthe present case, the Court does not find the impugned provision to
\n\t\tbe in any manner unconstitutional, hence, the question of reading
\n\t\tit down to save its constitutional validity does not arise.
\n\t\tBesides, the provisions of clause (iii) of the Explanation to
\n\t\tsection 115JB are clear and ambiguous and it is not possible to
\n\t\ttake two views as to the meaning of the statutory language. Hence,
\n\t\tthe request to read down the provision also does not merit
\n\t\tacceptance. Consequently, the question of directing the respondents
\n\t\tto allow reduction of the brought forward losses of
\n\t\tRs.11,67,85,411\/- of the petitioner company from the net profit in
\n\t\torder to compute book profits under section 115JB of the Act in
\n\t\tabsence of any unabsorbed depreciation in the assessment year under
\n\t\tconsideration, also cannot be accepted.\n<\/p>\n
For
\n\tthe foregoing reasons, the Court does not find any merit in the
\n\tpetition. The petition, therefore, fails and is accordingly,
\n\trejected. Notice is discharged. No order as to costs.\n<\/p>\n
[D.A.MEHTA,
\nJ.]<\/p>\n
[HARSHA
\nDEVANI, J.]<\/p>\n
parmar*<\/p>\n
\t\t   \u00a0\u00a0\u00a0<\/p>\n
\t\t   Top<\/p>\n","protected":false},"excerpt":{"rendered":"
Gujarat High Court Cairn vs Union on 9 November, 2011 Author: D.A.Mehta, Ms.Justice Devani, Gujarat High Court Case Information System Print SCA\/11581\/2008 41\/ 41 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 11581 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ========================================= 1 Whether Reporters of […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[16,8],"tags":[],"class_list":["post-182578","post","type-post","status-publish","format-standard","hentry","category-gujarat-high-court","category-high-court"],"yoast_head":"\nCairn vs Union on 9 November, 2011 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Cairn vs Union on 9 November, 2011 - Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011\" \/>\n<meta property=\"og:site_name\" content=\"Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/LegalindiaCom\/\" \/>\n<meta property=\"article:published_time\" content=\"2011-11-08T18:30:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2016-08-02T12:58:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/i0.wp.com\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg?fit=512%2C512&ssl=1\" \/>\n\t<meta property=\"og:image:width\" content=\"512\" \/>\n\t<meta property=\"og:image:height\" content=\"512\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Legal India Admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@legaliadmin\" \/>\n<meta name=\"twitter:site\" content=\"@Legal_india\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Legal India Admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"50 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/cairn-vs-union-on-9-november-2011#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/cairn-vs-union-on-9-november-2011\"},\"author\":{\"name\":\"Legal India Admin\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/person\\\/0bfdffe9059fb8bb24a86d094609c5ea\"},\"headline\":\"Cairn vs Union on 9 November, 2011\",\"datePublished\":\"2011-11-08T18:30:00+00:00\",\"dateModified\":\"2016-08-02T12:58:08+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/cairn-vs-union-on-9-november-2011\"},\"wordCount\":9932,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\"},\"articleSection\":[\"Gujarat High Court\",\"High Court\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/cairn-vs-union-on-9-november-2011#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/cairn-vs-union-on-9-november-2011\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/cairn-vs-union-on-9-november-2011\",\"name\":\"Cairn vs Union on 9 November, 2011 - Free Judgements of Supreme Court & High Court | Legal India\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#website\"},\"datePublished\":\"2011-11-08T18:30:00+00:00\",\"dateModified\":\"2016-08-02T12:58:08+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/cairn-vs-union-on-9-november-2011#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/cairn-vs-union-on-9-november-2011\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/cairn-vs-union-on-9-november-2011#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Cairn vs Union on 9 November, 2011\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#website\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/\",\"name\":\"Free Judgements of Supreme Court & High Court | Legal India\",\"description\":\"Search and read the latest judgements, orders, and rulings from the Supreme Court of India and all High Courts. A comprehensive database for lawyers, advocates, and law students.\",\"publisher\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\"},\"alternateName\":\"Free judgements of Supreme Court & High Court of India | Legal India\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\",\"name\":\"Judgements of Supreme Court & High Court | Legal India\",\"alternateName\":\"Legal India\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/logo\\\/image\\\/\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/wp-content\\\/uploads\\\/sites\\\/5\\\/2025\\\/09\\\/legal-india-icon.jpg\",\"contentUrl\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/wp-content\\\/uploads\\\/sites\\\/5\\\/2025\\\/09\\\/legal-india-icon.jpg\",\"width\":512,\"height\":512,\"caption\":\"Judgements of Supreme Court & High Court | Legal India\"},\"image\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/logo\\\/image\\\/\"},\"sameAs\":[\"https:\\\/\\\/www.facebook.com\\\/LegalindiaCom\\\/\",\"https:\\\/\\\/x.com\\\/Legal_india\"]},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/person\\\/0bfdffe9059fb8bb24a86d094609c5ea\",\"name\":\"Legal India Admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"contentUrl\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"caption\":\"Legal India Admin\"},\"sameAs\":[\"https:\\\/\\\/www.legalindia.com\",\"https:\\\/\\\/x.com\\\/legaliadmin\"],\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/author\\\/legal-india-admin\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Cairn vs Union on 9 November, 2011 - Free Judgements of Supreme Court & High Court | Legal India","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011","og_locale":"en_US","og_type":"article","og_title":"Cairn vs Union on 9 November, 2011 - Free Judgements of Supreme Court & High Court | Legal India","og_url":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011","og_site_name":"Free Judgements of Supreme Court & High Court | Legal India","article_publisher":"https:\/\/www.facebook.com\/LegalindiaCom\/","article_published_time":"2011-11-08T18:30:00+00:00","article_modified_time":"2016-08-02T12:58:08+00:00","og_image":[{"width":512,"height":512,"url":"https:\/\/i0.wp.com\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg?fit=512%2C512&ssl=1","type":"image\/jpeg"}],"author":"Legal India Admin","twitter_card":"summary_large_image","twitter_creator":"@legaliadmin","twitter_site":"@Legal_india","twitter_misc":{"Written by":"Legal India Admin","Est. reading time":"50 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011#article","isPartOf":{"@id":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011"},"author":{"name":"Legal India Admin","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea"},"headline":"Cairn vs Union on 9 November, 2011","datePublished":"2011-11-08T18:30:00+00:00","dateModified":"2016-08-02T12:58:08+00:00","mainEntityOfPage":{"@id":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011"},"wordCount":9932,"commentCount":0,"publisher":{"@id":"https:\/\/www.legalindia.com\/judgments\/#organization"},"articleSection":["Gujarat High Court","High Court"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011","url":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011","name":"Cairn vs Union on 9 November, 2011 - Free Judgements of Supreme Court & High Court | Legal India","isPartOf":{"@id":"https:\/\/www.legalindia.com\/judgments\/#website"},"datePublished":"2011-11-08T18:30:00+00:00","dateModified":"2016-08-02T12:58:08+00:00","breadcrumb":{"@id":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.legalindia.com\/judgments\/cairn-vs-union-on-9-november-2011#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.legalindia.com\/judgments\/"},{"@type":"ListItem","position":2,"name":"Cairn vs Union on 9 November, 2011"}]},{"@type":"WebSite","@id":"https:\/\/www.legalindia.com\/judgments\/#website","url":"https:\/\/www.legalindia.com\/judgments\/","name":"Free Judgements of Supreme Court & High Court | Legal India","description":"Search and read the latest judgements, orders, and rulings from the Supreme Court of India and all High Courts. A comprehensive database for lawyers, advocates, and law students.","publisher":{"@id":"https:\/\/www.legalindia.com\/judgments\/#organization"},"alternateName":"Free judgements of Supreme Court & High Court of India | Legal India","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.legalindia.com\/judgments\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.legalindia.com\/judgments\/#organization","name":"Judgements of Supreme Court & High Court | Legal India","alternateName":"Legal India","url":"https:\/\/www.legalindia.com\/judgments\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/","url":"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg","contentUrl":"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg","width":512,"height":512,"caption":"Judgements of Supreme Court & High Court | Legal India"},"image":{"@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/LegalindiaCom\/","https:\/\/x.com\/Legal_india"]},{"@type":"Person","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea","name":"Legal India Admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","caption":"Legal India Admin"},"sameAs":["https:\/\/www.legalindia.com","https:\/\/x.com\/legaliadmin"],"url":"https:\/\/www.legalindia.com\/judgments\/author\/legal-india-admin"}]}},"modified_by":null,"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts\/182578","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/comments?post=182578"}],"version-history":[{"count":0,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts\/182578\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/media?parent=182578"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/categories?post=182578"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/tags?post=182578"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}