TMI Blog1958 (10) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... additional income-tax is leviable at the rate of forty-four pies in a rupee. Appeal dismissed. - - - - - Dated:- 9-10-1958 - Judge(s) : A. K.SARKAR., GAJENDRAGADKAR., VENKATARAMA AIYAR JUDGMENT The judgment of the court was delivered by GAJENDRAGADKAR, J.---This appeal arises from the assessment proceedings taken against the appellant, Rajputana Agencies Ltd., Lavanpur, for its income for the assessment year 1952-53, the accounting period being the corresponding Marwadi Year ending in October, 1951. The appellant is a private limited company and it was assessed to income-tax and super-tax by the Income-tax Officer, Morvi Circle, Morvi, on a total income of Rs. 26,385. The appellant had declared dividend of Rs. 30,000. The Income-tax Officer held that out of the said amount of dividend, Rs. 15,159 was excess dividend. On this basis the Income-tax Officer determined the additional income-tax payable by the appellant at the rate of forty-four pies in a rupee on the said excess dividend. The additional income-tax payable by the appellant in that behalf was computed at Rs. 3,473-15-0. This order was passed on November 25, 1952. The appellant filed an appeal against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fit one for appeal to this court. It is with this certificate that the present appeal has been brought to this court ; and the only point which it raises for our decision relates to the construction of the expression "at the rate applicable to the total income of the company" appearing in the relevant provision of the Act. The appellant does not dispute its liability to pay additional income-tax under clause (ii) of the proviso to paragraph B of Part I of the First Schedule to the Act. The dispute between the parties is in regard to the rate at which the additional income-tax has to be charged. The appellant has paid income-tax on its total income in the relevant assessment year at the rate of sixteen pies in a rupee in accordance with the computation prescribed by paragraph 6 of the Order ; and it is urged on its behalf, that the rebate to which it is entitled under the provisions of the said Order is irrelevant in determining the rate at which the additional income-tax can be computed against it. On the other hand, the respondent contends that the additional income-tax has to be computed at the rate at which the appellant's income has been actually assessed and so the rebat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x payable by the appellant for the relevant year. It is well known that when different Part B States merged with the adjoining States or Provinces and were made taxable territories under the Income-tax Act, the operation of the Indian rate of tax was introduced by phases and rebates on a graduated scale were allowed to the assessees under the provisions of this Order. As we have already mentioned, it is common ground that the appellant was entitled to and has obtained rebate under sub-clause (iii) of paragraph 6 of the Order, with the result that his total income has been taxed to income-tax at the rate of sixteen pies in a rupee. The point for determination is whether this rebate is relevant in determining the rate at which the additional income-tax has to be levied against the appellant under the relevant provisions of the Act. Let us now consider the relevant provisions of the Act. Section 3 of the Income-tax Act which is the charging section provides that "where any Central Act enacts that income-tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me an additional income-tax equal to the sum, if any, by which the aggregate amount of income-tax actually borne by such excess (hereinafter referred to as "the excess dividend") falls short of the amount calculated at the rate of five annas per rupee on the excess dividend. It would thus be seen that the object of the Legislature in enacting this proviso is to encourage companies to plough back some of their profits into the industry and not to distribute unduly large portions of their profits to their shareholders by declaring unreasonably high or excessive dividends. In order to give effect to this intention the Legislature has offered an inducement to the companies by giving them a certain rebate. If a company does not distribute as dividends more than roughly nine annas of its profits which is specified as distributable, then the rebate of one anna is given to the company to the extent that the dividend paid by it was less than the distributable dividend. If the company pays more than the distributable amount of dividend then it was not entitled to claim any rebate ; but, on the contrary, it becomes liable to pay an additional income-tax as provided in clause (ii) of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the total income of the company for that year reduced by the rate at which rebate, if any, was allowed on the undistributed profits." Clause (i) explains what shall be deemed to be the excess dividend and how it should be ascertained. Clause (ii) lays down how the portion of the excess dividend as is deemed to be out of the undistributed profits of each of the years mentioned in clause (ii) of the proviso shall be deemed to have borne tax. Sub-clause (a) of clause (ii) is concerned with cases where an order has been made under section 23A(1) in respect of the undistributed profits of that year at the rate of five annas in a rupee. We are not concerned with this clause in the present appeal. It is sub-clause (b) of clause (ii) of the explanation to the proviso to paragraph B that falls for consideration in the present appeal. The appellant's case is that the expression "at the rate applicable to the total income" means the rate prescribed by paragraph B of the Act and not the rate at which income-tax has actually and in fact been levied. This contention has been rejected by the High Court and the appellant urges that the High Court was in error in rejecting its case. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther provision in sub-clause (b) itself which requires that the relevant rate has to be reduced by the rate at which the rebate, if any, has been allowed on the undistributed profits ; which means that, for determining the rate in sub-clause (b), it is necessary to take into account the rebate which may have been allowed to the company under clause (i) of the proviso to paragraph B, so that in such a case the rate applicable cannot be the rate prescribed in paragraph B of the Act ; it must be the rate so prescribed reduced by the rate at which the rebate has been granted under clause (i) of the proviso to paragraph B. It is thus clear that the words "rate applicable" in such cases mean the rate determined after deducting from the rate prescribed by paragraph B the rate of rebate allowed by clause (i) of the proviso to the said paragraph. Therefore, at least in these cases the material words mean the rate actually applied. If that be the true position, the rate applicable must in all cases mean the rate actually applied. The same words cannot have two different meanings in the same clause. Incidentally we may point out that the provision of the Act in regard to the payment of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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