9911796707
TMI Blog1967 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... passed under s. 23A deeming dividend to have been declared Rs. 1946-47 46,563 March 18, 1952 1947-48 43,959 March 18, 1952 1948-49 47,829 March 18, 1952 1949-50 97,875 March 18, 1952 1950-51 92,591 March 18, 1952 1951-52 25,899 March 30, 1955 3,54,716 On July 7, 1955, the company in a general meeting resolved that the amount of Rs. 3,54,716, which was under the orders of the Income-tax Officer deemed to have been distributed as dividend amongst the shareholders pursuant to orders under section 23A of the Income-tax Act, be distributed as dividend to the shareholders, and in pursuance of that resolution, proportionate part of the dividend due to each shareholder was credited to his account. The Income-tax Officer completed the assessment of the company for the year 1956-57 and determined Rs. 5,69,396 as its total income. The Income-tax Officer computed the super-tax payable by the company under the Finance Act, 1956, at the rate of six annas and nine pies in the rupee of the total income, and granted a rebate at the rate of four annas in the rupee in accordance with the provisions of clause D, provisos (i)(b) and (ii) of the Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as justified in disposing of the appeal as it did ? 2. Whether the Tribunal was right in law in entertaining the assessee's contention relating to the applicability of section 34(1)(b) under rule 27 of the Appellate Tribunal Rules ? 3. Whether the setting aside of the assessment under section 34(1)(b) was correct in law ? " The High Court decided in favour of the company on the first two questions. In considering the third question the High Court observed that the plea of the company that reassessment proceedings under section 34(1)(b), on the ground of " excessive relief ", cannot be initiated, must be accepted. The court then proceeded to consider whether allowance of rebate to which the assessee was not entitled, did not amount to assessing income at too low a rate, and observed that " there can be no question that the rebate of tax rate and a reduction of such rebate is essentially the arithmetic of rate. Reading, however, the provisions of the Finance Act, 1956, as a whole in the perspective that its chief aim and object is to prescribe the rate of income-tax and super-tax, it seems to us that an assessee escaping some of its provisions and failing to pay the full measu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Act or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section :......" It was held by the High Court of Bombay in P. S. Subramanyan, Income-tax Officer, Companies Circle I(1), Bombay v. Simplex Mills Ltd. that " the relief referred to in section 34(1)(b) of the Income-tax Act, 1922, can only be such relief as is granted to the assessee by reason of his income, profits and gains being chargeable to tax. It is, therefore, referable to the various kinds of relief afforded to the assessee under the Act in respect of his income, profits and gains, such, for instance, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income shall be allowed in the case of any company which satisfies condition (a), but not condition (b) of the preceding clause ; and.... Provided further that-- (i) the amount of the rebate under clause (i) or clause (ii), as the case may be, of the preceding proviso shall be reduced by the sum, if any, equal to the amount or the aggregate of the amounts, as the case may be, computed as hereunder :-- (a) on the amount representing the at the rate of two annas per face value of any bonus shares or the amount of any rupee. bonus issued to its shareholders during the previous year with a view to increasing the paid-up capital, except to the extent to which such bonus shares or bonus have been issued out of premiums received in cash on the issue of its shares ; and (b) in addition, in the case of a company referred to in clause (ii) of the preceding proviso which has distributed to its shareholders during the previous year dividends in excess of six per cent. of its paid-up capital, not being dividends payable at a fixed rate-- on that part of the said dividends at the rate of two annas per which exceeds 6 per cent. but does not exceed 10 rupee. per cent. of the paid-up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of proportion or fraction. The expression "rate" is often used in the sense of a standard or measure. Provided the tax is computable by the application of a prescribed standard or measure, though not directly related to taxable income, it may be called tax computed at a certain rate. We agree with the High Court that the rebate of tax and the reduction of such rebate are essentially matters of measure or standards of rate. The chief aim and object of the Finance Act, 1956, is to prescribe the standard or measure of income-tax and super-tax and it seems that an assessee escaping some of its provisions, and failing to pay the full measure of tax is assessed at too low a rate. But the view we have taken is not sufficient to dispose of the appeal. It may be recalled that the question arising out of the order of the Tribunal was about the competence of the Income-tax Officer to initiate proceedings under section 34(1)(b). It is true that it was not argued before the Tribunal on behalf of the company that on the notice served by the Income-tax Officer proceedings for reassessment could only be initiated on the ground that income had been the subject of excessive relief, and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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