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TMI Blog1971 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------------------------------------------------------------------- 1955-56 31-3-1955 236,242 100,562 135,680 100,000 1956-57 31-3-1956 250,464 108,795 141,669 100,000 1957-58 31-3-1957 257,986 151,087 106,899 87,500 1959-60 31-3-1959 361,338 209,505 151,333 100,000 -------------------------------------------------------------------------------------------------------------------------------------------------- Now, section 23A gives power to the Income-tax Officer to assess companies to super-tax on undistributed income in certain cases. Explanation 2 to the section prescribes the different statutory percentages in the cases of different classes of companies. A company in order to avoid the liability to pay the super-tax envisaged by section 23A has to declare dividends at the appropriate statutory percentage of the total income as reduced by taxes referred to in section 23A(1). According to Explanation, in the case of a company "whose business consists wholly or mainly in the dealing in or holding of investments", the prescribed percentage is 100. If, however, this provision does not apply, the percentage prescribed would be not 100 but 60. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Let us now look into the authorities in support of these propositions. In Inland Revenue Commissioners v. Desoutter Bros. Ltd. the Court of Appeal was considering the expression "income received from investments" in the Finance (No. 2) Act, 1939, for imposition of excess profits tax. Section 12 of the 1939 Act dealt with "profits arising in any chargeable accounting period from any trade or business to which this section applies". Sub-section (4) of section 12 said: " Where the functions of a company or society incorporated by or under any enactment consist wholly or mainly in the holding of investments or other property, the holding of the investments or property shall be deemed for the purpose of this section to be a business carried on by the company or society. " Then again, Schedule 7, Part J, Paragraphs 6(1) and (2) of the 1939 Act were as follows : " (1) Income received from investments shall be included in the profits in the cases and to the extent provided in sub-paragraph (2) of this paragraph and not otherwise. " " (2) In the case of the business of a building society, or of a banking business, assurance business or business consisting wholly or mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom various dictionaries which, so far as they deal with the business meaning of the word 'investment'-of course, it has a primary meaning nothing to do with business, and it also has a military meaning which has nothing to do with business--but so far as they deal with the business meaning, the word 'investment' exactly describes what these holdings (to use a neutral word) of the respondents are. I see in the Oxford English Dictionary that 'investment' is defined as 'the conversion of money or circulating capital into some species of property from which income or profit is expected to be derived in the ordinary course of trade or business', and then it goes on to distinguish it from speculation. " In the House of Lords, Viscount Cave L.C. has observed at page 534: " That they are investments in the ordinary sense of the term, probably no one would deny. They are money put out in the shares and securities of undertakings other than the undertaking of the appellant-company itself, with the expectation of receiving dividends or interest upon them; and they satisfy any one of the definitions quoted by the Master of the Rolls from well-known dictionaries and any other definition of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnacular of the man in the street but in the vernacular of the business man. It is a form of income-yielding property which the business man looking at the total assets of the company would single out as an investment. .. . The business man would not limit income from investments to income from the kinds of securities which are quoted on the stock exchange, and he would, I think, regard as income from investment a profitable rent from a sub-lease of office premises, or the like,... " All the authorities cited above point to the conclusion that the word "investment", in the context in which it appears in Explanation 2 to section 23A of the Indian Income-tax Act, 1922, ought to be understood in the ordinary popular sense in which it is used by business men. And laying out of money in houses and immovable properties with a view to earn income regularly may be regarded as investments in appropriate cases. The Supreme Court in Lakshminarayan Ramgopal and Son Ltd. v. Government of Hyderabad, observed : " When a company is incorporated for carrying out certain activities it would be relevant to enquire what are the objects for which it has been incorporated." In the instant reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee carries on the business of dealing in or holding of investments in the shape of house properties. In support of this argument he has relied on the cases of Bengal Jute Mills Co. Ltd. v. Commissioner of Income-tax, Bengal and Assam Investors Ltd. v. Commissioner of Income-tax, and Dalhousie Investment Trust Co. Ltd. v. Commissioner of Income-tax. In these cases it was pointed out that there had to be evidence to show what an assessee's business was. If for instance an assessee was engaged in the manufacture and sale of jute products and had let out a portion of its business premises, it could not be said that the letting out of property was the sole or the main business of the assessee. These cases, in our opinion, have no application to the facts in the present reference. Here, it appears, the tax authorities found that the assessee's main source of income was from properties purchased by the assessee, in other words, its main activity was to invest in house properties and to enjoy regularly the incomes derived from those properties. Moreover, these activities were well within the objects clause of the assessee's memorandum of association. In the context of these fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investments. Lastly, Mr. Mukherjee showed to us the official quotations of the stock-exchange in which "real property and zamindari" are always quoted separately from other kinds of investments. These arguments of Mr. Mukherjee would be sustainable only if it were imperative for us to consider the meaning of "investment" in Explanation 2(i) to section 23A in the context of an "investment company". But the English decisions cited above lead us to the conclusion that for construction of the word "investment" in section 23A we should not import meanings or considerations attributable to an "investment company". We have also stated earlier in this judgment that the relevant provisions of the English Profits Tax Act and those of our Excess Profits Tax Act were the same and, in spite of that, uniformly English courts have decided that the word "investment" must be understood in its popular sense and not in any technical sense. Mr. Mukherjee also placed strong reliance on the decision of the House of Lords in Special Commissioners of Income-tax v. Pemsel. Here, it was held that the words "charitable purposes" within the meaning of the Income-tax Act are to be interpreted not accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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