TMI Blog1960 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... n the affirmative and the second in the negative were correct in the circumstances of the case. Appeal dismissed. - C.A. 477 OF 1957 - - - Dated:- 4-5-1960 - Judge(s) : HIDAYATULLAH., KAPUR., S. K. DAS JUDGMENT The judgment of the court was delivered by HIDAYATULLAH, J.--This appeal is with a certificate granted by the High Court against its judgment and order dated September 9, 1955, in a reference under section 66(1) of the Indian Income-tax Act. The Tribunal had referred the following questions for the decision of the High Court: "(1) Whether there was any excess dividend declared by the assessee company ? (2) Whether the assessee company is liable to pay additional income-tax in respect of the excess dividend pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the previous year, and that, therefore, the said paragraphs could not, on their terms, operate in the circumstances. The view of the minority was that even if there were no profits, the intention of the Finance Act to levy the additional income-tax on the excess dividends was perfectly plain, and that the assessee company was liable. It may be mentioned at this stage that the decision of the Tribunal turned entirely upon the fact that no profits were brought forward from the previous years, and that, therefore, the paragraphs. could not be applied. The High Court held that though excess dividends were, in fact, paid, the absence of profits from previous years rendered the Finance Act unworkable in this case. It, therefore, accepted the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctually 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. For the purposes of the above proviso, the expression 'dividend' shall have the meaning assigned to it in clause (6A) of section 2 of the Income-tax Act, but any distribution included in that expression, made during the year ending on the 31st day of March, 1950, shall be deemed to be a dividend declared in respect of the whole or part of the previous year. For the purpose of clause (ii) of the above proviso, the aggregate amount of income-tax actually borne by the excess dividend shall be determined as follows: (i) the excess dividend shall be deemed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny previous assessment year and gives deduction for that amount. The additional income-tax is payable on the excess dividends calculated at a different rate but allowing for the tax already paid. For this purpose, the aggregate amount of income-tax to be borne by the excess dividends has to be calculated in a particular manner. This manner is indicated in the paragraph, and it begins by providing that the excess dividend shall be deemed to be out of the whole or such portion of the undistributed profits of one or more years preceding the previous year as would be just sufficient to cover the amount of the excess dividend and were not likewise taken into account to cover an excess dividend of a previous year. It is then provided that the exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given by it. The Accountant Member whose decision was in a minority, gave two reasons. The first was that "the explanation provides for the determination of the years out of the profits of which the excess dividend has come", and the second was that "in order to escape the liability imposed by clause (ii), the company must prove that the excess dividend has borne tax of 5 annas in the rupee as it is only in that event that the additional tax payable will be nil." These reasons were also put before us for acceptance. We are, however, unable to agree. The fiction cannot be whittled down in the manner suggested in the first reason. The fiction incorporates within itself not only what the Accountant Member says but also a mode of calculati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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