9911796707
TMI Blog1960 (8) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ding March 31, 1942, were placed for consideration. The accounts were passed at the meeting but no dividend was declared though the accounts disclosed large profits. On June 11, 1947, an Income-tax Officer of Calcutta passed an order under section 23A of the Income-tax Act that Rs. 14,23,110 being the undistributed portion of the assessable income of the company for the year ending March 31, 1942, after the deductions provided in the section, be deemed to have been distributed as dividend among the three shareholders on the date of the general meeting, that is, April 17, 1943. As a result of this order a sum of Rs. 4,74,370 being his share of the amount directed to be distributed, had, under the section to be included in the income of the appellant for the assessment year 1944-45. The validity of this order was never challenged. The Income-tax Officer, Calcutta, informed the Income-tax Officer, Delhi, of the order made by him under section 23A. Thereupon the Income-tax Officer, Delhi, on April 10, 1948, issued a notice under section 34 of the Act to the appellant then residing in Delhi, requiring him to file within thirty-five days, a revised return for the year 1944-45 as a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore January 28, 1953, due to a postman's default as was admitted by the postal authority concerned. Sawday & Co. filed the petition in the Tribunal on the same date but that was one day too late as it should have been filed on January 27, 1953. The Tribunal thereupon dismissed the application as having been made out of time. The appellant appealed against this dismissal to the High Court at Calcutta but the High Court dismissed the appeal. In these circumstances, the appellant moved this court for special leave to appeal and asked for condonation of delay in moving this court, placing before it all the facts which we have earlier mentioned. This court on a consideration of these facts condoned the delay and granted special leave. There was no attempt by the appellant to overreach or mislead the court and the court in its discretion gave the leave. In these circumstances, we are unable to agree with the contention that the appellant is not entitled to proceed with this appeal, because he could have availed himself of the remedy provided by the Act and was by his own conduct, unable to do so. This court had in spite of this thought fit to grant leave to the appellant to appeal from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without foundation. Section 34 provides that in the cases mentioned in it, the income may be assessed or reassessed and the provisions of the Act shall, so far as may be, apply accordingly as if the notice issued, under the section had been issued under section 22(2) of the Act. Now the place where an assessment is to be made pursuant to a notice under section 22(2) has to be determined under section 64. Indeed that is the only provision in the Act for deciding the proper place for any assessment. There is nothing which makes section 64 inapplicable to an assessment made under section 34. Therefore, it seems to us clear, that the place where an assessment under section 34 can be made has to be decided under section 64. Now the appellant was not carrying on any business, profession or vocation. He was working as the Defence Minister of the Government of India and residing in Delhi. He could be properly assessed by the Income-tax Officer, Delhi, under section 64(2) if the assessment was the original assessment. This is not in dispute. It follows that no objection can legitimately be taken by the appellant to his assessment under section 34 by the Income-tax Officer, Delhi. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is argued that the language of section 34 does not permit two fictions being created, and that as the section reopens a closed transaction, it must be strictly construed. Reliance was placed on certain decisions in support of this contention. First, we were referred to two English cases, namely, Dodworth v. Dale and Rankine v. Commissioners of Inland Revenue. These cases do not assist the appellant for they were not concerned with a statutory provision like section 23A on which the present case turns and which requires that an assessee would be deemed to have received a certain income on a specified date in the past and also requires that income to be included in his total income for assessment to tax. The other case to which we were referred was the decision of this court in Chatturam Horilram Ltd. v. Commissioner of Income-tax, where it was said that the contention " that the escapement from assessment is not to be equated to non-assessment simpliciter, is not without force." This court, however, in the very next sentence proceeded to state clearly that " it is unnecessary to lay down what exactly constitutes ' escapement from assessment '." The actual decision in this case af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld to have actually escaped assessment. We are unable to agree that in order to apply section 34 to an income deemed to exist under section 23A, we would have to read the former section to cover a case where income has to be deemed to have escaped assessment. If the income had come into existence, and not been assessed, it has escaped assessment ; it is not a case where the income has to be deemed, to have escaped assessment. In our view, therefore, the present contention of the appellant must fail and the income deemed to have been received by him by virtue of the order made under section 23A oft June 11, 1947, must be held to have escaped assessment for the year 1944-45 and his income must, therefore, be liable to reassessment under section 34. It is now necessary to refer to one of the reasons on which the judgment of the Tribunal is based. It was there said that : " It was, incumbent on the Income-tax Officer, Calcutta, passing the order under section 23A to have included the sum of Rs. 4,74,370 in the other assessed income of the assessee and to have recomputed the assessable income and the tax thereon." It was held that " the Income-tax Officer, Delhi, went wrong in having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person on his income ; under it a law cannot be made taxing one person on the income of another. Mr. Sastri says that in law a company and its shareholders are, different persons---a proposition which is indisputable---and, therefore, section 23A is incompetent as it purports to tax the shareholders on the income of the company in which they hold shares. He points out, and this again is not in dispute, that the section does not give a right to a shareholder on an order being made under it, to realise from the company the dividend, which by the order is to be deemed to have been paid to him. He says, and this also seems right, that the income remains the income of the company and a shareholder is taxed on a portion of it representing the dividend deemed to have been paid to him. In spite of all this it seems to us that the legislation was not incompetent. Under entry 54 a law could, of course, be passed imposing a tax on a person on his own income. It is not disputed that under that entry a law could also be passed to prevent a person from evading the tax payable on his own income. As is well-known the legislative entries have to be read in a very wide manner and so as to include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the bounds of the Companies Act. It lies solely in its hands to decide whether a dividend shall be declared or not. When, therefore, in spite of there being money reasonably available for the purpose, it decides not to declare a dividend it is clear that it does so because it does not want to take the dividend. Now it may not want to take the dividend if it wants to evade payment of tax thereon. Thus by not declaring the dividend the persons constituting the group in control could evade payment of super-tax, which, of course, is a form of income-tax. They would be able to evade the super-tax because super-tax is payable on the dividend in the hands of the shareholders even though it may have been paid by the company on the profits out of which the dividend is paid, and because the rate at which super-tax is payable by a company may be lower than the rate at which that tax is payable by other assessees. By providing that, in the circumstances mentioned in it, the available assessable income of a company would be deemed to have been distributed as dividend and be taxable in the hands of the shareholders as income received by them, the section would prevent the members of such a gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that entry 54 permitted tax on income and contended that it authorised taxing of A on the income of B. He said that, where a shareholder was taxed on the income of the company, the two being considered separate legal entities, the tax was none the less on income though the burden of the tax was put on one to whom the income had not accrued or by whom it had not been received and so was within the scope, of entry 54. In support of this contention he referred to Amina Umma v. Income-tax Officer, Kozhikode, Janab Jameelamma v. Income-tax Officer, Nagapattinam and C. W. Spencer v. Income-tax Officer, Madras. As earlier stated, Mr. Sastri disputes the correctness of this contention. We do not consider it necessary to pronounce on this question or as to the correctness of the decisions cited so far as they support it. In our view, the legislative competence to enact the section can be clearly upheld on the ground that it was to prevent evasion of income-tax and that would be enough to dispose of the argument advanced by Mr. Sastri that the section was an incompetent piece of legislation.
This appeal, therefore, fails and it is dismissed with costs.
Appeal dismissed.
X X X X Extracts X X X X X X X X Extracts X X X X
|
