COMMISSIONER OF INCOME-TAX, BOMBAY CITY I, BOMBAY vs. AFCO (P) LTD., BOMBAY

CIVIL APPEAL No. 21/1962Supreme Court1962 INSC 30125 October 1962Bench: 3 JudgesAuthor: J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH BOMBAY11 pages
AI SummaryDismissed

What were the facts?

For the year of account ending March 31, 1955, Afco (P) Ltd., a private limited company, earned a total income of Rs. 49,843. The company declared a dividend of Rs. 11,712 on July 13, 1955, and an additional dividend of Rs. 5,612 before the close of the assessment year 1955-56. This aggregate dividend was not less than 60% of its total income, reduced by income-tax and super-tax. The company claimed a rebate of one anna in the rupee on the computed amount as per Schedule I, Part I, Item B, read with Section 2 of the Finance Act, 1955. The Income-tax authorities rejected the claim, interpreting the phrase 'company to which the provisions of s. 23A of the Income-tax Act cannot be made applicable' to exclude private limited companies. The Appellate Tribunal and the High Court, however, held that the rebate was admissible if the conditions of Section 23A(1) were met.

What did the Supreme Court hold?

The Supreme Court held that the appellant company was entitled to the rebate claimed. The Court reasoned that the expression 'to which the provisions of s. 23A of the Income-tax Act cannot be made applicable' in Schedule I, Part I, Item B of the Finance Act, 1955, meant that the applicability of Section 23A depended on an order to be made by the Income-tax Officer, not on an inherent exclusion by the Act's provisions. The right to rebate was claimable only when an order under Section 23A would not be justified in the given circumstances. The Court noted that the legislative history, particularly the distinction in phrasing between provisions for income-tax rebate and super-tax rebate in the Finance Act of 1955, supported this interpretation. The appeal was dismissed.

What were the issues?

1. Whether the assessee company, having distributed dividends exceeding 60% of its total income less taxes, is entitled to a rebate of one anna per rupee on the undistributed balance of profits as provided in clause (i) of the proviso to item B of Part I of the 1st Schedule to the Finance Act of 1955, considering the interpretation of the phrase 'company to which the provisions of s. 23A of the Income-tax Act cannot be made applicable'. Assessee's Contention: The assessee argued that the benefit of the rebate provided by the Finance Act, 1955, should not be denied to a private company if the conditions prescribed in Section 23A(1) of the Income-tax Act were fulfilled. They contended that 'cannot be made applicable' refers to a situation where an order under Section 23A could not be made due to specific circumstances. Revenue's Contention: The revenue contended that the expression 'company to which the provisions of s. 23A of the Income-tax Act cannot be made applicable' referred to a company against which an order under Section 23A could never be made. Since private limited companies could potentially be subject to an order under Section 23A if dividend distribution conditions were not met, they were excluded from the rebate.

Which sections of the Income-tax Act were involved?

Section 23A,Section 2,Section 18(3D),Section 18(3E)

AI-generated summary — verify with the full judgment below

1962 , f'.V. Narasimham v.

Slit• of Orino Subba Rao, J. 1962 October, 25. 766 SUPREME COURT REPORTS [1963]SUPP. appeals belong to that class of cases where the High Court should have given definite findings on all the issues, !or that would have prevented the un- necessary prolongation of this litigation and would have also enabled us to dispose of these appeals finally and more satisfactorily. But in the events that have happened we have no option but to set aside the judgment of the High Court and remand the said appeals to it for disposal on the other questions of fact and law raised therein. Costs of the said appeals will abide the result of the proceed- ings in the High Court.

Appeals Nos. 147 to 149, 152 to 154, 156 and 157 remanded. Appeals Nos. 150, 151 and 155 d·ismissed. COMMISSIONER OF INCOME-TA\, BOMBAY CITY I, BOMBAY v. AFCO (P) LTD., BOMBAY u. L. KAPUR, M. HIDAYATULLAH and j. C. SHAH, JJ.)

Income Tax-Rebate-Claim by private company for n·lmtc-"Claim to which the provisions of 8. 23A of the Income- tax .. Jct cannot be 'inade applicahle"-lndian lncome-f,ax Act, 1922 (ll of In2.~), s. 23-A-Finance Act, 1955 ( 15 of 19.55), 8. 2, Sch. I:

The order continues below.

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