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Anup Prabha Bai Sethi Vs. Commissioner of Income-tax, M. P. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberM. C. C. No. 119 of 1959
Reported in[1962]44ITR237(MP)
AppellantAnup Prabha Bai Sethi
RespondentCommissioner of Income-tax, M. P.
Excerpt:
- - , ujjain, a company registered in a part b state, to wit, madhya bharat, on the ground that these dividends were exempt from income-tax as well as super-tax under paragraph 12 of the taxation concessions order, 1950. the assessee is an individual and was a resident of indore in a part b state in the previous year. for the applicability of the paragraph, two conditions must be satisfied :first, the income from dividends must be paid by a company registered in a state in which there was no state law relating to the charge of income-tax and super-tax; the concession is clearly confined to income-tax and does not apply to super-tax. the assessees contention that the concession given by paragraph 12 applies also to super-tax must, therefore, fail......states and was not brought into british india. but that income was included in the assessees total income for the purpose of determining the rate applicable to his taxable income. on the merger of the indian states and the inauguration of the republic, the definition of 'taxable territories' was amended so as to make the whole of india, excluding jammu and kashmir and pepsu union, taxable territories with respect to any period after march 31, 1950. the effect of the amendment was that for the assessment year 1950-51 an assessee, who was a resident of madhya bharat, a part b state, in the relevant previous year was deemed to have been resident in the taxable territories prior to april 1, 1950, and such an assessee, as a resident, became taxable in respect of all his income of the.....
Judgment:

DIXIT C.J. - This is a reference under section 66 (1) of the Income-tax Act and the question raised by the Appellate Tribunal, Bombay, is whether the concession granted under paragraph 12 of the Part B States (Taxation Concessions) Order, 1950, applies also in respect of super-tax.

The facts, shortly, are that in the course of the proceedings for assessment of the tax for the year 1950-51 the assessee, Shrimati Anup Prabha Bai, made no disclosure of any dividends received by her from the Binod Mills Ltd., Ujjain, a company registered in a Part B State, to wit, Madhya Bharat, on the ground that these dividends were exempt from income-tax as well as super-tax under paragraph 12 of the Taxation Concessions Order, 1950. The assessee is an individual and was a resident of Indore in a Part B State in the previous year. The Income-tax Officer gave the concession under paragraph 12 in respect of income-tax only. He negatived the claim as regards super-tax. The decision of the Income-tax Officer was upheld in appeal by the Appellate Assistant Commissioner of Income-tax, Indore, and also by the Appellate Tribunal. The present reference has been made at the instance of the assessee.

The question raised lies within a very narrow compass. But in order to appreciate it, it is necessary to state the position about the taxability of income which accrued or was received in the Indian States before April 1, 1950, and thereafter. Till the definition of 'taxable territories' was amended in 1950, income which accrued or was received by a resident in any of the Indian States was not subject to any tax under the Indian Income-tax Act which was not in force in those States. Clause (c) of sub-section (2) of section 14, as it stood then, also exempted income which accrued or was received in the Indian States and was not brought into British India. But that income was included in the assessees total income for the purpose of determining the rate applicable to his taxable income. On the merger of the Indian States and the inauguration of the Republic, the definition of 'taxable territories' was amended so as to make the whole of India, excluding Jammu and Kashmir and Pepsu Union, taxable territories with respect to any period after March 31, 1950. The effect of the amendment was that for the assessment year 1950-51 an assessee, who was a resident of Madhya Bharat, a Part B State, in the relevant previous year was deemed to have been resident in the taxable territories prior to April 1, 1950, and such an assessee, as a resident, became taxable in respect of all his income of the previous year, whether accruing or received within Madhya Bharat or from outside. The income from dividends received by the assessee here in the previous year 1949-50 was thus under the provisions of the Act itself liable to income-tax and super-tax at the rates prescribed by the relevant Finance Act. But the Part B States (Taxation Concessions) Order, 1950, made by the Central Government in exercise of its power under section 60A of the Indian Income-tax Act granted certain concessions in respect of taxation of income accruing or arising in any Part B State. The concessions given by paragraphs 5, 6, 11 (1), 12 and 13 of the Taxation Concessions Order, 1950, apply only to the assessees mentioned in paragraph 4 (1) of the Order. The assessee in the present case falls under the category specified in paragraph 4 (1) (iii) of the Order. Under paragraph 6 of the Order so much of the income, profit and gains of the previous year 1949-50 of the assessee as accrued or arose in Madhya Bharat is liable to tax at the lower rates of tax determined according to the manner indicated in paragraph 6. As before April 1, 1950, there was no State law in Madhya Bharat relating to the charge of income-tax and super-tax, the tax payable by the assessee here is the difference between the amount of tax computed at the Indian rate of tax as defined in paragraph 3 (iii) of the Taxation Concessions Order, 1950, and the tax computed according to the rates specified in the schedule to the Taxation Concessions Order, 1950.

Now, paragraph 12 of the Order gives a further concession to the assessees mentioned in paragraph 4. It provides :

'Where the total income of an assessee chargeable to tax for the assessment for the year ending on the 31st day of March, 1951, includes any income from dividends paid by a company registered in a State in which there was no State law relating to the charge of income-tax and super-tax and the dividend is paid out of profits which were not liable to be taxed, in whole or in part, either in the State or in the taxable territories, no income-tax shall be payable by the assessee on such proportion of the dividend as the non-taxable profits of the company arising in the State bear to the total income of the company.'

It will be seen that this paragraph does not exempt dividend income from tax. It only says that no income-tax shall be payable by the assessee on such proportion of the dividend of the kind specified in the paragraph as the non-taxable profits of the company arising in the State bear to the total income of the company. Paragraph 12 thus gives partial relief in respect of the tax payable on such dividend income. For the applicability of the paragraph, two conditions must be satisfied : first, the income from dividends must be paid by a company registered in a State in which there was no State law relating to the charge of income-tax and super-tax; and, secondly, the dividend must be paid out of the profits which were not liable to be taxed, in whole or in part, either in the State or in the taxable territories. In connection with the second condition it must be pointed out that it is not the liability but the non-liability of the profits, in whole or in part, either in the State or in the taxable territories that is material. So that if a part of the profits of a company registered in a State in which there was no State law are liable to be taxed in the taxable territories other than a Part B State, the concession would none the less apply if in that Part B State the profits were not liable to be taxed. The amount of net dividend paid out of the profits which have been taxed in the taxable territories other than a Part B State may be grossed up under section 16 (2) of the Act before its inclusion in the assessees total income. But if the shareholder is an assessee falling under paragraph 4 the tax payable on the entire dividend income included in the total income, after excluding the proportion of non-taxable dividend under paragraph 12, would be at the concessional rates under the Taxation Concessions Order, 1950. This position, obvious from the provisions of paragraphs 4, 5 and 6 of the Order, is not disputed by the learned counsel for the assessee and the learned Advocate-General appearing for the department.

The question whether the concession given by paragraph 12 of the Taxation Concessions Order, 1950, is also in respect of super-tax presents no difficulty. The concession is clearly confined to income-tax and does not apply to super-tax. This follows from the wording of paragraph 12 and the concept of income-tax and super-tax under the Indian Income-tax Act. Wherever it was intended that exemption or concession in respect of super-tax should be given, the Concessions Order made an express provision to that effect. Paragraph 15 of the Order says that any income falling within the classes enumerated therein shall be exempt from income-tax and super-tax. But paragraph 12 itself, though it makes a reference to a State law relating to the charge of income-tax or super-tax, does not provide that no super-tax shall be payable by the assessee on a certain proportion of the dividend. The object of paragraph 12 is not to exclude from the total income of an assessee any dividend amount chargeable to income-tax but to provide that no income-tax shall be payable on a certain proportion of a certain kind of dividend income. Now under section 55 of the Income-tax Act super-tax is an additional duty of income-tax at the rate or rates laid down for the relevant year by the Central Act. This additional duty of income-tax is charged, levied and paid for the material year in respect of the total income when it exceeds a specified amount. Super-tax is a tax in respect of the income received from any particular source. It cannot, therefore, be contended on any analogy that as concession in respect of income-tax has been granted with regard to income from dividends paid by a company registered in a Part B State, a concession should be allowed in respect of super-tax also. Section 56 of lays down that for the purposes of super-tax the total income of every assessee shall be the total income as assessed for purposes of income-tax except in the specified special cases. Now, it must be remembered that paragraph 12 of the Taxation Concessions Order, 1950, is not a provision for computation of total income. It does not exclude any dividend income from the total income. On the other hand, it expressly says 'where the total income of an assessee chargeable to tax; includes any income from dividends' and thus provides that for the applicability of paragraph 12 the dividend income has to be included in the total income. Paragraph 12, as pointed out earlier, only says that no income-tax shall be payable by the assessee on such proportion of the dividend as the non-taxable profits of the company arising in the State bear to the total income of the company. It, therefore, for the applicability of paragraph 12, the total income must include dividend income, it follows that the paragraph cannot be invoked for contending that the total income for the purposes of super-tax cannot include that proportion of the dividends which has been declared by paragraph 12 as not subject to income-tax. The assessees contention that the concession given by paragraph 12 applies also to super-tax must, therefore, fail. The assessee is liable to pay super-tax at the concessional rates mentioned in the Concessions Order, 1950.

For these reasons, our answer to the question referred by the Tribunal is that the concession granted under paragraph 12 of the Part B States (Taxation Concessions) Order, 1950, cannot be applied in respect of super-tax. There will be no order as to costs.

Reference answered accordingly.


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