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Maharaja Salt Works Co. (Private) Ltd. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 9 of 1960
Judge
Reported in[1961]43ITR107(Guj)
ActsIndian Finance Act, 1950; States (Taxation Concessions) Order, 1950
AppellantMaharaja Salt Works Co. (Private) Ltd.
RespondentCommissioner of Income-tax
Appellant Advocate S.G. Bajaj, Adv.
Respondent Advocate J.M. Thakore, Adv.
Cases ReferredRajputana Agencies Ltd. v. Commissioner of Income
Excerpt:
.....concessions) order, 1950 - whether applicant entitled to rebate of rs. 12805 under clause (i) of proviso to paragraph b of part i of act of 1950 in addition to rebate allowed to applicant under paragraph 6 (1) of part b of order of 1950 - order of part b helpful to assessee - where assessee did not dispute its liability to pay additional income-tax under clause (ii) of proviso to paragraph b of part i of first schedule dispute between parties only in regard to rate at which additional income-tax charged - these observation made in case where concession made on behalf of assessee as applicability of law and not regarded even as obiter - question answered in negative. - - the assessee went in appeal before the appellate assistant commissioner and thereafter before the income-tax..........and east punjab states union and travancore-cochin - (i) the tax shall be computed (a) at the indian rate of tax and (b) at the state rate of tax in force immediately before the appointed day; (ii) where the amount of tax computed under sub-clause (a) of clause (i) is less than or is equal to the amount of tax computed under sub-clause (b) of clause (i), the amount of the first mentioned tax shall be the tax payable; (iii) where the amount of tax computed under sub-clause (a) of clause (i) exceeds the tax computed under sub-clause (b) of clause (i), the excess shall be allowed as a rebate from the first mentioned tax and the amount of the first mentioned tax as so reduced shall be the tax payable...' 3. the expression 'indian rate of tax' for the purpose of the order has been.....
Judgment:

Desai, C.J.

1. The assessee in this case is the Maharaja Salt Works Co. (Private) Limited. The relevant assessment year is 1950-51. The total income of the company for this assessment year was computed at Rs. 5,42,469. The company declared a dividend for the assessment year amounting to Rs. 1,17,200. The assessee claimed that it was entitled to a rebate of one anna in a rupee amounting to Rs. 12,805 under clause (i) of the proviso to paragraph B of Part I of the First Schedule to the Finance Act, 1953. The Income-tax Officer refused to allow this rebate. The assessee went in appeal before the Appellate Assistant Commissioner and thereafter before the Income-tax Appellate Tribunal without any success. The assessee thereupon applied to the Tribunal for station a case and making a reference under section 66(1) of the Income-tax Act, 1922. The Tribunal has made this reference raising the following question of law :

'Whether, on the facts and in the circumstances of the case, the applicant is entitled to a rebate of Rs. 12,805, under the provisions of clause (i) of the proviso to Paragraph B of Part I of the Indian Finance Act, 1950, in addition to the rebate allowed to the applicant under paragraph 6(1) of the Part B States (Taxation Concessions) Order, 1950 ?'

2. The company being a company carrying on business in Saurashtra, a former Part B State, the provisions of the Part B States (Taxation Concessions) Order, 1950, apply to the company. Paragraph 6 of that Order provides as under :

'The income, profits and gains of any previous year ending after the March 31, 1949, which does not fall within paragraph 5 of this Order shall be assessed under the Act for the year ending on the March 31, 1951, or on the March 31, 1952, as the case may be, and the tax payable thereon shall be determined as hereunder :

In respect of so much of the income, profits and gains included in the total income as accrue or arise in any State other than the States of Patiala and East Punjab States Union and Travancore-Cochin -

(i) the tax shall be computed (a) at the Indian rate of tax and (b) at the State rate of tax in force immediately before the appointed day;

(ii) where the amount of tax computed under sub-clause (a) of clause (i) is less than or is equal to the amount of tax computed under sub-clause (b) of clause (i), the amount of the first mentioned tax shall be the tax payable;

(iii) where the amount of tax computed under sub-clause (a) of clause (i) exceeds the tax computed under sub-clause (b) of clause (i), the excess shall be allowed as a rebate from the first mentioned tax and the amount of the first mentioned tax as so reduced shall be the tax payable...'

3. The expression 'Indian rate of tax' for the purpose of the Order has been defined to mean 'the rate determined by dividing the amount of income-tax and super-tax payable in the taxable territories on the total income for the year in question in accordance with the rates prescribed by the relevant Finance Act of the Central Government, by the amount of such total income.' As the amount of tax computed under the aforesaid sub-clause (a) of clause (i) at the Indian rate of tax for the relevant assessment year exceeded the amount of tax computed under sub-clause (b) of clause (i) at the State rate of tax, the excess was allowed as a rebate from the first mentioned tax, as provided by clause 6(iii). In effect the assessee was taxed at the State rate of tax. The assessee contends that in addition to this rebate which was obtained under the provisions of the Part B States (Taxation Concessions) Order, 1950, the assessee is entitled to further rebate under the provisions contained in clause (i) of the proviso to Paragraph B of Part I of the First Schedule to the Indian Finance Act, 1950. The relevant provision runs as under :

'RATES OF INCOME-TAX

In the case of every company - Rate

On the whole of total Four annas, in the income rupee :

Provided that in the case of a company which, in respect of its profits liable to tax under the Income-tax Act for the year ending on the March 31, 1951, has made the prescribed arrangements for the declaration and payment within the territory of India excluding the State of Jammu and Kashmir, of the dividends payable out of such profits, and has deducted super-tax from the dividends in accordance with the provisions of sub-section (3D) or (3E) of section 18 of that Act - (i) where the total income, as reduced by six and a half annas in the rupee and by the amount, if any, exempt from income-tax, exceeds the amount of any dividends (including dividends payable at a fixed rate) declared in respect of the whole or part of the previous year for the assessment for the year ending on the March 31, 1951, and no order has been made under sub-section (I) of section 23A of the Income-tax Act, a rebate shall be allowed at the rate of one anna per rupee on the amount of such excess...'

4. It is urged that rebate at the of one anna per rupee on the amount of the excess referred to above ought to have been allowed after the assessee had been given the benefit of the provisions of paragraph 6(i) and (iii) of the Part B States (Taxation Concessions) Order, 1950. This argument proceeds on an incorrect reading of the provisions of the Part B States (Taxation Concessions) Order, 1950, and of the Finance Act, 1950. Under the provisions of paragraph 6 of the Part B States (Taxation Concessions) Order, it is necessary first to calculate the tax at the Indian rate of tax and then at the State rate of tax in force immediately before the appointed day. In calculating the tax at the Indian rate of tax rebate has to be given as provided in clause (1) of the proviso to paragraph B of Part I of the First Schedule to the Indian Finance Act, 1950. In respect of the difference in the amounts of tax calculated at the Indian rate of tax and the State rate of tax, where the tax calculated at the Indian rate is higher, rebate is required to be given to the extent of the excess under the Part B States (Taxation Concessions) Order, 1950. This in fact has been done.

5. The proviso to paragraph B of Part I of the First Schedule to the Indian Finance Act, 1950, regulates the rate of four annas in the rupee referred to above. The assessee desires to read the proviso as constituting an independent provision. There is no warrant for the same. The Supreme Court had occasion to consider sub-clause (ii) of the proviso appearing in the Indian Finance Act, 1952, in Commissioner of Income-tax v. Elphinstone Spinning and Weaving Mills Co. Ltd. The said sub-clause (ii) ran as under :

'Where the amount of dividends referred to in clause (i) above exceeds the total income as reduced by six and a half annas in the rupee and by the amount, if any, exempt from income-tax, there shall be charged on the total income an additional income-tax equal to the sum, if any, by which the aggregate amount of income-tax actually borne by such excess (hereinafter referred to as 'the excess dividends') falls short of the amount calculated at the rate of five annas per rupee on the excess dividend.'

6. The Supreme Court in that case has observed as follows :

'The proviso is to paragraph B in the First Schedule of the Finance Act, and the Schedule only imposes a rate of tax and this rate, either by itself or with rebate or with additional tax at a higher rate, has to be applied to the total income. The extra tax under the second part of the proviso, though called an additional tax, is only the difference between the tax charged at one rate and the tax subsequently chargeable at another rate. The function of the proviso is thus to prescribe varying rates for varying circumstances, and it deals with rate or rates, first and last, and not with chargeability to tax, which is the subject-matter of section 3 of the Income-tax Act.'

7. The effect of the proviso in question is to vary the amount calculated at the rate of four annas in the rupee mentioned in paragraph B.

8. Mr. Bajaj, the learned advocate for the assessee, relied upon some observation made by the Supreme Court in the case of Rajputana Agencies Ltd. v. Commissioner of Income-tax. In that case the Supreme Court has stated :

'It would be notices that, in addition to the rebate received by the appellant under the relevant provisions of the Order, it would have been entitled to receive the rebate under clause (i) of the proviso to paragraph B if the dividend declared by it had not exceeded the specified distributable amount.'

9. The Order referred to here is the Part B States (Taxation Concessions) Order. These observations are helpful to the assessee. These observations, however, are mere passing observations in a case where the assessee did not dispute its liability to pay additional income-tax under clause (ii) of the proviso to paragraph B of Part I of the First Schedule to the Finance Act, the dispute between the parties being only in regard to the rate at which additional income-tax had to be charged. These passing observation were made in a case where there was a concession made on behalf of the assessee as to the applicability of the provisions law on the subject and cannot be regarded even as obiter.

10. In the result, we answer the question in the negative. The assessee will pay to the respondent the costs of the reference.

11. Question answered in the negative.


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