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Commissioner of Income-tax, Gujarat Vs. Ahmedabad Kaiser-i-hind Mills Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 61 of 1976
Judge
Reported in[1983]141ITR472(Guj)
ActsFinance Act, 1968 - Sections 2; Income Tax Act, 1961 - Sections 4, 4(1), 28, 37, 40 and 104; Finance Act, 1966 - Sections 2
AppellantCommissioner of Income-tax, Gujarat
RespondentAhmedabad Kaiser-i-hind Mills Co. Ltd.
Appellant Advocate N.U. Raval, Adv.
Respondent Advocate J.P. Shah, Adv.
Excerpt:
- .....with the subject to the provisions of the act in respect of the total income of the previous year or previous years, as the case may be. it is thus evident that income-tax is chargeable provided and only provided there is income. the total income is of course required to be computed in accordance with the provisions of the i.t. act. but, in the first place, there must be income. when the total income is computed, the question of charging income-tax at a particular rate may arise. and, it is only when it is established by the revenue that there was income in the previous year that the provisions of para. f of the first schedule under s. 2 of the finance act, 1968, can arise. existence of income is a condition precedent to the chargeability to income-tax in respect of the previous.....
Judgment:

Thakkar, J.

1. Five question have been referred to this court for its opinion under s. 256(1) of the I.T. Act 1961, by the Income-tax Appellate Tribunal, Ahmedabad Bench 'B'. Out of these five questions, four questions are already concluded by decisions of this court and only one question, namely, question No. 4, is res integra. The said question has been referred at the instance of the Commissioner of Income-tax and it reads thus :

'Whether the Tribunal was right in holding that since the assessee has suffered a loss in the assessment year 1968-69 and since there was no liability to basic tax, the question of levy of additional tax in respect of excess dividends did not arise under the provisions of the Finance Act, 1968, for the assessment year 1968-69 ?'

2. It is not in dispute that the assessee is a company which falls within the description of a 'domestic company' as specified in Para. F mentioned in the First Schedule to s. 2 of the Finance Act, 1968. It is provided therein that the rate of income-tax in the case of a company which falls under clause (i) or (ii) or (iii) of I(B) on so much of the total income as does not exceed the relevant amount of distribution of dividends by the company will be 7.5%. The said paragraph falls within Pt. I of the First Schedule which provides the rates of income-tax and surcharge on income-tax in the context of s. 2 of the aforesaid Finance Act of 1968. The question is whether income-tax at the said rate under the said provision is chargeable in respect of a company which has incurred losses. The Tribunal has negatived the contention of the Revenue that income-tax is chargeable under the aforesaid provision even in the case of a company which has incurred a loss. Now, the charging section of the I.T. Act is s. 4 which, inter alia, provides that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with the subject to the provisions of the Act in respect of the total income of the previous year or previous years, as the case may be. It is thus evident that income-tax is chargeable provided and only provided there is income. The total income is of course required to be computed in accordance with the provisions of the I.T. Act. But, in the first place, there must be income. When the total income is computed, the question of charging income-tax at a particular rate may arise. And, it is only when it is established by the Revenue that there was income in the previous year that the provisions of Para. F of the First Schedule under s. 2 of the Finance Act, 1968, can arise. Existence of income is a condition precedent to the chargeability to income-tax in respect of the previous year. The view taken by the Tribunal is, therefore, unexceptionable. Question No. 4, referred to this court, must, therefore, be answered in the affirmative and against the Revenue.

3. In the result, the questions referred to us are answered as under :

Q 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in finding that payment of betterment charges to the Ahmedabad Municipal Corporation under the provisions of the Town Planning Act, 1954, made by the assessee was allowable as a deduction u/s. 37 of the Income-tax Act, 1961, for the A.Ys. 1968-69 and 1969-70

A) In the negative and in favour of the Revenue having regard to the decision in Addl. CIT v. Rustam Jehangir Vakil Mills Ltd. : [1976]103ITR298(Guj) . Q 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in coming to the conclusion that the provisions of section 40(c)(iii)/40(a)(v) were applicable for determining the question of allowance of perquisites allowed to the directors, for the assessment year 1968-69 and 1969-70, respectively

A) In the affirmative and in favour of the assessee in view of the fact that the point is concluded by a decision in Addl. CIT v. Tarun Commercial Mills Ltd. : [1978]113ITR745(Guj) Q 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the value of perquisites as allowed to the directors was not hit by the provisions of s. 40(c)(i) if the I.T. Act, 1961

A) In the affirmative and in favour of the assessee in view of the fact that the point is concluded by a decision in Addl. CIT v. Tarun Commercial Mills Ltd. : [1978]113ITR745(Guj) . Q 4. Whether the Tribunal was right in holding that since the assessee had suffered a loss in the assessment year 1968-69 and since there was no liability to basic tax, the question of levy of additional tax in respect of excess dividends did not arise under the provisions of the Finance Act, 1968, for the assessment year 1968-69

A) In the affirmative and against the Revenue for the reasons specified hereinabove Q 5. Whether, on the facts and in the circumstances of the case, the payment of Rs 3,560 made to the Textile Commissioner under the provisions of clause 120(1)(b) of the Cotton Textile (Control) Order, 1948, was business expenditure allowable under s. 28 or under s. 37 of the Act A) In the affirmative and against the Revenue in view of the decision in Addl. CIT v. Rustam Jehangir Vakil Mills Ltd. : [1976]103ITR298(Guj) .

4. Reference answered accordingly.

5. No order regarding costs.

6. Schedule reproducing the relevant provisions (as they stood at the material time) referred to in the judgment.

7. Section 4(1) of the Income-tax Act (in so far as material) :

'4. (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person :......

Section 2(1) of the Finance Act, 1968 :

2. Income-tax. -(1) Subject to the provisions of subsections (2) and (3), for the assessment year commencing on the April 1, 1968, income-tax shall be charged at the rates specified in Part I of the First Schedule and, in the cases of which Paragraphs A, B, C and D of that Part apply, shall be increased by a surcharge for purposes of the Union and a special surcharge for purposes of the Union calculated in either case in the manner provided therein.'

THE FIRST SCHEDULE (See section 2)

PART I Income-tax and surcharges on Income-tax.

Paragraph F

8. In the case of a company, other than the Life Insurance Corporation of India, established under the Life Insurance Corporation Act, 1956 (31 of 1956), -

Rates if income-tax I. In the case of a domestic company --.... (B) in addition, where the company is - (i) a company in which the public are substantially interested, or (ii) a company as is referred to in clause (iii) of sub-section (2) or clause (a) or clause (b) of sub-section (4) of section 104 of the Income-tax Act, or

(iii) such a company as is exempt from the operation of section 104 of the said Act by a notification issued under the provisions of sub-section (3) of that section,

On so much of the total income as does not exceed the relevant amount of distributions of dividends by the company.

7.5 per cent.

Explanation 1. -In clause (B), the expression 'the relevant amount of distributions of dividends' means the aggregate of the following amounts, namely :-...

(b) so much of the amount of the dividends, other than dividends on preference shares, declared or distributed by the company during the previous year as exceeds ten per cent. of its paid-up equity share capital as on the first day of the previous year'


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