G.N. Das, J.
1. This is a reference under section 66 (1), Income-tax Act & arises out of orders under section 23-A (1) of the Act for the assessment years 1941-42 & 1942-43.
2. The assessee is Kilburn Properties Limited Calcutta; the only source of income of the company is house property.
3. The assessable income of the company for 1941-42 was Rs. 34,772 & the income-tax payable was Rs. 10,141-13/- only leaving a balance of Rs. 24,630-3/- available for distribution as dividends. The general meeting of the company was held on 6-6-1941. No dividend was declared.
4. In the profit & loss account the company showed Rs. 31,331/- as depreciation allowance on the original cost of Rs. 1,19,002/- only & thus the profits were shown as Rs. 55-2-6 only.
5. The Income-tax Officer thought that the company should have declared 60 per cent of the assessable income less tax as dividend & made an order in terms of section 23-A (1) of the Act.
6. During the assessment year 1942-43 the assessable income was Rs. 35,847/- & the tax payable was Rs. 11,762-6-0 & the balance of Rs. 24,084-10/- was available for distribution as dividend. The general meeting was held on 28-5-1942 but no dividend was declared. The company debited Rs. 31,472 as depreciation allowance & the profits were shown as Rs. 65-8-2 only.
7. The Income-tax Officer made a similar order under section 23-A (1) of the Act in this year also.
8. On appeal by the assessee the Appellate Assistant Commissioner held that notional income under section 9 of the Act was not included in section 23-A & set aside the orders of the Income-tax Officer for both years.
9. Appeals were taken by the Income-tax Officer to the Income-tax Appellate Tribunal who reversed the orders of the Appellate Assistant Commissioner & restored the orders of the Income-tax Officer.
10. On application filed by the assessee under Section 66, Income-tax Act the Tribunal referred the following question for toe opinion of this Court.
'Whether in view of the fact that the entire income of the assessee was derived from 'property' assessable under section 9, Income-tax Act, the provisions of section 28-A were at an applicable to the case?'
11. The relevant portion of section 23-A reads as follows:
'Where the Income-tax Officer is satisfied that in respect of any previous year the profits & gains distributed as dividend by any company........are less than 60 per cent of the assessable income of the company as reduced by the amount of income-tax & super-tax payable........he shall make.........an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income-tax purposes & reduced by the amount of income-tax & super tax payable by the company in respect thereof snail be deemed to have been distributed as dividends amongst the share-holders as at the date of the general meeting aforesaid, & thereupon the proportionate share thereof of each share-holder shall be included in the total income of such share-holder for the purpose of assessing his total income.'
12. Mr. Mitter, learned counsel appearing for the assessee contended that the words 'profits' used in section 23-A (1) have reference to a company carrying on business & cannot apply to a company whose only source of income is derived from property, He, therefore, submitted that the question referred to this Court should be answered in the negative.
13. In our opinion, this contention cannot be accepted for the following reasons:
14. It would appear from a resume of the Act that the expression 'profits & gains' is not limited to business only, it has been used in other cases also. Again the word income & not profits & gains has been used in case of business, see Sections 2 (6-A), 4 (3) (1-a), 4 (3) (iii), 10 (iv), 23 (A), 24 (1), 24 (2). We may particularly refer to section 24 (1), 24 (2) which speak of loss of profits & gains under any of the heads mentioned in section (6), viz.. salary, interest on securities, property, etc. Similarly the second proviso to section 55 uses the expression 'profits & gains' generally in relation to income from all sources, viz., salary, interest on securities, property etc., of an unregistered firm or association of individuals.
15. In section 23-A (1) (3) (ii) (4) : We find that both the expressions 'undistributed portion of the assessable income & undistributed portion of profits & gains' have been used.
16. Section 6 of the Act classifies the 'income, profits & gains' under several heads, e.g., salary, interest on securities, property, profits & gains from business., profession or vocation '& other sources'. This classification was intended for the purpose of calculation of assessable income after deductions, as would appear from Sections 7, 8, 9, 10, 11. Reliance was placed on the following observation of Mullick, J., in 'In re. Jyotiprosad Singh Deo' A.I.R. (8) 1921 Pat. 103 at p. 103.
'The Act makes a difference between income & profits. Profits are included within the term income but profits are not synonymous with income.' The observations are 'obiter' & were made in a different connection, viz., the deduction of cess from rents & royalties under section 11 & must be limited to the facts of that case.
17. The observations of Courtney-Terrell, C.J., in 'Commissioner of Income-tax v. Gopal Charan Narain Singh, 2 I.T.R. 264: A.I.R. (21) 1934 Pat. 384 (FB), to the effect that.
'There is no definition of income in the Act & the words 'profits & gains' are an amplification & not a limitation upon the word 'income'.'
do not in our opinion help the assessee in any way in the present case: Mr. Mitra strongly relied on the observations of Page, C.J., in 'Commissioner of Income-tax Burma v. Bengalee Urban Co-operative Credit Society Ltd.' 2 I.T.R. 121: A.I.R. (21) 1934 Rang. 27 at p. 30, viz.
'Prima facie', therefore, neither interest from securities nor income derived from property are 'profits' within the meaning of that term as used in the notification.'
The question there turned on the intention & purpose as expressed in the notification & as such the observations are not a useful guide in construing the words 'profits & gains' occurring in section 23 (a).
18. No useful purpose would be served by a reference to English decisions in construing the section under consideration. It may be noted that in section 21 of Pin. Act (12 & 13) Geo. V, C. 17, the words are 'actual income.'
19. In 'Commissioner of Income-tax, Bengal v. Shaw Wallace & Co.' 59 I. A. 206, it was pointed out that:
'The Indian Act is not in 'pari materia' with the English Act, it is less elaborate in many ways, subject to fewer refinements, & in arrangement & language it differs greatly from the provisions with which the Courts in England have had to deal. Under such conditions little can be gained by attempting to reason from one to other.''
20. In our opinion, the words 'profits & gains' used in section 23-A (1) have to be construed on the terms used in the Indian Act without reference to English decisions, bearing in mind the rule of construction laid down by Lord Selborne, L.C., in 'Caledonian Rly. Co. v. North British Rly. Co.,' (1881) 6 A.C. 114 at p. 122:
'The mere literal construction ought not to prevail, if (as the Court below has thought) it is opposed to the intentions of the Legislature, as apparent by the statute, & if the words are sufficiently flexible to admit of some other construction by which that intention will be better effectuated.'
21. Mr. Mitter contended that the words 'profits & gains' have a technical meaning, which limits it to business profits & gains & that this technical meaning should be applied to the words occurring in section 23-A of the Act on the principle laid down in 'Commissioners for Special Purposes of Income-tax v. Pemsal (1891) A. C. 531:
22. For the reasons already stated we cannot accept the contentions put forward on behalf of the assessee & give the words 'profits & gains' a limited meaning.
23. In the second place, Mr. Mitter contended that where the only assets of a company are derived from property, the assessable income of the company would under section 9 of the Act, be the notional income of the property held by the company; such notional income may be unrealizable or in fact not realised, in such a case, if the company is compelled to distribute 60 per cent of the assessable income, it will have to draw on the capital of the company, which is an impossible position for a company.
24. This argument is plausible but does not bear examination.
25. If such a contingency occurs, the Income-tax Officer will not exercise his powers under the section on account of the smallness of the profits.
26. Moreover, the Inspecting Assistant Commissioner may withhold his approval in such a case.
27. The section speaks of 'any' company without any qualification;' we do not find anything in the Act which compels us to cut down the plain meaning of these words & to limit the same so as to exclude companies whose only source of income is property.
28. It is pertinent to observe that the proviso to section 23-A itself is an exception in regard to certain categories of companies out does not exclude a company like the assessee.
29. The question referred to us is answered in the affirmative.
30. The assessee will pay the costs of this reference : clearing fee being assessed at 15 G.Ms.
R.P. Mookerjee, J.
31. I agree.