SANKAR PRASAD MITRA, J. - This is an application for leave to appeal to the Supreme Court. The assessment year out of which the reference arose was the year 1956-57 and the relevant accounting year was the calendar year ended on the 31st December, 1955. The total income of the assessee was computed at Rs. 6,14,525. In computing the tax on the total income in accordance with the Finance Act, 1956, the Income-tax Officer calculated the reduction in rebate in the following manner :
Total dividend and bonus taken during the year :
(The bonus declared is also to be included in the dividend as it is not bonus declared with a view to increasing the capital)
6 per cent. of the ordinary share capital
4 per cent of ordinary share capital.
The Income-tax Officer based his calculation on the paid-up share capital of Rs. 30,50,000. According to the Finance Act, 1956, the expression 'paid-up capital' means the paid-up capital of the company as on the 1st day of the previous year relevant to the assessment for the year ending on the 31st of March, 1957, increased by the premium received in cash by the company on the issue of its shares standing to the credit of the share premium account as on the 1st day of the previous year aforesaid.
The assessees accounts as on the 31st December, 1954, being equivalent to the balance-sheet as on the 1st January, 1955, disclosed no separate amount standing under the name of share premium account. The receipts on account of share premium said to be for Rs. 45,50,000 were transferred to the 'reserve fund and other reserve accounts' disclosing an aggregate figure of Rs. 1,08,00,000. The Income-tax Officer did not aggregate the paid-up capital by addition of the said sum of Rs. 45,50,000.
The Appellate Assistant Commissioner first considered the Explanation to Paragraph D of the First Schedule to the Finance Act, 1956, which runs thus :
'(1) The expression paid-up capital means the paid-up capital (other than capital entitled to a dividend at a fixed rate) of the company as on the 1st day of the previous year relevant to the assessment for the year ending on the 31st day of March, 1957, increased by any premiums received in cash by the company on the issue of its shares, standing to the credit of the share premium account as on the 1st day of the previous year aforesaid.'
The Appellate Assistant Commissioner also considered the provisions of section 78 of the Companies Act, 1956. This section is as follows :
'78. (1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the share premium account; and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section apply as if the share premium account were paid-up share capital of the company.
(2) The share premium account may, notwithstanding anything in sub-section (1), be applied by the company -
(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or
(d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.
(3) Where a company has, before the commencement of this Act, issued any shares at a premium, this section shall apply as if the shares had been issued after the commencement of this Act :
Provided that any part of the premiums which has been so applied that it does not at the commencement of this Act form an identifiable part of the companys reserves within the meaning of Schedule VI shall be disregarded in determining the sum to be included in the share premium account.'
Having regard to the provisions of the Explanation to Paragraph D of the First Schedule to the Finance Act, 1956, and section 78(3) of the Companies Act, 1956, the Appellate Assistant Commissioner held that the sum of Rs. 45,50,000 forms an identifiable part of the banks reserves and that the amount should be added to the paid-up share capital for the purpose of calculation of rebate of super-tax.
The Appellate Tribunal affirmed the order of the Appellate Assistant Commissioner and, on an application under section 66(1), the following question was referred to this court :
Whether, on the facts and in the circumstances of the case, the amount of Rs. 45,50,000 should be added to the paid-up capital of the assessee as on the 1st of January, 1955, for the purpose of allowing rebate to the assessee under Paragraph D of Part II of the First Schedule to the Indian Finance Act, 1956.'
This court by its judgment delivered on the 17th December, 1963, has supported the view of the Appellate Tribunal for reasons stated therein and has answered the question in the affirmative. Broadly speaking, this court has held that section 78 of the Companies Act, 1956, also applies to banking companies and by the deeming provisions of section 78(3) the disputed figure which was an identifiable sum should be taken to have satisfied the requirements of the Finance Act, 1956.
The Commissioner of Income-tax, who is the petitioner herein, wants to urge before the Supreme Court that the definition of 'paid-up capital' in the Explanation to Paragraph 'D' of the First Schedule to the Finance Act, 1956, refers to addition of an amount 'standing to the credit of the share premium account'. The provision, according to learned counsel for the petitioner, postulates that there should be an account labeled as the 'share premium account' and unless this account labeled as aforesaid was there on the relevant date, namely, the 1st January, 1955, nothing could be said to be standing to its credit. In other words, if on January 1, 1955, there was no share premium account with restrictions imposed upon the company regarding its application, the Explanation to Paragraph D of the First Schedule to the Finance Act, 1956, could not be availed of. Learned counsel submits that section 78(3) of the Companies Act, 1956, does not satisfy the requirements of the said Explanation. Learned counsel submits further that up till now there is no decision either of the Supreme Court or of any other High Court on this point.
There is no doubt that on the grounds aforesaid advanced by learned counsel for the petitioner, the certificate prayed for ought to be granted. Mr. E. R. Meyer appearing for the respondent also did not raise any substantial objection to our allowing the application on merits. But there is a technical objection strenuously urged by Mr. Meyer which I shall presently deal with.
The point is that the Indian Income-tax Act, 1922, has been repealed by sub-section (1) of section 297 of the Income-tax Act, 1961. Then, sub-section (2), clause (c), of section 297 of the 1961 Act, provides that notwithstanding the repeal of the Indian Income-tax Act, 1922, any proceeding pending on the commencement of the 1961 Act before any income-tax authority, the Appellate Tribunal or any court, by way of appeal, reference or revision, shall be continued and disposed of as if the 1961 Act had not been passed. Mr. Meyer contends that at the date of commencement of the 1961 Act, that is, the 1st April, 1962, the reference out of which this application has arisen was pending, but it has been disposed of by the judgment of this court delivered on the 17th December, 1963. In the premises, there is no scope for an application for leave to appeal to the Supreme Court under section 66A(2) of the repealed Act.
Learned counsel then proceeded to make his submissions on section 298(1) of the 1961 Act. This sub-section provides that if any difficulty arises in giving effect to the provisions of the 1961 Act, the Central Government may, by general or special order, do anything not inconsistent with such provisions which appears to it to be necessary or expedient for the purpose of removing the difficulties. According to Mr. Meyer, section 297(2) (c) did not provide for leave to appeal to the Supreme Court. By an order made by the Central Government therefore this difficulty cannot be removed. Such an order, if made, would be inconsistent with the provisions of the 1961 Act.
The Income-tax (Removal of Difficulties) Order, 1962, has been made. Clause 4(1) of this order prescribes that proceedings by way of the first or subsequent appeals, references or revision in respect of any order made under the Indian Income-tax Act, 1922, shall be instituted and disposed of as if the repealing Act has not been passed. Mr. Meyer points out that this Removal of Difficulties Order does not give - and properly - a right to appeal to the Supreme Court. An appeal to the Supreme Court is neither the first nor a subsequent appeal nor a reference nor revision. The scheme of the 1922 Act is that the first appeal from the order on the Income-tax Officer is made under section 30 to the Appellate Assistant Commissioner. The second appeal is made to the Appellate Tribunal under section 33. Then under section 66 there may be a reference to the High Court on questions of law arising out of the order of the Tribunal and under sub-section (5) of section 66 the Appellate Tribunal passes an order which is necessary to dispose of the case in conformity with the judgment of the High Court. The Income-tax Act, 1922, also provides for revision by the Commissioner by section 33A and section 33B. It is these sections that the Central Government had in its contemplation, according to Mr. Meyer, in clause 4(i) of the Removal of Difficulties Order. There is no question here of a right of appeal to the Supreme Court.
Assuming, Mr. Meyer says, clause 4(i) of the Order wanted to provide for appeal to the Supreme Court, such a provision was ultra vires the powers of the Central Government inasmuch as it was inconsistent with the provisions of the 1961 Act. The Central Government, Mr. Meyer submits, has no power to add to the provisions of section 298 of the 1961 Act.
On the grounds aforesaid, learned counsel for the assessee has strongly urged before us that this application is not at all maintainable and should be dismissed.
I have already said that section 297(2) (c) of the 1961 Act clearly provides that any proceeding pending on the date of commencement of that Act whether before any income-tax authority or the Appellate Tribunal or any court by way of appeal, reference or revision, shall be continued and disposed of as if the 1961 Act had not been passed.
Now, it is conceded on behalf of the assessee that the reference was pending on the date of commencement of the 1961 Act. This very fact, to my mind, attracts the operation of all the provisions of the 1922 Act in respect of the proceedings subsequently taken relating to the judgment of this court delivered on the reference. The expression used in section 297(2) (c) is 'shall be continued and disposed of as if this Act had not been passed.' The fiction which Parliament seeks to create must in my opinion be given its full effect. A subsequent appeal and the steps that are to be taken to file that appeal should be treated as continuation of the old proceedings from which the appeal arises.
Let me first refer to the judgment of the House of Lords in East End Dwellings Co. Ltd. v. Finsbury Borough Council. In this case, before 1944, the claimants owned certain property consisting of 55 flats which were subject to the Rent Restrictions Acts. On June 24, 1944, the flats were completely demolished by enemy action, and a cost of works payment in respect of the damage was determined to be appropriate. The vacant site was compulsorily acquired by the local authority and, since none of the damage had been made good at the date of the notice to treat, which was served on July 28, 1948, the question arose of the amount of compensation payable to the claimants, having regard to the Town and Country Planning Act, 1947, section 53(1) (a) whereof provided that in such a case the value of the interest for the purposes of assessment of compensation should be taken to be the value which it would have if the whole of the damage had been made good before the date of the notice to treat. The House of Lords has held that the 'damage', referred to in section 53(1) (a) of the Act of 1947, could only be the physical damage to the building, and a building which had been completely demolished could only be 'made good' if it was rebuilt and, therefore, the value to be considered in determining the compensation payable to the appellants under section 53(1) (a) was the value which the building would have had if it had been rebuilt before the date of the notice to treat; had it been rebuilt before that date, the appellants would have been freed from the restrictions as to rents which attached to the demolished building; and, therefore, the compensation payable to them was to be assessed on the basis that the rents of the notional building would not be restricted to the amount of the former standard rents. Lord Asquith at page 599 observes :
'If one is bidden to treat an imaginary state of affairs as real, one must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that one must imagine a certain state of affairs. It does not say that, having done so, one must cause or permit ones imagination to boggle when it comes to the inevitable corollaries of that state of affairs.'
The above observation of Lord Asquith was applied by our Supreme Court in Commissioner of Income-tax v. Teja Singh. The Supreme Court has construed in this case the provisions of section 18A(3) and (9) and section 28 of the Indian Income-tax Act, 1922. The Supreme Court expresses the view that by a legal fiction the failure of a person, not hitherto assessed, to send an estimate of tax payable by him in accordance with section 18A(3) of the Income-tax Act is treated as a failure to furnish a return of income under section 22. By reason of this fiction, the notice required to be given under section 22 must be deemed to have been given, and the assessee must be deemed to have failed to comply with it. Thus section 28 of the Act would apply on its own terms. The Income-tax Officer is, therefore, competent to impose a penalty under section 28 read with section 18A(9) (d) in respect of a failure to submit an estimate under section 18(A) (3). Before quoting Lord Asquith, Venkatarama Ayyar J. says :
'It is a rule of interpretation well settled that in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate.'
In the instant case, having regard to the provision of section 297(2) (c) of the 1961 Act, the judgment of this court on the pending reference must be taken to have been delivered under the old Act. The inevitable corollary is that the old Act must be deemed to be operative in respect of proceedings subsequently taken with reference to the judgment.
Looking at the problem from another point of view, the word 'continued' in section 297(2) (c), having regard to the purpose for which these provisions have been enacted, appears to be helpful. An appeal to the Supreme Court is a continuation of the 1961 Act. An application for leave to appeal is a step preliminary or incidental to the appeal and must necessarily be governed by the old Act.
Assuming, however, that learned counsel for the assessee is right in contending that section 297(2) (c) of the 1961 Act does not provide for appeal to the Supreme Court, in my view, this application will be maintainable by reason of the provisions of section 6 of the General Clauses Act, 1897. The relevant provisions of the section are as follows :
'6. Where this Act or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appear, the repeal shall not -...
(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or...
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the Repealing Act or Regulation had not been passed.'
So far as a reference under the 1922 Act was concerned, the party aggrieved had a right of appeal to the Supreme Court under section 66A(2) of that Act. Neither this right of the petitioner nor any legal proceeding or remedy in respect of such right can be affected by the 1961 Act unless a different intention appears therein. I do not find this different intention in section 297(2) (c) of the 1961 Act. At best there may be a lacuna or an omission but no different intention has been expressed. The petitioner, therefore, in my opinion, is entitled to urge that his application under section 66A(2) is protected by section 6 of the General Clauses Act.
Coming now to clause 4 of the Income-tax (Removal of Difficulties) Order, 1962, I am clearly of opinion for reasons stated above that it has not made any provision which is inconsistent with the provisions of the 1961 Act. My view is that the 1961 Act has not deprived a party aggrieved by a judgment on reference to the High Court of his right to appeal to the Supreme Court. That being so, under clause 4 of the above cited Order, proceedings by way of subsequent appeal to the Supreme Court in respect of any order made under the 1922 Act should be instituted and disposed of as if the repealing Act had not been passed. Mr. Meyer has strongly urged before us that, when this court delivers judgment on a reference, there is no order which is passed and, therefore, clause 4 of the Removal of Difficulties Order cannot be attracted. I intend only to quote the observations of a Division Bench of this court in Income-tax Reference No. 57 of 1953 (Howrah Trading Co. Ltd. v. Commissioner of Income-tax). In the judgment delivered on April 28, 1955, Chakravartti C.J. (sitting with Lahiri J., as his Lordship then was) has said :
'It would seem that an appellant to the Supreme Court against the judgment delivered on a reference under section 66(1) of the Income-tax Act is entitled to both the time requisite for obtaining a copy of the judgment and the time requisite for obtaining a copy of the order. He is entitled to the former by virtue of the provisions of section 66A(3) of the Income-tax Act and he is entitled to the latter by virtue of the provisions of section 67A.'
Chakravartti C.J. was thinking of, inter alia, the clear provision of section 67A that 'In computing the period of limitation prescribed for an appeal under this Act or for an application under section 66, the day on which the order complained of was made, and the time requisite for obtaining a copy of such order, shall be excluded.'
In the premises aforesaid, we overrule the contentions of learned counsel for the assessee on the maintainability of the present application.
We grant a certificate in terms of clause (a) of the prayers in the petition under section 66A(2) of the Indian Income-tax Act, 1922. The costs of this application will be costs in the appeal to the Supreme Court.
MASUD J., - I agree.