Additional tax liability under section 104 follows the law in force on the date of default, not a later amendment.

Liability to additional tax under section 104 of the Income-tax Act, 1961 was governed by the law in force on the date of default. The default occurred on 1 April 1977 when the assessee failed to distribute the prescribed portion of distributable income within the required period, and section 104 as then in force attached additional tax liability. An amendment to sub-section (4) effective from 1 April 1978, excluding manufacturing companies, could not be applied retrospectively to a default already committed. The assessee therefore remained liable to additional tax, and the issue was answered against it.

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Issues: Whether the law in force on the date of default governed the assessee's liability to additional tax under section 104 of the Income-tax Act, 1961, and whether the amendment excluding manufacturing companies from the provision could be applied to avoid liability.

Analysis: The default was found to have occurred on 1 April 1977, when the assessee failed to distribute the prescribed percentage of its distributable income within 12 months of the end of the previous year. On that date, section 104 of the Income-tax Act, 1961, as it then stood, made the assessee liable to additional tax. The subsequent amendment to sub-section (4) with effect from 1 April 1978 could not govern a default already committed earlier.

Conclusion: The law in force on 1 April 1977 applied, and the assessee remained liable to pay additional tax under section 104 of the Income-tax Act, 1961. The question was answered in the affirmative, against the assessee.

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