Previous-year option and dividend tax concession: rate-only inclusion is not assessment, and relief stays within the Order.

For the purpose of the statutory option as to the previous year, prior inclusion of income only for rate purposes does not amount to an assessment of that source; a conscious and demonstrable election is required. On that basis, the managing and selling agency income could be computed on the financial year ending 31 March 1950. Under paragraph 12 of the Part B States (Taxation Concessions) Order, 1950, relief was confined to the express concession for dividend income, and the provision did not extend the same relief to super-tax beyond the limits stated in the Order.

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Issues: (i) Whether the assessee was entitled to adopt the financial year ending on 31 March 1950 as the previous year for the managing and selling agency income, and whether prior inclusion of that income only for rate purposes amounted to a prior assessment or an exercised option; (ii) whether the dividend income was entitled to the concession under paragraph 12 of the Part B States (Taxation Concessions) Order, 1950, and whether super-tax was payable only at concessional rates.

Issue (i): Whether the assessee was entitled to adopt the financial year ending on 31 March 1950 as the previous year for the managing and selling agency income, and whether prior inclusion of that income only for rate purposes amounted to a prior assessment or an exercised option.

Analysis: The expression that an assessee has "once been assessed" in respect of a source of income means that the income from that source must have been computed under the Act and included in total income. Mere inclusion of the income in earlier years for the limited purpose of determining the rate of tax on world income does not amount to assessment in respect of that source. The right of option under the relevant provision must be a conscious and demonstrable election. No material showed a clear election by the assessee to adopt the Diwali year as the previous year for this source after it became taxable.

Conclusion: The assessee was entitled to adopt the financial year ending on 31 March 1950 as the previous year for the managing and selling agency income.

Issue (ii): Whether the dividend income was entitled to the concession under paragraph 12 of the Part B States (Taxation Concessions) Order, 1950, and whether super-tax was payable only at concessional rates.

Analysis: Paragraph 12 gave relief from income-tax in respect of the relevant non-taxable portion of dividend income, but the concession did not extend to super-tax. The taxable portion of the dividend was to be grossed up and brought to tax according to the Order, while super-tax remained chargeable at the concessional rates prescribed by the Order on the entire dividend income included in the assessment.

Conclusion: The assessee was entitled to the concession only to the extent allowed under paragraph 12, and super-tax was payable at concessional rates on the entire dividend income.

Final Conclusion: The reference was answered partly in favour of the assessee, with the managing and selling agency income computed on the financial year basis chosen by the assessee and the dividend income receiving only the limited concession recognised by the Order.

Ratio Decidendi: Prior inclusion of income from a source for rate purposes does not amount to assessment of that source for the purpose of the statutory option as to previous year, and the concession under the relevant taxation order must be confined to the relief expressly provided by it.

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