Application of section 23A: incapacity to apply requires absence of conditions, so company remained eligible for rebate.

The article construes the proviso excluding companies "to which the provisions of section 23A cannot be made applicable" as referring to the incapacity to apply section 23A owing to absence of the substantive conditions and procedural pre requisites required for an order under that provision. It reasons that the proviso was amended to require presence of conditions enabling an order rather than an actual order having been made. Operatively, where the necessary conditions for invoking the provision are absent-here because the statutory dividend was paid-the company remains eligible for the rebate.

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Issues: Whether the expression "cannot be made applicable" in the proviso (Item B of Part I of the First Schedule to the Finance Act, 1955) excluding companies to which section 23A of the Income-tax Act can be made applicable should be read as meaning that section 23A is capable of being applied (i.e. the company falls within the category of companies to which the section applies) or that the conditions required for an order under section 23A exist so that the section can actually be applied to deprive the company of the rebate.

Analysis: The provision grants a rebate unless "the company is a company to which the provisions of section 23A of the Income-tax Act cannot be made applicable." Section 23A itself contains substantive conditions and procedural safeguards (including discretion of the Income-tax Officer, exceptions under subsection (9), requirement of prior approval and hearing) which must be satisfied before an order under section 23A can be made. The legislative history shows that prior Finance Acts required an actual order under section 23A to have been made before denying the rebate; the 1955 amendment replaced that requirement with the presence of conditions that would permit an order to be made. Thus the correct construction of "cannot be made applicable" is that it refers to situations where, on account of the absence of the necessary conditions or pre-requisites in section 23A, an order under section 23A could not have been made against the company.

Conclusion: The expression "cannot be made applicable" means that section 23A must be incapable of being applied because the conditions for making an order under section 23A are not present; since the company had paid the statutory dividend and the conditions for an order under section 23A were absent, the company is entitled to the rebate. The question is answered in the affirmative in favour of the assessee.

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