Income prerequisite for additional tax under the Finance Act, 1968 bars levy where the company had no taxable income.

Income-tax under the Finance Act, 1968 could not be levied on a company that had incurred a loss and had no basic tax liability for the relevant assessment year, because section 4(1) of the Income-tax Act, 1961 charges tax only where there is income and the charge operates on total income of the previous year. The special rate in section 2(1) of the Finance Act, 1968 read with Paragraph F of the First Schedule therefore depended on the existence of income; without income, the additional tax provision did not apply. The question was answered in favour of the assessee and against the Revenue.

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Issues: Whether, for assessment year 1968-69, additional tax under the Finance Act, 1968, could be levied on a company which had incurred a loss and had no liability to basic tax.

Analysis: Under section 4(1) of the Income-tax Act, 1961, income-tax is chargeable only where there is income and the charge operates on the total income of the previous year in accordance with the Act. The rate provision in section 2(1) of the Finance Act, 1968, read with Paragraph F of the First Schedule, could therefore operate only if the assessee had income in the relevant previous year. The existence of income was a necessary prerequisite to the charge itself, and in the absence of income the question of applying the special rate on excess dividends did not arise.

Conclusion: The question was answered in the affirmative against the Revenue and in favour of the assessee.

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