Retrospective tax amendment excluded dividend income from war profits tax to prevent double taxation.

Dividend income received from a company was held not chargeable to war profits tax because the amending Explanation to the Ordinance operated retrospectively for the relevant accounting period. The charging and computation provisions, read with the later amendments, showed a legislative intent to exclude such dividend receipts from taxable profits. The Explanation was construed broadly to cover income falling under both rule 3(1) and rule 3(2), and not merely rule 3(2), so that dividend already subjected to tax in the company's hands was excluded from the recipient's profits and double taxation was avoided.

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Issues: Whether the dividend income received from the company was chargeable to war profits tax under the Ordinance, and whether the Explanation inserted by the amending Ordinances applied retrospectively to exclude such dividend income from the taxable profits.

Analysis: The charging and computation provisions of the Ordinance were read with the later amending Ordinances, which showed a legislative intention that the Explanation should operate retrospectively for the relevant chargeable accounting period. The wording of the Explanation was held to be broad enough to govern income from investments falling under both sub-rule (1) and sub-rule (2) of rule 3, and there was no justification for confining it only to rule 3(2). The Explanation, properly construed, excluded dividend income received from a company whose business was itself subject to war profits tax, so as to avoid double taxation.

Conclusion: The dividend income was not chargeable to war profits tax and the answer to the referred question was in the negative, in favour of the assessee.

Final Conclusion: The appeal failed because the relevant dividend receipt was excluded from the taxable profits under the Ordinance as retrospectively clarified by the amending provisions.

Ratio Decidendi: An amending Explanation to a taxing provision may operate retrospectively where the legislative text and context so indicate, and where its language is wide enough, it must be applied to the computation of profits so as to exclude dividend income already subjected to tax in the hands of the company.

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