TaxTMI 
TaxTMI 
1962 (10) TMI 53
X X X X Extracts X X X X
X X X X Extracts X X X X
....cable. In appeal, the Income-tax Appellate Tribunal, Bombay, reserved the order of the income-tax authorities. The Tribunal opined that the expression "cannot be made applicable" in item B of Part I of Schedule I of the Finance Act (15 of 1955) must be read in conjunction with section 23A of the Income-tax Act, and the benefit of rebate provided by the Finance Act, 1955, cannot be denied to a private company if the conditions prescribed in section 23A(1) are fulfilled. The following question referred by the Tribunal to the High Court of Judicature at Bombay was answered in the affirmative: "Whether, on the facts and in the circumstances of the case, the assessee company having distributed dividends of over 60% of the company's total income less income-tax and super-tax payable thereon is entitled to the rebate of 1 anna per rupee on the undistributed balance of profits as provided in clause (i) of the proviso to item B of Part I of the First Schedule to the Finance Act of 1955 ?" By the Finance Act (15 of 1955) Schedule I, item, B, read with section 2 of the Act, rates of tax were prescribed in the case of companies. Item B provided that "In the case of every company Ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d would be unreasonable. It is manifest that the order under section 23A, clause (1) would (excluding certain procedural conditions) be ordinarily made if the company has distributed by way of dividend within the twelve months immediately following the expiry of the accounting year less than the prescribed percentage of the total income as reduced by the amount of taxes paid in the case of non-banking companies and reserve fund in addition thereto in the case of banking companies. By the first paragraph of sub-section (9) of section 23A it is provided that "Nothing contained in this section shall apply to any company in which the public are substantially interested or to a subsidiary company of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year." This clause is followed by two explanations. Explanation 1, in so far as it is material to this case, provides : "Explanation 1. - For the purpose of this section, a company shall be deemed to be a company in which the public are substantially interested - ... (b) if it is not a private company as defined in the Indian Compan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is admissible only in favour of companies to which the provisions of section 23A of the Act cannot be made applicable. The income-tax authorities held that the expression "company to which the provisions of section 23A of the Income-tax Act cannot be made applicable" is descriptive of a class of companies against which in no circumstances can an order under section 23A of the Indian Income-tax be made, and private limited companies being companies in respect of which an order under section 23A of the Income-tax Act can be made if the conditions prescribed relating to distribution of dividend are fulfilled, the benefit of rebate is not admissible in their favour. The Tribunal and the High Court held that the expression "cannot be made applicable" only refers to a state of affairs in which having regard to the circumstances an order under section 23A of the Indian Income-tax Act cannot be made. In our judgment the Incometax Appellate Tribunal and the High Court were right in so holding. The legislature has used the expression "cannot be made applicable", which clearly means that the applicability of section 23A depends upon an order to be made by the Income-tax Officer, and not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h a provision led to delay in the disposal of assessment proceedings and caused administrative inconvenience. It appears that the legislature modified the scheme of granting rebate in enacting the Finance Act of 1955, with a view to simplify the procedure and avoid delays, and not with the object of depriving the private limited companies as a class, of the benefit of rebate which was permissible under the earlier Acts. Counsel for the Income-tax Commissioner invited our attention to the Finance Acts 1956 and 1957 and contended that the legislature in dealing with the right to rebate under Part II relating to the rates of super-tax used phraseology which restricted the right of rebate only to public companies. It must be noticed that even under the Finance Act of 1955 by Part II of Schedule I, item D, a rebate of three annas per rupee of the total income was to be allowed to companies in respect of profits liable to tax under the Income-tax Act for the year ending March 31, 1956, if the company had made prescribed arrangements for payment of dividend payable out of profits and for reduction of supertax from dividends in accordance with the provisions of sub-section (3D) of secti....