TaxTMI 
TaxTMI 
1961 (1) TMI 73
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....he Finance Acts of 1948 to 1953 respectively on the undistributed profits of those years. It will be convenient to set out here the income finally determined by the Income-tax Officer in respect of those years, the undistributed profits determined by the Income-tax Officer and on which rebate was allowed and the rebate that was allowed on that basis. "Assessment year Income finally determined by Undistributed profits determined by the I.T.O. Rebate. Rs. Rs. Rs. A. P. 1. 1948-49 3,11,166 1,55,447 9,715 7 0 2. 1949-50 3,80,852 1,68,691 10,543 3 0 3. 1950-51 3,64,893 45,392 2,837 0 0 4. 1951-52 3,70,055 36,892 2,305 12 0 5. 1952-53 5,32,114 2,24,050 14,003 2 0 6. 1953-54 3,81,764 1,39,478 8,717 6 0 Total 23,40,844 7,69,950 48,121 14 0" For the year ending December 31, 1956, the company itself declared an aggregated sum of ₹ 2,15,232 as dividends at its ordinary general meeting. It issued income-tax refund certificate in pursuance of a resolution of August 26, 1957. It will suffice here to mention that the total amount of dividends declared at the aforesaid meeting was ₹ 2,15,232 which was made up inter alia of a....
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....quidator issued on income- tax refund certificate to the effect that the total amount of dividends distributed and aggregating to ₹ 1,15,200 was "out of the reserves formed out of the profits or accumulated profits of the earlier years" ending December 31, 1948, December 31, 1949, December 31, 1950 and December 31, 1951. On this petition, we are concerned with the amounts of accumulated profits of all the four years, which amounts respectively were ₹ 1,574, ₹ 47,642, ₹ 40,354 and ₹ 25,630 aggregating to ₹ 1,15,200. On 27th July, 1959, the liquidator distributed a further sum of ₹ 100 per each ordinary share and the total amount of distribution was ₹ 76,800. The certificate stated that the total amount of dividends distributed was ₹ 76,800 "out of the reserves formed out of the profits or accumulated profits of the earlier year ending December 31, 1948." To the petition, the petitioner company has annexed a statement which show the distribution of dividends by and in respect of the petitioner company, containing some details in respect of the assessment years 1948-49 to 1953-54, which we have given in the be....
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.... latter contention cannot be availed of by the petitioner in this court. In New Shorrock Spinning and Manufacturing Co. Ltd. v. Income-tax Officer, Special Circle, Ahmedabad [1959] 37 I.T.R. 41 a division bench of the Bombay High Court held that section 35(10) would apply in a case of undistributed profits of previous years. In my judgment in that case I pointed out that section 35(10) was very clear in its scope and application and showed that it dealt with rebate granted in respect of the assessment years beginning with April 1, 1948, to 1955 and that the rule of construction against retrospective operation did not apply. I also pointed out in my judgment that section 35 operated despite the doctrine of finality of assessments. That decision of the Bombay High Court is binding on this court, and as far as this court is concerned, the contention relating to retrospective operation of section 35(10) must be negatived. To turn to the principal contention of Mr. Dwarkadas. But, before we examine the same, it will be convenient to set out section 35(10): "Where, in any of the assessment for the years beginning on the 1st day of April of the years 1948 to 1955 inclusive, a reba....
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....is availed of by the company, wholly or partly, for declaring dividends in any year." The expression "dividend" has been defined in section 2(6A) of the Act. The relevant and material part of that definition, and to which our attention has been drawn, is as under: "'dividend' includes: (a) any distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company; (b) any distribution by a company of debentures or debenture-stock, to the extent to which the company possesses accumulated profits, whether capitalised or not; (c) any distribution made to the shareholders of a company out of accumulated profits of the company on the liquidation of the company." Counsel for the petitioner company does not dispute before us that what has been distributed by the company and the liquidator is "dividend". In fact, all the certificates refer to the amounts distributed as "dividend". The argument, however, is that the definition in clause (c) of section 2(6A), which speaks of distribution made to the s....
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....x [1955] 27 I.T.R. 684 also decided by the High Court of Bombay, Chagla C.J. and Tendolkar J. pointed out that in the case of sub-clause (c) to section 2(6A) of the Income-tax Act, the clear intention of the legislature was that only those accumulated profits which had not been capitalised should come within its ambit. There have been changes in the definition of "dividend" in section 2(6A), to which we shall be referring a little later in our judgment. It will not be necessary for us to go into an inquiry about profits which are capitalised and profits which are not capitalised. It is sufficient for the purpose of appreciating the present argument of Mr. Dwarkadas that Burrell's case [1924] 9 Tax Cas. 27 (K.B.) has been accepted as good law in England since it was decided and the principle there enunciated has been accepted by the Bombay High Court. Now there would have been considerable force in the argument canvassed before us by counsel for the petitioner company, if certain amendment in section 2(6A) had not been made by the legislature. That amendment particularly resulted in incorporating into the definition of "dividends" in the Act a special provi....
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....spect, differently worded. To sub-clause (c) relating to distribution made to shareholders of a company on the liquidation of the company was appended a proviso. That sub-clause was as under: "(c) Any distribution made to the shareholders of a company out of accumulated profits of the company on the liquidation of the company: Provided that only the accumulated profits so distributed which arose during the six previous years of the company preceding the date of the liquidation shall be so included. The amendment made in clause (6A) by the Finance Act of 1955 and sub-clause (c) as amended by the Finance Act of 1955 have already been set out by us when stating the definition of dividend with which we are here concerned. Clauses (8), (9) and (10), as they stood at all relevant time for the purpose of the present petition, were introduced in section 35 by the Finance Act, 1956. It is of some importance and cogency to note that it was by the same Finance Act of 1956 that the definition of "dividend" in section 2(6A) with which we are concerned was substituted. The proviso to sub-clause (c) disappeared. Between April 1, 1955 and April 1, 1956, sub-clause (c) had to be r....