1974 (12) TMI 22

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....8-7. On the 9th February, 1955, the directors submitted their report to the shareholders in respect of the half-yearly account up to 30th November, 1954. The directors recommended distribution of dividend out of the aforesaid profit of Rs. 2,38,754-8-7 as follows: "Preference shares at Rs. 3-8-0 per share amounting to Rs. 35,000 and ordinary shares at Rs. 15 per share amounting to Rs. 1,50,000. Distribution of dividend has left a balance of Rs. 53,754-8-7 which was carried forward. The Lothian Jute Mills Co. Ltd. on the 24th March, 1955, distributed to the shareholders the aforesaid dividends of Rs. 35,000 on preference shares and Rs. 1,50,000 on ordinary shares." In August, 1955, proceedings were taken for amalgamation of Lothian Jut....

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....ed. In the present case, the matter related to reduction of the rebate pursuant to sub-clause (i)(b) of the second proviso to Paragraph D of Part II of Finance Act, 1956. The relevant portion of the same was to the following effect: "Provided further that: (i) the amount of the rebate.........shall be reduced by the sum .........equal to the............... aggregate of the amounts..................computed as hereunder:- :....... (b) in addition, in the case of a company referred to in clause (ii) of the preceding proviso which has distributed to its shareholders during the year dividends in excess of six per cent. of its paid-up capital." While completing the assessment on 29th March, 1961, the Income-tax Officer computed reduc....

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...., even assuming that the original order was not and the present order was correct in law, the remedy open to the department was not by way of rectification; and thirdly, even if it was a case of rectification, the Income-tax Officer should have taken action under section 35 of the Indian Income-tax Act, 1922, and not under section 154 of the Income-tax Act, 1961. The Tribunal rejected the last contention. As regards the first contention the Tribunal did not consider it necessary to express any final opinion as to whether the Income-tax Officer's order reducing the rebate with reference to the dividend distribution of Rs. 1,50,000 was justified on merits, since the Tribunal agreed with the second contention of the assessee, namely, that t....

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.... in this case is, whether the view taken by the Income-tax Officer previously and the present view are two conceivable different possible views or whether the previous view of the Income-tax Officer was a view which was not possible but was only a mistake. That depends on the interpretation as to what effect is to be given to the distribution of the dividend of Rs. 1,50,000 by Lothian Jute Mills Co. Ltd. to its shareholders. The time when the distribution took place they were admittedly shareholders of Lothian Jute Mills Co. Ltd. but the scheme of amalgamation provided for relating back to a particular date. The question is whether this relating back would also have the effect of making the shareholders of Lothian Jute Mills Co. Ltd. the sh....