TaxTMI 
TaxTMI 
1984 (10) TMI 41
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....nds of the official liquidator can be distinctly classified as representing paid-up share capital of the company as on the first day of the year of account relevant to the assessment year and whether any portion of the fund can be similarly identified as forming a " reserve ". The assessee is a banking company, namely, the Palai Central Bank Ltd., which went into liquidation on August 8, 1960. On that date, the official liquidator took charge of the assets and liabilities of the company and a balance-sheet has been prepared as on the same date. Thereafter, for every year, the liquidator used to prepare only an income and expenditure statement for submission to the Reserve Bank of India. The assessment year, with which we are concerned is ....
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....e matter in further appeal before the Income-tax Appellate Tribunal, Cochin Bench. The Tribunal held that in the hands of the liquidator, there is only one integral fund which could not be split up into share capital, reserve and profits. In the opinion of the Tribunal, the exemption provision contained in s. 27 of the Act which states that nothing contained in the Act shall apply to any company which has no share capital was clearly attracted to the case. It was further held by the Tribunal that even if the exemption under s. 27 of the Act did not get attracted, s. 4 of the Act, which is the charging section, would not apply to the assessee-company in liquidation as the " standard deduction " was incapable of ascertainment. The Tribunal, a....
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....ained in this Act, there shall be charged on every company for every assessment year commencing on and from the 1st day of April, 1963, a tax (in this Act referred to as the super profits tax) in respect of so much of its chargeable profits of the previous year or previous years, as the case may be, as exceed the standard deduction, at the rate or rates specified in the Third Schedule." The expression " chargeable profits " has been defined in clause (5) of section 2 thus "2(5) 'chargeable profits ' means the total income of an assessee computed under the Income-tax Act, 1961 (XLIII of 1961), for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule." The next definition t....
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....on the first day of the previous year relevant to the assessment year, of its paid-up share capital and of its reserve, if any, created under the proviso (b) to clause ( ) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (XI of 1922), or under sub-section (3) of section 34 of the Income-tax Act, 1961 (XLIII of 1961), and of its other reserves in so far as the amounts credited to such other reserves have not been allowed in computing its profits for the purposes of the Indian Income-tax Act, 1922 (XI of 1922), or the Income-tax Act, 1961 (XLIII of 1961), diminished by the amount by which the cost to it of the assets the income from which in accordance with clause (iii) or clause (vi) or clause (vii) of rule I of the First ....
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....ed in computing the profits of the company for the purpose of assessment to income-tax. From the aggregate of the aforesaid amounts, certain deductions as specified in the section have to be made but the details of such deductions are not relevant for the purpose of the present case. What is important to notice is that unless the company can be said to have a paid-up share capital as on the first day of the previous year relevant to the assessment year, the formula laid down in the rule for computation of capital of the company cannot have any application and the calculation of " standard deduction" being based wholly on the capital of the company becomes wholly incapable of ascertainment. After a company has gone into liquidation, can it....
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....lated profits disappear and there is only one integrated or consolidated fund in the hands of the liquidator. The concept of a fluctuating share capital or reserve which is the basic premise necessary to attract the applicability of rule I of the Second Schedule is wholly foreign in respect of a company in liquidation. In CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294, this court pointed out that under the scheme of the I.T. Act, 1961, charge of tax will not get attracted unless the case or transaction falls under the governance of the relevant computation provisions. " The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation provisions togeth....