ASOKA TEXTILES LIMITED Vs. INCOME TAX OFFICER
HIGH COURT OF KERALA
Asoka Textiles Limited
INCOME TAX OFFICER
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(1.) This petition has come before us under an order of reference which runs as follows:-
"This petition is filed under Art.226 of the Constitution by the Asok Textiles Ltd., Alwaye. It calls in question certain rectification proceedings purported to be taken under S.35 of the Indian Income Tax Act by the 1st respondent who is the Income Tax Officer, Alwaye. The 2nd respondent is the Commissioner of Income Tax for the region who confirmed the orders of the 1st respondent.
2. The Petitioner is a public limited Company carrying on the business of spinning yarn in their mill at Alwaye. They started business in January 1951 and we are concerned with their first assessment year 1952-53 in respect of the accounting period ended with 31st December 1951. The assessment order is dated 22nd February 1953 and is filed as Ext. A. The next assessable income was fixed at Rs. 1,43,083. There were two rectifications of this order, one on 25th January 1954 and the other on 13th August 1954. The first rectification was on the basis that additional income tax on excess dividends as contemplated in the schedule to the Indian Finance Act of 1952 was omitted to be levied. The excess dividend was in the result fixed at Rs. 4,68,001 and the additional income tax levied thereon at the rate of 1 anna in the rupee amounted to Rs. 29.250-1-0. The second rectification proceeded on the basis that the additional income tax should have been levied at the rate of 5 annas in the rupee instead of 1 anna. The second rectification also took in the levy of penal interest under S.18(A)8. The net result of the rectification orders was the enhancement of income tax levied on the petitioner by an amount of Rs. 1,46,250-5-0.
3. The question is raised in these proceedings that the Income Tax Officer had no jurisdiction in the circumstances whatever to invoke and that repeatedly the provisions of S.35 of the Income Tax Act of 1922. The contention is also raised on the merits that the question of excess dividend did not arise because the company had commenced business only in 1951 and there was no preceding years to its previous year in which any income could possibly have been earned and that even so the assessment at the rate of 5 annas in the rupee was totally unjustified.
4. The question turns upon the proper interpretation of the provisions in paragraph (b) Part I of the first Schedule of the Indian Finance Act of 1951 which have been made to apply for 1952 and also the applicability of S.35 of the Income Tax Act to the circumstances of the case. These are difficult and interesting questions which seem to have arisen here for the first time. It is desirable therefore that the matter is heard and disposed of by a Bench. I, therefore, refer the petition herein to a Division Bench.
(2.) To appreciate the questions involved the following further facts may also be stated. The petitioner company filed its return in connection with its assessment to income tax by the Income Tax Officer, Alwaye District, for the year 1952-53 declaring an income of Rs. 3,21,284. The assessment order however computed its total income at Rs. 10,61, 511 and arrived at the net income of Rs. 3,26,101 after deduction of depreciation ordinary and extra and allowed under law. The net assessable income was then ascertained as Rs. 1,47,083 after deducting an allowance under S.15(c) of six per cent on the computed capital of Rs. 29,83,637. The total tax payable by way of income tax, surcharge and corporation tax was then fixed at Rs. 63,889-3-0. An amount of Rs. 5,000 already paid as per S.23(b) assessment was given credit to and the balance of Rs. 58,839-3-0 was directed to be paid on or before 26th February 1953. This assessment order is dated 22nd February 1953 and is filed in the case as Ext. A.
(3.) The first rectification under S.35 of the Income Tax Act was made by the succeeding Income Tax Officer, the 1st respondent herein by Ext. B order dated 25th January 1954 on the basis that additional income tax on excess dividend which was contemplated in the Schedule to the Indian Finance Act 1952 had been omitted to be levied. Such excess dividend was found on calculation to come to Rs. 4,68,001, being the major portion of the total of Rs. 4,72,415 declared as dividend. Additional income tax at 1 anna in the rupee amounting to Rs. 29,250-1-0 was thereupon levied and directed to be paid on or before 20th February 1954.;
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