- (1.) This appeal is with a certificate granted by the High Court against its judgment and order dated September 9, 1955, in a reference under S. 66(1) of the Indian Income-tax Act. The Tribunal had referred the following questions for the decision of the High Court. "1. Whether there was any excess dividend declared by the assessee Company 2. Whether the assessee Company is liable to pay additional income-tax in respect of the excess dividend paid by the assessee Company -
(2.) The High Court answered the first question in the affirmative and the second, in the negative. The Commissioner of Income-tax, Bombay is the appellant before us, and the Jalgaon Electric Supply Co., Ltd. (the assessee Company) is the respondent.
(3.) The facts of the case are simple. For the assessment years 1949-50 and 1950-51, the book profits of the assessee Company were respectively Rs. 1,22,469 and Rs. 76,886. After adjustment of depreciation allowance and other deductions, the income of the assessee Company was finally assessed at Rs. 3,423 and Rs. 3,312 respectively. The assessee Company declared a divided of Rs. 46,024 in the first year and Rs. 53,323 in the next. The Income-tax Officer, applying the Proviso to Para. B of Part I of the Third and First Schedules of the Finance Acts, 1949 and 1950 respectively, assessed the difference in each year to additional income-tax, and charged income-tax at the rate of 5 annas in the rupee on the amounts for the two assessment years. The assessee Company appealed first to the Appellate Assistant Commissioner and then to the Tribunal. In the Tribunal, there was a difference of opinion between the President and the Accountant Member, the former holding that the assessee Company was not liable and the latter, that it was. The case was then referred to a third Member who agreed with the President. The main reason for the decision of the majority was that there were no profits in the years preceding the previous year, and that therefore, the said Paragraphs could not, on their terms, operate in the circumstances. The view of the minority was that even if there were no profits, the intention of the Finance Act to levy the additional income-tax on the excess dividends was perfectly plain, and that the assessee-Company was liable. It may be mentioned at this stage that the decision of the Tribunal turned entirely upon the fact that no profits were brought forward from the previous years, and that, therefore, the Paragraphs could not be applied. The High Court held that though excess dividends were, in fact, paid the absence of profits from previous years rendered the Finance Act unworkable in this case. It, therefore accepted the reasons given by the Tribunal, and upheld its decision.;