- (1.) This is an appeal on a certificate of fitness granted by the High Court of Bombay under S. 66-A (2) of the Indian Income-tax Act, 1922.
(2.) The short facts giving rise to the appeal are these. The original assessee was Purshottamdas Thakurdas, a well-known businessman of Bombay. He died sometime after the proceedings in the High Court had terminated and the appellants herein are his legal representatives. As nothing turns upon the distinction between the assessee and his legal representatives in this case, we shall ignore it for the purpose of this judgment. By a notice issued under S. 18-A(1) of the Act the Income-tax Officer concerned required the assessee to make advance payment of tax in respect of the assessment year 1947-48. On September 15, 1946 the assessee submitted an estimate of his income under sub-s (2) of S. 18-A/. In this estimate the assessee showed his total income at Rs.4,64,000/-. He deducted the sum of Rs.3,64,000/- stated to be his dividend income, on the ground that S.18 of the Act applied to such income. After claiming credit for Rs.10,000/- on the ground of double taxation relief, the assessee estimated the advance tax payable by him at Rs.2,67,752/-. The Income-tax Officer took the view that under S. 18-A (2) of the Act the assessee was bound to include in his estimate, and to pay advance super-tax on, his dividend income. Since that was not done and the advance tax paid was less than eighty per-cent of tax determined on the basis of the regular assessment he levied penal interest on the assessee under sub-s (6) of S. 18-A of the Act in respect of super-tax payable on the dividend income. There was an appeal to the Appellate Assistant Commissioner who confirmed the view of the Income-tax Officer. On a further appeal, the Appellate Tribunal held by its order dated October 25, 1957 that sub-s. (6) of S. 18-A did not apply to dividend income and the assessee was not liable to pay penal interest in respect of dividend income. The Commissioner of Income-tax, Bombay City, respondent before us, moved the Appellate Tribunal to state a case to the High Court of Bombay on the following question of law which arose out of the Tribunal's order : "Whether on the facts and circumstances of the case, the assessee is liable to pay interest in respect of dividend income as provided under S. 18-A (6) of the Income-tax Act:"
(3.) The Tribunal stated a case on the aforesaid question and the reference made by the tribunal was dealt with by a Divisional Bench of the High Court of Bombay by its judgment dated July, 3, 1959. The question framed by the Tribunal was slightly altered by the High Court, but the alteration made is not material for our purpose. J.C. Shah, J. came to the conclusion that dividend income was not income in respect of which S.18 made any provision "for deduction of income-tax at the time of payment" within the meaning of sub-s. (1) of S. 18-A and though the phraseology used in sub-s (6) of S. 18-A was slightly different from the phraseology used in sub-s. (1) of S. 18-A, the two sub-sections substantially had the same meaning. Accordingly, he answered the question in the affirmative and against the assessee. S. T. Desai, J. also gave the same answer to the question, though he reached a somewhat different conclusion. He held that on a proper construction of sub-s (6) of S. 18-A an assessee was liable to pay interest in respect of tax on dividend income to the extent that sub-s. (5) of S. 18 did not apply to the same. He said : "An assessee who is called upon to make advance payment of tax under S. 18-A (1) may, under sub-s. (2) of that section, pay such amount as accords with his own estimate. If he excludes the amount of super-tax on dividend income from his estimate he takes the risk of the application of the ratio of eighty per cent resulting in a shortfall and he would have to pay interest upon the amount by which the tax so paid falls short of the said eighty per cent. The eighty per cent would be of the amount of tax determined on the basis of the regular assessment so far as such tax relates to income to which the provisions of S. 18 do not apply. The provisions of S. 18(5) as I have already pointed out do not apply to super-tax and the amount of super-tax on the dividend income must be included and taken into consideration in the computation necessary for the purpose of fixing the quantum. of tax to which the ratio of eighty per cent is to be applied. I would, therefore, answer the question as framed by us in the affirmative.";