- (1.) The appellant-a company registered under the Indian Companies Act, 1913- was assessed in the assessment years 1948-49 to 1953-54 in respect of the profits earned in its business, and was allowed rebate under the appropriate provisions contained in the Schedules to the relevant Finance Acts on the undistributed profits of the previous years. On December 31, 1956 at an annual general meeting of the shareholders the Company declared an aggregate sum of Rs. 2,15,232 as dividend for the year ending December 31, 1956. Thereafter a special resolution was passed for voluntary winding up of the company with effect from October 1, 1957, and for appointing a liquidator to wind up the affairs of the Company. On October 20 and 21 1957 the liquidator distributed to the shareholders Rs. 5,17,171-20 and thereafter on February 21 and 22, 1958; March 31, 1958 and July 27, 1959 the liquidator distributed diverse other amounts to the shares-holders. In respect of each such distribution the liquidator issued an "income-tax refund certificate" certifying " certifying that the amount was distributed out of reserves formed out of accumulated profits of earlier years.
(2.) The Income-tax Officer, Special Investigation Circle-B, Ahmedabad in exercise of the power under S. 35(10) of the Indian Income-tax Act, 1922. passed an order withdrawing the rebate granted in respect of each of the six assessment years 1948-49 to 1953-54 and demanded payment of tax on the amount of the rebate. The appellant then applied to the High Court of Bombay for writs quashing the orders of the Income-tax Officer and the notice of demand and directing the Income-tax Officer to withdraw and cancel the order and notice of demand. The petition was dismissed by the High Court. With certificate granted by the High Court, this appeal has been preferred.
(3.) Two questions are raised for determination in this appeal. (1) Whether, S. 35 (10) authorises the Income-tax Officer to bring to tax rebate granted in assessment years commencing prior to April 1, 1956; and (2) Whether distribution by the liquidator of accumulated profits in the previous years could be regarded as declaration of dividend within the meaning of S. 35(10) so as to attract the applicability of the provisions enabling withdrawal of rebate and demand for tax. ;