Shah, J. - (1.) On December 24, 1959. M/s. Short Brothers (Private) Ltd. sold its coffee estates and other assets, and by resolution, dated February 6, 1960, it was resolved that it be voluntarily wound up and liquidators be appointed to administer its affairs. Out of the proceeds realized by sale of its assets, the liquidators of the Company distributed on March 30 1960, Rupees 8,50,000 to the shareholders. By letter, dated December 19, 1960 the Income-tax Officer Salem, informed the liquidators that he proposed to treat that amount distributed as dividends in the hands of the shareholders, and to call upon the liquidators to pay the amount of tax deductible under S. 18 (3D) of the Income Tax Act. The liquidators submitted that the amount distributed to the shareholders was capital appreciation realised by sale of agricultural lands and buildings of the Company, and was not liable to tax, and that in any event the amounts distributed represented "current profits" of the year in which it was resolved that the Company be wound up and were on that account not dividend within the meaning of Section 2 (6A) (c) of the Income Tax Act. After some correspondence the Income-tax Officer, Salem by his order, dated October 18, 1962 finally called upon the liquidators to pay Rs. 4,11,700 which was retained by the liquidators from the distribution made to the shareholders.
(2.) The liquidators then moved the High Court of Judicature at Madras, for a writ of prohibition restraining the First Income-tax Officer from taking further action to enforce collection of the amount referred to by him in his communication, dated October 18, 1962. Holding that the demand made by the Income-tax Officer was "not in conformity with the law" in that the amount of Rs. 8,50000 which had been distributed could not be deemed to be distributed as dividend without determining whether any portion of the amount represented capital gains, which arose out of the sale of capital assets consisting of lands from which agricultural income was derived, the High Court issued a writ restraining the Income-tax Officer from' enforcing the demand for tax. The High Court reserved liberty to the Income-tax Officer to examine the question afresh, and to determine "the correct amount of dividend within the meaning of S. 2 (6A) (c)". With special leave, the First Income-tax Officer has appealed to this Court.
(3.) It was submitted on behalf of the Income-tax Officer that the High Court in entertaining the petition in its extra-ordinary jurisdiction under Art. 226 of the Constitution, by-passed the machinery of assessment and rectification of orders of assessment prescribed by the Indian Income Tax Act which is both adequate and efficacious. But the High Court has under Art. 226 of the Constitution jurisdiction to issue to any person or authority within the territories in relation to which it exercises jurisdiction directions, orders, or writs in the nature, amongst others, of mandamus, prohibition and certiorari for the enforcement of any of the rights conferred by Part III and for any other purpose. It is true that normally the High Court will not entertain a petition in exercise of its jurisdiction under Art. 226 of the Constitution when the party claiming relief has an alternative remedy which is adequate and efficacious. The question however, is one of discretion of the High Court and not of its jurisdiction and if the High Court in exercise of their discretion thought that the case was one in which their jurisdiction may be permitted to be invoked, this Court would normally not interfere with the exercise of that discretion.;