Sabyasachi Mukharji J. - (1.) In order to appreciate the controversy in this case it would be relevant to refer to certain facts. It appears that on 30th November, 1954, there was half-yearly closing of account by Lothian jute Mills Co. Ltd. and the accounts for the half-year ended on 30th November, 1954, were drawn up by the Lothian Jute Mills Co. Ltd, The said accounts disclosed a surplus profit of Rs. 2,38.754-8-7. On the 9th February, 1955, the directors submitted their report to the shareholders in respect of the half-yearly account up to 30th November. 1954. The directors recommended distribution of dividend Out of the aforesaid profit of Rs. 2,38,754-8-7 as follows: " Preference shares at Rs. 3-8-0 per share amounting to Rs. 35,000 and ordinary shares at Rs. 15 per share amounting to Rs. 1,50,000. Distribution of dividend has left a balance of Rs. 53,754-8-7 which was carried forward. The Lothian Jute Mills Co. Ltd. on the 24th March, 1955, distributed to the shareholders the aforesaid dividends of Rs. 35,000 on preference shares and Rs. 1,50,000 on ordinary shares."
(2.) In August, 1955, proceedings were taken for amalgamation Of Lothian Jute Mills Co. Ltd. and Albion Jute Mills Co, Ltd. with the New Central Jute Mills Company Ltd., the assessee herein, OB the 30th November 1955, Lothian Jute Mills Co. Ltd. and Albion Jute Mills Co. Ltd. distributed dividends in respect of the year ended on 30tb November, 1955. We are not concerned with this distribution and the question relating thereto. An order of this court was passed in Matter No. 337 of 1955 on 6th December, 1955. approving the scheme of amalgamation by which the undertaking of Lothian Jute Mills Co. Ltd. and the Albion Jute Mills Co. Ltd. stood transferred to and vested in the New Central Jute Mills Co. Ltd. as and from 1st December, 1954. We are concerned in this reference with the order of the Income-tax Officer under Section 154 of the Income-tax Act, 1961. By the aforesaid order, the Income-tax Officer wanted to rectify the mistake in the original assessment order made on the 29th March, 1961, in respect of the assessment year 1956-57, Under the scheme of amalgamation referred to hereinbefore the Whole of the undertaking, property and all the assets and liabilities of the two other companies known as the Lothian Jute Mills Co, Ltd. and Albion Jute Mills Co. Ltd. were transferred to and vested in the assessee-company as indicated before. In completing the assessment on the assessee for the assessment year 1956-57, the Income-tax Officer had to compute the super-tax payable by the assessee and allow a rebate thereon and then reduce the rebate so allowed. In the present case, the matter related to reduction of the rebate pursuant to Sub-clause (i)(b) of the second proviso to Paragraph D of Part II of Finance Act, 1956. The relevant portion of the same was to the following effect: " Provided further that: (i) the amount of the rebate.........shall fee reduced by the sum......... equal to the......aggregate of the amounts..................computed as hereunder:--.... (b) in addition, in the case of a company referred to in Clause (ii) of the preceding proviso which has distributed to, its shareholders during the year dividends in excess of six per cent, of its paid-up capital."
(3.) While completing the assessment on 29th March, 1961, the Income-tax Officer computed reduction in rebate at Rs. 86,703-12-0. As a result of the amalgamation, the balance-sheet of the assessee-company incorporated in itself the balance-sheets of the other two companies as on the 1st December, 1954, The Income-tax Officer subsequently noticed that; in calculating the reduction in rebate on the super-tax the dividend of Rs. 1,50,000 distributed by Lothian Jute Mills Co. Ltd. with reference to the year ending on 30th November, 1954, has been left out of account. This will appear from the balance-sheets of 31st December, 1955, distributed to the shareholders as attached to the said balance-sheet; the company, namely, Lothian Jute Mills Co. Ltd,, was maintaining half-yearly accounts and the accounts for the half-year ending 30th November, 1954, had disclosed a surplus profit as indicated before.;