DIPAK KUMAR SEN, J. - (1.) THE Shell Petroleum Co. Ltd., the assessee, a non-resident company, was assessed to income-tax in the asst. yr. 1957-58, the relevant accounting year ending on December 31, 1956. During the relevant accounting year, the assessee held 50per cent of the total share capital of Burmah-Shell Refineries Ltd., an existing company within the meaning of the Companies Act, 1956 (hereinafter referred to as " the Indian company ").
(2.) IN the income-tax assessment for the said assessment year, the ITO included in the total income of the assessee the dividend received from the Indian company. The Indian company issued a certificate under s. 20 of the Indian IT Act, 1922, recording that 22.01per cent of the dividend came out of the profits of the Indian company exempt under s. 15C of the Act of 1922. The ITO accepted the percentage provisionally pending final assessment of the Indian company. The dividend received from the Indian company was grossed up to Rs. 1,35,76,257. On completion of the income-tax assessment of the Indian company, the assessment of the assessee for the said assessment year was reopened under s. 34(1)(b) of the Indian IT Act, 1922, and the computation of the dividend income of the assessee was made as follows:
(3.) FROM the total income of the Indian company which was assessed at Rs. 5,42,46,753, losses carried forward from the previous year of Rs. 66,33,021 was deducted and the taxable balance was determined to be Rs. 4,76,12,732. Profits exempt under s. 15C of the Act were computed at Rs. 1,28,18,538 and the excess depreciation allowed was ascertained at Rs. 2,12,76,702.;