P.B.Mukharji, J. - (1.) This is a reference at the instance of the Commissioner of Income-tax, West Bengal. The statement of the case raises two questions for answer by this court. They are : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the rebate of super-tax was allowable to the assessee under Clause (ii) of the first proviso to Paragraph D of Part II of the First Schedule to the Finance (No. 2) Act of 1957 ?" "(2) If the answer to the first question is in the negative--whether the Tribunal was right in holding that no withdrawal of rebate granted by the first proviso to Paragraph D of Part II of the Finance (No. 2) Act of 1957 was justified under Clause (i) of the second proviso to the said paragraph ?"
(2.) The relevant facts recorded in the statement of the case are as follows : The assessee, Messrs. Jasrup Baijnath Bahety & Sons Private Ltd., of 35, Cross Street, Calcutta, is a private limited company. The controversy relates to the assessment year 1957-58 for which the previous year was the calendar year 1956. The Income-tax Officer determined the total income of the company at Rs. 8,962. The share capital of the company, which stood at Rs. 3,84,000 at the beginning of the year, was reduced to Rs, 96,000 by the order of this court dated the 24th July, 1956. The reduction in capital thus amounted to Rs. 2,88,000. The company distributed amounts, in cash to the shareholders in consequence of such reduction. It is recorded in paragraph 5 of the statement of the case that the assessee-company was formerly carrying on the business of generation and supply of electricity at Khandwa, Madhya Pradesh. Since the electricity supply was taken over by the State Government, the assessee had practically no business and the share capital was in excess of the requirements of the company. The High Court ordered the reduction of capital in the following terms : "The capital of Messrs. Jasrup Bijnath Bahety & Sons (Private) Ltd. henceforth is Rs. 96,000 divided into 3,840 shares of Rs. 25 each reduced from Rs. 4,34,000 divided into 4,340 shares of Rs. 100 each and by extinguishing the unissued capital of Rs. 40,000 and reducing 3,840 of the issued ordinary shares by Rs. 75 each. The 3,840 shares were part of 4,340 ordinary shares. At the time of registration of this minute the full sum of Rs. 25 per share has been and is to be deemed paid up on the said 3,480 ordinary shares."
(3.) The Income-tax Officer found that there were accumulated profits to the extent of Rs. 97,399. In his order the Income-tax Officer records as follows : "During this year the assessee effected reduction in the share capital. Share capital which stood at Rs. 3,84,000 at the beginning of the year was reduced to Rs. 96,000 by order of the court, dated 24th July, 1956. Reduction in capital amounts to Rs. 2,88,000. The company is distributing amounts in cash to its various shareholders. The distribution by the company on the reduction of share capital would be regarded as dividend to the extent to which the company possesses accumulated profits.";