- (1.) THIS is a reference under Section 66 (1) of the Indian Income-Tax Act, 1922 (hereinafter called the Act) made by the Income-Tax Appellate Tribunal, Delhi bench 'b' and it arises out of the following circumstances :
(2.) THE assessee in this case has been. assessed as an individual. The assessment year concerned is 1957-58 for which the relevant previous year is the financial year ending on 31st of March, 1957. The assessee had various sources of income out of which one source was the income from dividends. The Income-tax Officer, special Investigation Circle, Jaipur, while assessing the income of the assessee increased the income-tax on dividend income which was undoubtedly included in the unearned income by 15 per cent to compute the amount of special surcharge as per the Finance Act, 1957. The assessee challenged the assessment order by filing an appeal before the Appellate Assistant Commissioner of Income-Tax, 'a' range, Jaipur, on various grounds, but this question that special surcharge at the rate of 15 per cent could not be imposed on his dividend income was not raised in that appeal by the assessee. It was for the first time that an objection was taken by the assessee before the income-Tax Appellate Tribunal, Delhi Bench 'b' that the special surcharge on unearned income at the rate of 15 per cent as provided by the Finance Act of 1957 could not be imposed on the dividend income of the assessee for that year because of the provisions of Section 2 (3) (a) of the Finance Act, 1957, which provides that the income-tax on dividend income could be calculated as per the rates under operation of the Finance Act, 1956. The Tribunal did not see any merit in the contention raised by the assessee and, therefore, it dismissed this ground. On an application filed by the assessee under Section 66 of the Act, the Income-Tax Appellate Tribunal came to the conclusion that a question of law arises from its order in Income-Tax Appeal No. 6347 of 1964-65 filed by the assessee against the assessment for the assessment year 1957-58 and referred the following question to this Court under Section 66 (1) of the Act: "whether on the facts and in the circumstances of the case surcharge was a separate item of taxation different from income-tax and therefore the special surcharge imposed as per Finance Act, 1957 was leviable on income from dividends in spite of the provisions contained in Clause (a), sub-section (3) of Section 2 of this Finance Act to the effect that income-tax on income from dividends would be charged for 1957-58 assessment year at the rate prescribed by the Indian Finance Act, 1956?"
(3.) DR. Pal appearing on behalf of the assessee urged that under the scheme of the indian Income-tax Act, 1922, no other tax except the income-tax could be charged from the assessee and the surcharge or special surcharge as provided by the Finance Act of 1957 is included in the term "income-tax". He also urged that the mode for computing income-tax on dividend income is given in Section 2 (3) (a) of the Finance Act of 1957, according to which the income-tax on dividend income can be computed by applying the rate or rates applicable under the operation of the Finance Act of 1956, and, therefore, according to him, the assessing authority could not have charged special surcharge at the rate of 15 per cent as provided by the Finance Act No. 2 of 1957 as that rate could not be made applicable for computing income-tax on the dividend income of the assessee. He, therefore, urged that the income-tax authorities under the Act were not empowered to levy a special surcharge for which there was no provision made in the Finance Act of 1956.;