KILBURN PROPERTIES LIMITED Vs. COMMISSIONER OF INCOME TAX, BENGAL.

JUDGEMENT

(1.) THIS is a reference under Section 66(1) of the Indian Income Tax Act and arise out of orders under section 23A (1) of the Act for the assessment year 1941 -42 and 1942 -43. The assessee is Kilburn Properties Limited, Calcutta; the only source of income of the company is house property. The assessable income of the company for 1941 -42 was Rs. 34,772 and Income Tax payable was Rs. 10,141 -13 -0 only leaving a balance of Rs. 24,630 -3 -0 available for distribution as dividends. The general meeting of the company was held on June 6, 1941. No dividend was declared. In the profit and loss account the company shewed Rs. 31,331 as depreciation allowance on the original cost of Rs. 1,19,002 only and thus the profits were shewn as Rs. 55 -2 -6 only. The Income Tax Officer though that the company should have declaref 60 per cent. of the assessable income less tax as dividend and the made an order in terms of section 23A(1) of the Act. During the assessment year 1942 -43 the assessable income was Rs. 35,847 and the tax payable was Rs. 11,762 -6 -0 and the balance of Rs. 24, 084 -10 -0 was available for distribution as dividend. The general meeting was held on May 28, 1942, but no dividend was declared. The company debited Rs. 31,472 as depreciation allowance and the profits were shown as Rs. 65 -8 -2 only.

(2.) THE Income Tax Officer made a similar order under Section 23A(1) of the Act in this year also. On appeal by the assessee the Appellate Assistant Commissioner held that national income under Section 9 of the Act was not included in Section 23A and set aside the orders of the Income Tax Officer for both years. Appeals were taken by the Income Tax Officer to the Income Tax Appellate Tribunal who reversed the orders of the Appellate Assistant Commissioner and restored the orders of the Income Tax Officer. On applications filed by the assessee under Section 66 of the Income Tax Act the Tribunal referred the following question for the opinion of this Court : - "Whether in view of the fact that the entire income of the assessee was derived from property assessable under Section 9 of the Indian Income Tax Act, the provisions of Section 23A were at all appplicable to the case ?" The relevant portion of Section 23A reads as follows : - "Whether the Income Tax Officer is satisfied that the in respect of any previous year the profits and gains distributed as dividends by any company.......are less then 60 per cent. of the assessable income of the company of that previous year, as reduced by the amount of income super -tax payable...he shall...make... an order in writing that the undistribution portion of the assessable income of the company that previous year as computed for Income Tax purposes and reduced by the amount of Income Tax and super -tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the shareholders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purpose of assessing his total income."

(3.) MR . Mitra, learned counsel appearing for the assessee, contended that the words "profits and gains" used in Section 23A (1) have reference to a company carrying on business and cannot apply to a company whose only source of income is derived from property.He, therefore, submitted that the question referred to this Court should be answered in the negative. In our opinion, this contention cannot be accepted for the following reasons. It would appear from a resume of the Act that the expression "profit and gains" is not limited to business only; it has been used in other case also; again the word "income" and not profits and gains has been used in case of business, see Section 2(6A), 4(3)(ia), 4(3)(iii), 10(iv), 23A, 24(1) and 24(2). We may particularly refer to Section 24(1) and 24(2) which speak of loss of profits and gains under any of the heads mentioned in Section 6, viz., salary, interest on securities, property, etc. Similarly the second proviso to Section 55 uses the expression "profits and gains" generally in relation to income from all sources, viz., salary, interest on securities, property, etc., of an unregistered firm or association of individuals. In Section 23A(1), (3)(ii), and (4) we find that both the expression "undistributed portion of the assessable income" and "undistributed portion of profits and gains" have been used. Section 6 of the Act classifies the "income", "profits and gains" under several heads, e.g., salary, interest on securities, property, profits and gains from the business, profession or vocation, and "other sources". This classification was intended for the purpose of calcuation of assessable income after deductions, as would appear from Section 7, 8, 9, 10 and 11. Reliance was placed on the following observations of Mullick, J., in In re Raja Jyotiprosad Singh Deo, viz., "the Act makes a differtence between income and profits. Profits are included within the term income but profits are not synonymous with income." The observations are obiter and were made in a different connection, viz., the decision of cess from rents and royalties under Section 11 and must be limited to the facts of that case.