{"id":246940,"date":"1975-04-09T00:00:00","date_gmt":"1975-04-08T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/c-i-t-madras-vs-t-v-sundram-iyengar-p-ltd-on-9-april-1975"},"modified":"2019-03-14T11:15:35","modified_gmt":"2019-03-14T05:45:35","slug":"c-i-t-madras-vs-t-v-sundram-iyengar-p-ltd-on-9-april-1975","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/c-i-t-madras-vs-t-v-sundram-iyengar-p-ltd-on-9-april-1975","title":{"rendered":"C.I.T. Madras vs T. V. Sundram Iyengar (P) Ltd on 9 April, 1975"},"content":{"rendered":"
Supreme Court of India<\/div>\n
C.I.T. Madras vs T. V. Sundram Iyengar (P) Ltd on 9 April, 1975<\/div>\n
Equivalent citations: 1976 AIR 255, \t\t 1975 SCR 93<\/div>\n
Author: Y Chandrachud<\/div>\n
Bench: Chandrachud, Y.V.<\/div>\n
           PETITIONER:\nC.I.T. MADRAS\n\n\tVs.\n\nRESPONDENT:\nT.   V. SUNDRAM IYENGAR (P) LTD.\n\nDATE OF JUDGMENT09\/04\/1975\n\nBENCH:\nCHANDRACHUD, Y.V.\nBENCH:\nCHANDRACHUD, Y.V.\nSARKARIA, RANJIT SINGH\nGUPTA, A.C.\n\nCITATION:\n 1976 AIR  255\t\t  1975 SCR   93\n 1976 SCC  (1)\t17\n CITATOR INFO :\n F\t    1983 SC 420\t (12)\n\n\nACT:\nIndian Income Tax Act. 1922, s. 23 A-Scope of.\n\n\n\nHEADNOTE:\nUnder Section 23A of the Indian income Tax Act, 1922, if  in\nrespect\t  of  any  previous  year  the\tprofits\t and   gains\ndistributed  as dividends within the 12\t months\t immediately\nfollowing the expiry of that previous year are less than the\nstatutory  percentage of the total income of  that  previous\nyear  as reduced by the amounts mentioned in cls.  (a),\t (b)\nand (c) and sub-s. (1), the Income Tax Officer shall make an\norder  that the company shall be liable to pay super-tax  at\nthe  prescribed\t rate on the undistributed  balance  of\t the\ntotal income of the previous year.  According to Explanation\n2, statutory percentage means 45 per cent of the  industrial\nprofits\t and  60  per  cent  of\t nonindustrial\t profits.The\nexplanation further says that the said percentages should be\napplied\t  separately  with  reference  to  the\tamounts\t  of\nprofits and gains attributable\t   to  the two parts of\t the\ncompany's business as if the said amounts were\trespectively\nthe  total income of the company in relation to each of\t its\nparts,\tthe  amount  of\t dividends  and\t taxes\talso   being\nsimilarly apportioned for purpose of sub-s. (1).\nIn  the present case 45 per cent of the\t industrial  profits\ncomes to Rs. 1.51 lakhs, while 60 per cent of non-industrial\nprofits\t comes to Rs. 8.43 lakhs.  The company,\t instead  of\ndistributing  a\t sum of Rs. 9.94 lakhs by way  of  dividends\ndistributed  Rs.  4.20\tlakhs, equally\tas  profits  of\t the\nindustrial  and non-industrial activities leaving aside\t the\nprofit of Rs. 13.21 lakhs.  The income Tax Officer allocated\nthe dividends declared by the company to the industrial\t and\nnon-industrial\tsegments  in  the  same\t proportion  as\t the\nprofits of the two segments bore to the total profits of the\ncompany and levied additional super-tax under s. 23A on\t the\nentire undistributed balance of the total profits  available\nfor  distribution,  namely Rs. 13.21 lakhs.  The  Order\t was\nconfirmed by the Appellate Assistant Commissioner.\nOn appeal, the Appellate Tribunal held that in so far as the\nprofits\t of  the  industrial activity  were  concerned,\t the\ncompany\t must  be  deemed  to have  distributed\t by  way  of\ndividends  out\tof those profits just so  much,as  would  be\nequal  to  45 per cent of such profits\tand  accordingly  it\nallocated the dividend out of industrial and  non-industrial\nprofits.  On this allocation it came to the conclusion\tthat\nthe  company having declared the statutory dividend  on\t its\nindustrial profits, was not liable to pay additional  super-\ntax in so far as these profits were concerned.\tIt, however,\nupheld\tthe levy of additional super-tax  on  non-industrial\nprofits.\nThe High Court confirmed the Tribunal's view.\nAllowing the appeal,\nHELD  : (1) The High Court was in error in holding that\t the\nprofits of the two parts of the company's business should be\ntreated as if they were the total income of the company for\nall purposes.  In taking this view the High Court overlooked\nthe concluding words of Explanation 2 by reason of which the\nlegal  fiction\thas  to be limited  to\tits  duly  appointed\npurpose. [106 D-E].\n(2)  The  High Court and the Tribunal were wrong in  holding\nin favour of the assessee.  Where a company has a  composite\nbusiness,  the first step is to ascertain the  distributable\nprofits\t of  the two parts separately.\tFor the\t purpose  of\nfinding\t out the minimum dividend that the company ought  to\nhave   distributed,  the  proper  statutory  percentage\t  as\nprescribed by Explanation 2 has to be applied separately  to\nthe  distributable  profits  of the two\t parts,\t as  if\t the\nrespective  profits are the total income of the\t company  in\nrelation  to  each  part of  its  business.   The  composite\ndividend distributed by the company has then to be\n94\napportioned  between the two parts in the same ratio as\t the\nrespective profits of the two parts bear to the toal profits\nof the company. [103H-104B].\n(3)(a) Explanation 2 by its express terms requires that\t for\nthe  purpose of sub-s. (1) the amount of dividends  must  be\n\"similarly apportioned\". [101 E]\n(b)  The  word \"similar\" may generally be said to be a\tword\nof ambiguous import in\tthe sense that the mere\t stipulation\nin a statute that something should be\tdone  similarly\t  is\ninsufficient  by itself to signify the degree of  similarity\nwith  which that thing must be done.  The  words  \"similarly\napportioned\" mean apportioned with reference to the  amounts\nof  profits  and gain attributable to the two parts  of\t the\ncompany's  business.   The Explanation first  refers  to  an\napportionment  or  splitting up and then provides  that\t the\ndividends and taxes shalt be similarly apportioned, that  is\nto   say,  similarly  split  up.   Accordingly,\t the   words\n\"similarly apportioned\" have a definite meaning and are\t not\nambiguous. [101G-102 C].\n(c)  The  word \"apportion\" is used in Explanation 2  in\t the\nsense  of \"split up\" so that \"similarly\t apportioned\"  means\n\"similarly split up \". The dividends have, therefore, to  be\nsplit up similarly, i.e. in the same ratio as the industrial\nand  non-industrial  profits bear to each  other  after\t the\ntotal  profit is split up in two parts, industrial and\tnon-\nindustrial. [102D-E]\n((1)  An  assignment as a proper portion  of  the  dividends\nwould mean an assignment in the same or similar ratio as the\nrespective  profits of the- two segments bear to  the  total\nprofits\t of the company.  It is not open to the\t company  to\nsplit  up and apportion the dividends to the Profits of\t the\ntwo  segments  in such a manner as it  finds  convenient  or\nthinks\t fit.\tThe  company's\tfreedom\t to  apportion\t the\ndividends  is conditioned by the ratio which the profits  of\nthe two segments bear to the total profits. [102 F-G]\nThe  sum  of Rs. 4.20 lakhs has to be split up in  the\tsame\nproportion which the respective profits of the two  segments\nbore to the total profits of the company.  There is a short-\nfall  in  respect of both the segments and  accordingly\t the\ncompany\t would be liable to pay additional super-tax at\t the\nrate  of 37 per cent on the entire undistributed balance  of\nthe distributable profits. [102 H-103 B].\n(4)(a) The language of s. 23A(1) as also of Explanation 2 is\nclear  and  distinct  and does not yield to  more  than\t one\nreasonable  interpretation.   The  fiction  created  by\t the\nExplanation  is expressly limited to the purposes of  sub-s.\n(1)  and there is no justification for pursuing the  fiction\nto  its\t logical conclusion so as to permit  it\t to  operate\nbeyond the limited purpose of sub-s. (1).  Under the  scheme\ncontained in s. 23A where a company has a composite business\nit  is\tnecessary  at the outset to  find  out\tthe  profits\nattributable  to  the  two  parts  of  its  business.\t The\nstatutory  percentages as prescribed by Explanation  2\thave\nthen  to  be applied separately to the profits\tof  the\t two\nparts.\t By reason of the fiction created by Explanation  2,\nthe  profits  of each part have, for this purpose,  and\t for\nthis purpose alone, to be treated as if they were the  total\nincome\tof that part of the Company's business.\t  By  sub-%.\n(1)  the company becomes liable to pay additional  super-tax\nif  the\t dividends  distributed by it  are  \"less  than\t the\nstatutory  percentage of the total income\".   Explanation  2\ncreates\t the fiction that for the purpose of sub-s. (1)\t the\nincome\tof  the respective parts is to be  regarded  as\t the\ntotal income of each part so that the statutory\t percentages\ncan  be applied separately to the income of each part.\t The\nfiction\t operates  in  this limited field and  is  in  terms\ncreated for this limited purpose. [105D-106 B].\n(b)  The  levy of additional super-tax under s.23A(1)  is  a\nsingle levy. The super-tax has to  be\t levied\t  \"on\t the\nundistributed  balance\tof  the\t total\tincome\t    of\t the\nprevious  year\".   Sub-section (1) itself clarifies that  by\nthese words is meant \"total   income   as  reduced  by\t the\namounts, if any, referred to in cls. (a), (b) or  (c)\t and\nthe  dividends\tactually distributed, if any.\" Even  if\t the\nIncome\tTax Officer finds that the apportioned\tdividend  in\nany part of the company's business is less than the dividend\nthat ought to have been\n95\ndeclared  by application of the statutory  percentage,\tthat\nadditional  super-tax has to be levied on the whole  of\t the\nundistributed profits of the company.\t [106 B-D].\n\t\t\t ARGUMENTS\nFor the appellant :\n1.On a true interpretation of Section 23A(1) and Explanation\n2   thereto  where  the\t company's  profits  liable  to\t  be\ndistributed   as  dividend  are\t composite   consisting\t  of\nindustrial   and  non-industrial  profits,  the\t  Income-tax\nOfficer\t has  first  to find  out  profits  attributable  to\nindustrial   activity  and  profits  attributable  to\tnon-\nindustrial  activity  and ascertain the ratios\tbetween\t the\nindustrial   and  non  industrial  profits  to\t the   total\ndistributable profit.  By the fiction created by explanation\n2  he  has to treat the profits in each section as  if\tthey\nwere  the  total  income  of  that  section  and  apply\t the\nstatutory  percentage to find out the minimum dividend\tthat\nmust be declared by the company.  He has then to dissect the\ncomposite dividend declared by the company and apportion the\nsame between the dividend relating to industrial profits and\ndividend  relating  to non-industrial profits  in  the\tsame\nratios\t as  the  industrial  profits  bear  to\t the   total\ndistributable profits and non-industrial profits bear to the\ntotal distributable profits.  Thereafter, he has to find out\nwhether\t the dividends so apportioned between the two  parts\nis below the minimum distributable on the application of the\nstatutory  percentage.\t If  he\t finds\tthat  the   declared\ndividend  apportioned to any part of the business  is  below\nthe  taxable  minimum arrived at by applying  the  statutory\npercentage   then  the\tIncome-tax  Officer  has   to\tlevy\nadditional  super tax on the entire  undistributed  profits,\nthat is to say, on the distributable profits minus the total\ncomposite dividend declared by the company.\n2.The  levy of additional super-tax u\/s. 23A(1) is a  single\nlevy  and is on the undistributed profits on their  entirety\nand,  therefore,  where on apportionment  of  the  composite\ndividend  declared  by the company the industrial  and\tnon-\nindustrial  profits, the Income-tax Officer finds  that\t the\napportioned  dividend in any part of the company's  business\nis  less than the dividend that ought to have been  declared\nby  application of the statutory percentage  the  Income-tax\nOfficer\t has  to  levy additional super-tax  on\t the  entire\nundistributed  profits even though in the other\t section  of\nthe business the declared dividend as apportioned may not be\nbelow the minimum that ought to have been distributed by the\napplication of the statutory percentage.\n3.   The  fiction  created  in clause of  explanation  2  of\nSection\t 23A(1) prescribing that the amounts of\t profits  or\ngains attributable to two parts of company's business should\nbe- treated as if they were the total income of the  company\nin relation to each of the parts is only for the purpose  of\napplying the statutory percentage which hag to be applied to\nthe  total  income  to find out the dividend  liable  to  be\ndistributed.   This  fiction  cannot  be  extended  for\t the\npurpose of deeming the profits of each part as total  income\nfor the purpose and levy of additional super-tax as if there\nwere  as  man total income as there were parts\tof  business\nprofits.\n4.   Even  on the interpretation put 'by the High Court\t and\nthe opinion given   by\tit on the question referred to\tu\/s.\n66(2) of the Income-tax Act, 1922, the\tIncome-tax   Officer\nwould  be justified in levying additional super-tax  on\t the\nentire distributed profit of Rs. 13,21,174 or atleast on Rs.\n12,36,196  which  is the amount\t of  non-industrial  profits\nminus  the balance of the declared dividend attributable  to\nnon   industrial  profits  i.e.\t Rs.  14,05,310\t minus\t Rs.\n2,69,114.\nFor the respondent\nSection 23A of the  Income-tax\t Act  was  recast   by\t the\nFinance Act II of 1957 with effect from\t 1-4-1957.   It\t  is\nthis  amended section that is applicable to the\t case  under\nconsideration as it relates to the assessment year 1957-58.\n96\nThe  scope  of\tExplanation 2 would appear  to\trequire\t the\nfollowing step& to be taken in order to find out whether  s.\n23A(1) is applicable in the case of a company whose  profits\nconsist partly of industrial activity and    partly of\tnon-\nindustrial activity.\n(i)  Ascertain the profits relating to each part  separately\nwhen   the   company's\tbusiness  consists  of\t partly\t  in\nmanufacture and partly of other activities.\n(ii)  Treat the profit of each part as the total  income  of\nthe  company  (in  order to find out  whether  the  dividend\ndistributed is less than the statutory percentage).\n(iii)  Apportion the taxes relating to each part and  deduct\nsuch tax from the profits of that of the company's business.\nArrive\tat  the balance of income by  deducting\t the  amount\ncovered by item (3) from the amount covered by item (2).\n(iv) Apply the statutory percentage of either 45 per cent or\n60 per cent on the balance of income arrived at.\n(v)   Find   out  whether  the\tdividend   distributed\t and\napportioned to each   part  is\tless  than   the   statutory\npercentage.\n(vi) If the dividend distributed is less than the  statutory\npercentage,  then on the undistributed balance of income  of\neach part less the  taxes specified in sub-section  (1)\t and\ndividend apportioned to\t this part, additional super-tax  to\nbe levied at 37 per cent.\nThe  expression\t 'similar' is an ambiguous word.   The\tword\napportionment  split  up.  So long as the  apportionment  is\nmade  with  the\t desire\t to, act as  fairly  and  justly  as\npossible by all parties no uniform mode of apportionment  is\nnecessary.   In the light of this the assessee\tcompany\t has\napportioned the dividend in accordance with the law.   There\nis  no\tother  method. of  apportionment  indicated  in\t the\nexplanation.\nSection\t 23A(1)\t is  not applicable to\tthat  party  of\t the\ncompany's  profits relating to manufacture.  If\t he  follows\nthe  provisions\t of  explanation 2  the\t Income-tax  Officer\ncannot be said to be satisfied that the dividend distributed\nrelating to this part of the company's business is less than\nthe statutory percentage.\nThe contention of the Revenue on the other hand is that\t the\ndividend  should  be apportioned in the same  proportion  in\nwhich the industrial profits and non-industrial profits bear\nto the total income of the company less the taxes  specified\nin cls. (a), (b) and (c) of s. 23A(1).\nIt  is undeniable that the words used in the latter part  of\nthe  explanation  are ambiguous.  They are capable  of\tmore\nmeaning\t than one.  The interpretation contended for by\t the\nrevenue\t leads to anamolous results.  In the  circumstances,\nthe construction which favors the assessee and saves it from\nthe penal consequences deserved to be adopted.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1392-93 of
\n1970.\n<\/p>\n
From the judgment and order dated the 23rd January, 1969  of
\nthe  Madras High Court in Tax Cases No. 116 of 1965 and\t 190
\nof 1967, Reference No. 48 of 1965 and 72 of 1967.
\nD.   N. Kharkhanis and S. P. Navar, for the appellant.
\nS.   Swaminathan and S. Gopalakrishnan, for respondent.\n<\/p>\n
97<\/span><\/p>\n
The Judgment of the Court was delivered by
\nCHANDRACHUD, J.-These appeals by certificate granted by\t the
\nHigh Court of Madras under section 66A(2) of the  Income-tax
\nAct,  1922 arise out of a common judgment dated January\t 23,
\n1969  delivered by the High Court in Tax Cases Nos.  116  of
\n1965 and 190 of 1967.  Tax Case No. 116 of 1965 arose out of
\nthe  reference\tmade by the  Income-tax\t Appellate  Tribunal
\nunder  section\t66(1) of the Act while Tax Case No.  190  of
\n1967 arose out a reference made by the Tribunal in pursuance
\nof  an order made by the High Court under section  66(2)  of
\nthe,  Act.  The question which arises for  consideration  in
\nthese  appeals is whether under section 23A of the Act,\t the
\nassessee-company  is liable to pay additional  super-tax  in
\nrespect of any portion of its profits.\n<\/p>\n
Section\t 23A of the Act of 1922, in so far as material\tread
\nthus at the relevant time :\n<\/p>\n
\t      “23A.  (1)  Where the  Income-tax\t Officer  is
\n\t      satisfied that in respect of any previous year
\n\t      the profits and gains distributed as dividends
\n\t      by  any  company\twithin\tthe  twelve   months
\n\t      immediately  following  the  expiry  of\tthat
\n\t      previous\tyear  are less\tthan  the  statutory
\n\t      percentage of the total income of the  company
\n\t      of that previous year as reduced by-<\/p>\n
\t      (a)   the\t amount of income-tax and  super-tax
\n\t      payable by the company in respect of its total
\n\t      income,  but  excluding  the  amount  of\tany.
\n\t      super-tax payable under this section ;\n<\/p><\/blockquote>\n
\t      (b)   the amount of any other tax levied under
\n\t      any  law\tfor the time being in force  on\t the
\n\t      company  by  the\tGovernment  or\tby  a  local
\n\t      authority\t in  excess of the amount,  if\tany,
\n\t      which has been allowed in computing the  total
\n\t      income ; and\n<\/p><\/blockquote>\n
\t      (c)   in\tthe case of a banking  company,\t the
\n\t      amount actually transferred to a reserve\tfund
\n\t      under section 17 of the Banking Companies Act,
\n\t      1949 ;\n<\/p><\/blockquote>\n
\t      the  Income-tax  Officer shall, unless  be  is
\n\t      satisfied\t that, having regard to\t the  losses
\n\t      incurred by the company in earlier years or to
\n\t      the  smallness  of  the profits  made  in\t the
\n\t      previous year, the payment of a dividend or  a
\n\t      larger  dividend than that declared  would  be
\n\t      unreasonable,  make an order in  writing\tthat
\n\t      the   company  shall,  apart  from   the\t sum
\n\t      determined  as payable by it on the  basis  of
\n\t      the assessment under section 23, be liable  to
\n\t      pay super-tax at the rate of fifty per cent in
\n\t      the case of a company whose business  consists
\n\t      wbolly or mainly in the dealing in or  holding
\n\t      of  investments,\tand at the  rate  of  thirty
\n\t      seven  per  cent\tin the\tcase  of  any  other
\n\t      company  on the undistributed balance  of\t the
\n\t      total income, of the previous
\n\t      98<\/span>
\n\t      year,  that is to say, on the total income  as
\n\t      reduced by the amounts, if any, referred to in
\n\t      clause  (a), clause (b) or clause (c) and\t the
\n\t      dividends actually distributed, if any.\n<\/p><\/blockquote>\n
\t\t   x\t x    x\t   x\tx    x\t  x\n\t\t    x\t x    x\t   x\tx    x\t  x\n\t\t    x\t x    x\t   x\tx    x\t  x\n\t      Explanation   2.-For  the\t purposes  of\tthis\n\t      section'. statutory\n\t      percentage means,-\n<\/pre>\n
\t       (i)  In the case of a company whose  business
\n\t\t\t    consists wholly or mainly in the deali
\nng in  or
\n\t      holding\tof   investments   ..\t     ..\t  ..
\n\t      100%\n<\/p><\/blockquote>\n
\t       (ii) In\tthe case of an Indian company  whose
\n\t      business consists wholly in the manufacture or
\n\t      processing  of  goods or in mining or  in\t the
\n\t      generation  or distribution of electricity  or
\n\t      any\tother\t   from\t      of       power
\n\t      45%\n<\/p><\/blockquote>\n
\t       (iii)\t In   the   case   of\tan    Indian
\n\t      company a part only of whose\t    business
\n\t      consists in any of the activities specified in
\n\t      clause (ii)-\n<\/p><\/blockquote>\n
\t      (a)in    relation\t   to\t the\tsaid\tpart\n\t      of\tthe\t   company's\t    business\n\t      45%\n<\/pre>\n
\t       (b)  in relation to the remaining part of the
\n\t\tcompany ‘s business–\n<\/p><\/blockquote>\n
\t      (1)  if  it is a company which  satisfies\t the
\n\t      conditions\tspecified      in\tsub-\n<\/p><\/blockquote>\n
\t      clause\t (a)\t   of clause (iv)  90%\n      (2) in any other case\t60%\n\t      the    said    percentages    being    applied\n<\/pre>\n
\t      separately  with reference to the\t amounts  of
\n\t      profits  and  gains attributable\tto  the\t two
\n\t      parts  of the company’s business aforesaid  as
\n\t      if  the  said amounts  were  respectively\t the
\n\t      total  income  of the company in\trelation  to
\n\t      each of its parts, the amount of dividends and
\n\t      taxes also being similarly apportioned for the
\n\t      purposes of subsection
\n\t       x\t  x\t\tx\t     x
\nFor  the  assessment year 1957-59 relevant to  the  previous
\nyear  ended  December 31, 1956 the company was\tassessed  to
\nadditional  super-tax  under the aforesaid  provision.\t The
\nbusiness of the company consists partly in, the\t manufacture
\nor processing of goods and partly
\n99<\/span>
\nof  an activity of a non-industrial nature.  Out of a  total
\nincome\tA  of  Rs.  37,98,774 the  profits  of\tthe  company
\navailable  for\tdistribution came to Rs.  17,41,814  out  of
\nwhich  Rs. 3,36,504’represented industrial profits  and\t Rs.\n<\/p><\/blockquote>\n<\/blockquote>\n
14,05,310  represented non-industrial profits.\tThe  company
\ndistributed by way of dividends a sum of Rs. 4,20,640  only,
\nclaiming  that the dividend was declared equally out of\t the
\nprofits\t of  the industrial and\t non-industrial\t activities.\n<\/p><\/blockquote>\n
Thus, the profits which were available for distribution\t but
\nwhich were not distributed came to Rs. 13,21,174.
\nThe   Income-tax  Officer,  while  making  the\t assessment,
\nallocated  the\tdividends  declared by the  company  to\t the
\nindustrial and nonindustrial segments in the same proportion
\nas the profits of the two segments bore to the total profits
\nof  the company.  By this method, out of the total  dividend
\nof Rs. 4,20 640 declared by the company, a sum of Rs. 81,264
\nwas treated as dividends declared out of industrial  profits
\nwhile  a  sum  of Rs., 3,39,376\t was  treated  as  dividends
\ndeclared out of non-industrial profits.\t Holding that  under
\nsection 23A, the company was liable to distribute by way  of
\ndividends  a sum of Rs. 1,51,426 out of\t industrial  profits
\nand a sum of Rs. 8,43,186 out of non-industrial profits, the
\nIncome-tax  Officer  levied  additional\t super-tax  on\t the
\nentirety  of the undistributed balance of the total  income,
\nthat is to say, on Rs. 13,21,174.\n<\/p>\n
The  Appellate\tAssistant Commissioner having  rejected\t the
\nappeal,\t the company carried the matter in a further  appeal
\nto   the  Income-tax  Appellate\t Tribunal,   Madras   Bench,
\ncontending  that  it had declared  dividends  utilising\t the
\nindustrial and non-industrial profits equally and since\t the
\ndividends  thus declared out of industrial profits  exceeded
\nthe  statutory\tpercentage  of\tthe  minimum   distributable
\ndividend as provided in section 23A, the levy of  additional
\nsuper-tax on the industrial profits was unjustified.  On the
\nother hand, it was submitted on behalf of tie Department of
\nsection 23A, to be apportioned in the same for the  purposes
\nof section 23A, to be apportioned in the same ratio in which
\nthe  profits themselves were apportioned between  industrial
\nand  non-industrial activities.\t The Tribunal  rejected\t the
\nmethod canvassed by the Department as “a Rule of thumb”\t but
\nthen  it also rejected the method adopted by the company  of
\nallocating  the\t declared  dividend half  and  half  to\t the
\nprofits\t of  the  two segments.\t Having\t rejected  both\t the
\nmethods,  the.\tTribunal held that in so far as\t profits  of
\nthe industrial activity were concerned, the company must  be
\ndeemed to have distributed by way of dividends out of  those
\nprofits\t just so much, neither more nor less-, as  would  be
\nequal  to  45 per cent of such\tprofits.   Accordingly,\t the
\nTribunal allocated a sum of Rs. 1,51,426 as dividends out of
\nindustrial profits and the balance, namely, Rs. 2,69,214  as
\ndividends out of non-industrial profits.  On this allocation
\nthe Tribunal came to the conclusion that the company, having
\ndeclared  the statutory dividend on its industrial  profits,
\nwas  not  liable to pay additional super-tax in\t so  far  as
\nthose profits were concerned.  It, however , upheld the levy
\nof additional super-tax on nonindustrial profits.\n<\/p>\n
100<\/span><\/p>\n
     Under  section 66(1) of the Act, the Tribunal  referred
\nthe following question for the opinion of the High Court
\n  (1)  “Whether\t on  the  facts\t and  in   the
\n\t      circumstances of the case, Tribunal was  right
\n\t      in holding that the assessee company     was
\n\t      not liable to. the additional super-tax  under
\n\t      sec.   23A  in  respect  of   the\t  assessee’s
\n\t      industrial  profits  for the  assessment\tyear
\n\t      1957,58”.\n<\/p>\n
\t       Under  section 66(2) of the Act the  Tribunal
\n\t      referred to the High,\tCourt the  following
\n\t      question
\n   (2)\t “Whether  on  the facts  and  in  the
\n\t      circumstances of\t   the case, the Tribunal is
\n\t      right  in holding that additional supertax  is
\n\t      not  leviable  under sec- 23A of the  Act,  in
\n\t      respect of any  portion of the profits of\t the
\n\t      assessee company for the assessment year 1957-\n<\/p>\n
\t      58.”\n<\/p>\n
The  second  question on which the High Court called  for  a
\nreference may seem to suggest that under the judgment of the
\nTribunal  the Company as heldi not liable to pay  additional
\nsuper-tax in respect\t of an portion\tof its profits. That
\nis not so. The Tribunal held that  the\t Company   was\t not
\nliable\tto  pay\t additional  super-tax\ton  its\t in-dustrial
\nprofits but was liable to pay it on non-industrial profits.
\nThe  High Court confirmed the Tribunal’s view. It held\tthat
\nthere  was  no\tjustification  in  Explanation\t2  for\t the
\napportionment of dividends in the ratio which the industrial
\nprofits\t bear to nonindustrial profits, that it was open  to
\nthe  asssee to apportion the dividends in such a way  as  to
\nconform to the requirements of section 23A in respect of one
\nof the two segments of its business and that the profits  of
\nthe  other  segment  only would\t attract  the  incidence  of
\nadditional  super-tax.\tThe  High  Court  demonstrated\t the
\nabsurdity   of\tthe  contrary  view  with  the\thelp  of   a
\nhypothetical illustration.\n<\/p>\n
We  are concerned in this appeal with the true\tconstruction
\nof  section  23A  as recast by Finance Act 2  of  1957.\t The
\nsection, in so far, as relevant, is extracted above.\t  It
\nhas  no\t application to companies in which  the\t public\t are
\nsubstantially  interested. The section provides for levy  of
\nadditional super-tax at 50 per cent in the case of a company
\nwhose  business consists wholly or mainly in the dealing  in
\nor holding of investments and at 37 per cent in the case  of
\nany  other company. The additional super-tax is leviable  if
\nin  respect  of\t any previous year  the\t profits  and  gains
\ndistributed  as dividends within the 12\t months\t immediately
\nfollowing the expiry of that previous year are less than the
\nstatutory  percentage  of the total income of  the  previous
\nyear as reduced by the amounts mentioned in clauses (a), (b)
\nand (c) of sub-section (1). The additional super-tax,  which
\nin the instant case would be 37 per cent, is payable on\t the
\nundistributed  balance of the total income of  the  previous
\nyear.By\t  ‘undistributed  balance  of  the   total   income’
\nis meant the total income as reduced by the amounts, if any,
\nreferred  to in clauses (a), (b) and (c) of sub-section\t (1)
\nand the dividends actually distributed if any.\n<\/p>\n
\t\t\t    101<\/span><\/p>\n
By  Explanation\t 2,  ‘statutory percentage’  means  for\t the
\npresent\t purpose, 45 per cent of industrial profits  and  60
\nper  cent of nonindustrial profits.  These percentages\thave
\nto be applied separately to the profits of the two  segments
\nas  if those profits were respectively the total  income  of
\nthe  company  in relation to each segment of  its  business.
\nThe   dividends\t and  taxes  have  also\t to  be\t  ‘similarly
\napportioned’, for the purposes of sub-section (1).
\nTwo questions arise for decision : (1) Whether the dividends
\ndistributed by the Company have to be apportioned as between
\nthe profits of the industrial and non-industrial segments of
\nits  business  in  the same  proportion\t as  the  respective
\nprofits\t bear to the total profits of the Company ; and\t (2)
\nWhether, if on apportionment, the dividend apportionment  to
\none  of\t the  two  segments is found to\t be  less  than\t the
\nstatutory  percentage  in  respect  of\tthat  segment,\t the
\nadditional  super-tax is leviable on the entire\t balance  of
\nthe  Company’s\tundistributed  profits\tor  whether  it\t  is
\nleviable  on  the balance of undistributed profits  of\tthat
\nsegment\t only  in  respect  of\twhich  the  short-fall\t has
\noccurred.  The second question may not strictly arise if  on
\nthe   first   question\tit  is\tfound  that   the   dividend
\napportionable to the two segments is less than the statutory
\npercentage  in respect of both the segments.  All the  same,
\nit would be necessary to examine that question also as\tthe
\nHigh Court has held that the liability to pay the additional\n<\/p>\n
-super-tax  must be restricted to the undistributed  profits
\nof  that segment only, in respect of which the\tdefault\t has
\noccurred.\n<\/p>\n
On  the\t first question, the language of  Explanation  2  is
\nclear and admits of no doubt or difficulty.  It requires  by
\nits express terms that for the purposes of sub-section\t(1),
\nthe  amount  of dividends must be  “similarly  apportioned”.
\nBut,  counsel  for  the\t respondent  urged  that  since\t the
\nExplanation does not refer to any apportionment at all,\t the
\nwords\t“similarly  apportioned”  cannot  be  ascribed\t any
\nrational  meaning  and it would therefore be  open  to\tthe
\ncompany to apportion the dividends 50 : 50 to the profits of
\nthe  two  segments.  Relying on “Words and  Phrases  Legally
\nDefined” by Saunders, Vol, V, p. 79 where it is stated\tthat
\nthe  word ‘similar’ is an ambiguous word, it  was  submitted
\nthat the benefit of an ambiguity in a taxing statute must go
\nto  the assessee and accordingly, the company would be\tfree
\nto  make  a convenient apportionment of dividends so  as  to
\nattract\t the  least incidence of the  additional  super-tax.
\nCounsel\t also relied on Burrow’s “Words and  Phrases”,\tVol.
\n1,   p.\t 217,  where  it  is  said  that  so  long  as\t the
\napportionment  is made with the desire to act as fairly\t and
\njustly\tas  possible  by all parties,  no  uniform  mode  of
\napportionment is necessary.\n<\/p>\n
The  word  ‘similar’ may be said to be a word  of  ambiguous
\nimport\tin the sense that the mere stipulation in a  statute
\nthat  something should be done similarly is insufficient  by
\nitself\tto signify the degree of similarity with which\tthat
\nthing  must be done.  A thing can be done similarly  without
\nits  being a slavish copy of the model.\t But  Explanation  2
\nindicates  with\t meticulous  particularity,  how   similarly
\ndividends  and taxes must be apportioned, When it says\tthat
\nthey   must  be\t “similarly  apportioned”,   the   reference
\nobviously is to the apportionment which is
\n102<\/span>
\nspoken of earlier in the Explanation.  After specifying what
\nparticular   percentages  shall\t constitute  the   statutory
\npercentage  for the purposes of section 23A,  Explanation  2
\nprovides  that\tthe  said  percentages,\t shall\tbe   applied
\nseparately  “with  reference to the amounts of\tprofits\t and
\ngains  attributable  to\t the  two  parts  of  the  company’s
\nbusiness.”   The   words   “similarly\tapportioned”   which
\nthereafter  occur in the Explanation mean apportioned  “with
\nreference  to the amounts of profits and gains\tattributable
\nto  the\t two parts of the company’s  business”.\t  Thus,\t the
\nExplanation first refers to an apportionment or splitting up
\nand  then  provides that the dividends and  taxes  shall  be
\nsimilarly  apportioned, that is to say, similarly split\t up.
\nAccordingly,  the  words “similarly  apportioned”  convey  a
\ndefinite meaning and are not ambiguous.\n<\/p>\n
It is urged that the division of total profits of a  company
\ninto  industrial  and non-industrial profits cannot  be\t the
\nresult\tof  any apportionment properly\tso-called  but\tmust
\nconform\t to  the company’s books of account  and  therefore,
\nExplanation  2 cannot be said to refer to any  apportionment
\nbefore speaking of the dividends and taxes being  “similarly
\napportioned”.\tThis  argument reads too much  in  the\tword
\n‘apportioned’. That word is used in Explanation 2  in  the
\nsense  of ‘split up’, so that ‘similarly apportioned’  means
\nsimply\t” similarly split-up.  The dividends have  therefore
\nto  be split up similarly, that is, in the same ratio as  to
\nindustrial  and\t non-industrial profits bear to\t each  other
\nafter the total profit is split up in two parts,  industrial
\nand nonindustrial.  According to Burrow’s Words and Phrases,
\nVol. 1. p. 217, to ‘apportion’ means ‘to split up’.
\nIt  is\ttherefore  impossible  to  accept  the\trespondent’s
\ncontention that though Explanation 2 requires that dividends
\nshould\tbe  similarly apportioned, it would be open  to\t the
\ncompany\t to  make any convenient division of  the  dividends
\ndistributed by it.  According to the Shorter Oxford  English
\nDictionary,  3rd Ed., Vol. 1, p. 87, to ‘apportion’  is\t ‘to
\nassign as a proper portion’.\n<\/p>\n
An  assignment\tas a proper portion of the  dividends  would
\nmean  an  assignment  in the same or similar  ratio  as\t the
\nrespective  profits  of the two segments bear to  the  total
\nprofits of the company.\t It is thus not open to the  company
\nto  split up and apportion the dividends to the\t profits  of
\nthe  two segments in such manner as it finds  convenient  or
\nthinks\t fit.\tThe  company’s\tfreedom\t to  apportion\t the
\ndividends  is conditioned by the ratio which the profits  of
\nthe two segments bear to the total profits.
\nThe  total distributable profits of the company came to\t Rs.
\n17,41,814  out\tof  which the  industrial  profits  are\t Rs.
\n3,36,504  and the non-industrial profits are Rs.  14,05,310.
\nForty-five  per cent of the industrial profits comes to\t Rs.
\n1,51,426  while\t 60 per cent of the  non-industrial  profits
\ncomes to Rs. 8,43,186.\tThe company therefore ought to\thave
\ndistributed  a\tsum  of Rs. 9,94,612  by  way  of  dividends
\nwhereas it distributed a sum of Rs. 4,20,640 only.  This sum
\nof  Rs. 4,20,640 has to be split up in the  same  proportion
\nwhich
\n103<\/span>
\nthe respective profits of the two segments bear to the total
\nprofits of the company.\t That is to say, a sum of Rs. 81,264
\nfrom out of the total dividends distributed is apportionable
\nto  the\t industrial profits while a sum of Rs.\t3,39,376  is
\napportionable to the non-industrial profits.  There is\tthus
\na short-fall in respect of both the segments and accordingly
\nthe  company would be liable to pay the additional  supertax
\nat  the\t rate  of 37 per cent on  the  entire  undistributed
\nbalance of distributable profits.\n<\/p>\n
The  hypothetical  illustration which was cited\t before\t the
\nIncome-tax  Officer  and which is relied upon  by  the\tHigh
\nCourt  may  at the highest, if its  fundamental\t premise  is
\ntrue, show that the interpretation canvassed by the  Revenue
\nmay  conceivably work out injustice.But if the\tlanguage  of
\nthe   statute\tis  clear  and\tunambiguous,  and   if\t two
\ninterpretations\t are  not reasonably possible, it  would  be
\nwrong  to  discard the plain meaning of the  words  used  in
\norder\tto   meet  a  possible\tinjustice.    Besides,\t the
\nillustration  only  assumes an injustice and  therefore\t its
\nfundamental premise is wrong.  The distributable profits  of
\nthe hypothetical company are said to be Rs. 1,00,000 out  of
\nwhich  Rs.  30,000  are\t industrial  and  Rs.  70,000\tnon-
\nindustrial profits.  Applying the statutory percentage of 45
\nand 60 per cent respectively, the company must distribute by
\nway  of dividends Rs. 13,500 plus Rs. 42,000, that  is,\t Rs.
\n55,500.\t  The  High  Court says that  even  if\tthe  company
\ndistributes Rs. 55,500 by way of dividends, apportioning Rs.
\n13,500 to industrial profits and Rs. 42,000 to nonindustrial
\nprofits, it would violate section 23A because, if the sum of
\nRs. 55,500 is to be apportioned in the same ratio which\t the
\nprofits\t of the two segments bear, a sum of Rs. 16,650\twill
\nbe  apportionable  to industrial profits and Rs.  38,850  to
\nnon-industrial\tprofits.  The fallacy of  this\tillustration
\nconsists in its overlooking that if the company is liable to
\ndistribute  Rs.\t 55,500\t by way of  dividends  and  it\tdoes
\ndistribute that, sum, there is no violation of section\t23A.
\nThat section applies only if “profits and gains\t distributed
\nas dividends …. are less than the statutory percentage  of
\nthe total income …. as reduced. . . . ”\n<\/p>\n
If  the\t dividends have to be apportioned in  the  ratio  of
\nprofits\t of  the  two segments, the taxes have\talso  to  be
\nsimilarly  apportioned\tfor  Explanation 2  speaks  of\t“the
\namount\t of  dividends\tand  taxes  also   being   similarly
\napportioned”.\tA  “similar” apportionment of taxes,  it  is
\nurged by the respondent, may in practice lead to  impossible
\nand unreal situations since the taxes on the profits of\t the
\ntwo  segments  may  be unequal as in the  case\tof  a  newly
\nestablished industrial undertaking which, in respect of\t its
\nindustrial income, may enjoy a tax concession.\tThere is  no
\nmerit  in this contention.  The method specified in  section
\n23A  has to be worked out according to its scheme and it  is
\nno  answer to the obligation to apportion the dividends\t and
\ntaxes, that taxes levied on the profits of the two  segments
\nare unequal or are leviable on a different basis.
\nThus, the High Court and the Tribunal were wrong in  holding
\nin favour of the assessee on the first of the two  questions
\nwhich we have framed for consideration.\t Where a company has
\na composite
\n104<\/span>
\nbusiness,  as  for  example  industrial\t and  non-industrial
\nbusiness,  the first step is to ascertain the  distributable
\nprofits\t of  the two parts separately.\tFor the\t purpose  of
\nfinding\t out the minimum divided that the company ought\t to-
\nhave   distributed,  the  proper  statutory  percentage\t  as
\nprescribed by Explanation 2 has to be applied separately  to
\nthe  distributable  profits  of the two\t parts,\t as  if\t the
\nrespective  profits are the total income of the\t company  in
\nrelation  to  each  part of  its  business.   The  composite
\ndividend   distributed\tby  the\t company  has  then  to\t  be
\napportioned  between the two parts in the same ratio as\t the
\nrespective  profits  of\t the two parts\tbear  to  the  total
\nprofits of the company.\n<\/p>\n
We  have  shown\t that  in  the\tinstant\t case  the  dividend
\napportionable  between\tthe  two  parts\t of  the   company’s
\nbusiness is less than the statutory percentage in respect of
\nboth the parts.\t The High Court, like the Tribunal, gave  to
\nthe company the choice to allocate the dividend suitably  to
\nthe  two  parts and held on such allocation that  since\t the
\ndefault\t had occurred in respect of the profits of the\tnon-
\nindustrial part only, the company would be liable to pay the
\nadditional  super-tax  on the undistributed balance  of\t the
\nnon-industrial\tprofits only.  The second question which  we
\npropose\t to  consider,\tthough\tit does\t not  arise  on\t our
\nfindings, is whether the company is liable to pay additional
\nsuper-tax  on  the undistributed balance  of  non-industrial
\nprofits\t only or whether it is liable to pay the  additional
\nsuper-tax  on  the  entire  undistributed  balance  of\t its
\ndistributable  profits.\t  We have heard a full\targument  on
\nthis  question and if we did not decide it the view  of\t the
\nHigh Court is likely to cause misunderstanding.
\nAs  observed  by  Chagla C. J. in Sir  Kasturchand  Ltd.  v.
\nCommissioner of Incoem-tax, Bombay City,(1) section 23A\t was
\nenacted\t in terrorem against private companies.\t The  object
\nof  the\t section is to prevent evasion of super-tax  by\t the
\nshareholders  of  a  company in which  the  public  are\t not
\nsubstantially  interested.   The shareholders of  a  private
\ncompany\t could\tavoid  the high incidence  of  super-tax  by
\nallowing  the  profits of the company to accumulate  in\t its
\nhands  so that the accumulated profits could be\t distributed
\neventually  in\tthe  form  of bonus  shares  which  are\t not
\nassessable as income in their hands.\n<\/p>\n
In  considering\t whether  the  company\tis  liable  to\t pay
\nadditional super-tax on the entire balance of  distributable
\nprofits,  it  has to be borne in mind that  section  23A  is
\nclearly penal in nature ; for, in    circumstances  mentioned
\ntherein, if a private company fails to distribute by way  of
\ndividends  the\tstatutory percentage  of  its  distributable
\nprofits, it becomes liable to pay, apart from the sum deter-
\nmined as payable by it on the basis of the assessment  under
\nsection\t 23, super-tax at 50 per cent or 37 per cent as\t the
\ncase   may   be,  on  the  undistributed  balance   of\t its
\ndistributable  profits.\t In the first place, this  provision
\nbeing  penal, the burden would lie on the revenue  to  prove
\nthat   the   conditions\t laid  down  by\t the   section\t are
\nsatisfied.(2)
\n(1)  17 I. T. R. 493, of 495 and 496.\n<\/p>\n
(2)  Commissioner  of Income-tax, West-Bengal  v.  Gangadhar
\nBanerjee & Co.(p) Ltd., 57 I.T.R. 176, 184.\n<\/p>\n
105<\/span><\/p>\n
Secondly,  penal statutes have to be construed\tstrictly  in
\nthe sense that if there is a reasonable interpretation which
\nwill  avoid  the penalty, that interpretation  ought  to  be
\nadopted : “When the legislature imposes a penalty, the words
\nimposing it must be clear and distinct”.(1)
\nIt  is\tcontended  on  behalf of  the  respondent  that\t the
\nlanguage  of  section  23A (1) read with  Explanation  2  is
\nambiguous  and\ttherefore  the\tcourt  ought  to  adopt\t the
\ninterpretation\t which\t favorites   the   assessee,\tmore
\nparticularly because the relevant provisions provide for the
\nimposition  of a penalty.  In this behalf,  learned  counsel
\nfor   the  respondent  relied  strongly\t on  the   provision
\ncontained   in\t Explanation  2\t by  which   the   statutory
\npercentages  are  required  to be  applied  separately\twith
\nreference  to the amounts of profits and gains\tattributable
\nto the two parts of the company’s business, “as if the\tsaid
\namounts were respectively the total income of the company in
\nrelation  to  each  of its parts”.  It\tis  urged  that\t the
\nfiction\t created  by Explanation 2 must be  given  its\tfull
\neffect\tand  that  it must be carried to  its  logical\tcon-
\nclusion.  As the distributable profits of the two parts\t are
\nto  be\tdeemed\tto be the total income\tof  the\t company  in
\nrelation to each ,of those parts, the penalty, according  to
\nthe  respondent, can be imposed on that part of\t the  income
\nonly in respect of which the default has occurred.
\nIt  is\timpossible  to\taccept\tthis  contention.   If\t two
\ninterpretations\t of the relevant provisions were  reasonably
\npossible, we would have readily accepted that interpretation
\nwhich favours the assessee.  But the language of sub-section
\n(1)  of\t section 23A as also of Explanation 2 is  clear\t and
\ndistinct  and  does not yield to more  than  one  reasonable
\ninterpretation.\t  Sub-section  (1)  provides  that  if\t the
\ndividends  distributed\tby  a  company\tare  less  than\t the
\nstatutory percentage of the “total income” of the company as
\nreduced\t by  the amounts mentioned in clauses (a),  (b)\t and\n<\/p>\n
(c),  the  Income-tax Officer shall make an order  that\t the
\ncompany\t shall be liable to pay additional super-tax at\t the
\nprescribed rates “on the undistributed balance of the  total
\nincome\tof the previous year”, that is to say on  the  total
\nincome as reduced by the amounts referred to in clauses (a),\n<\/p>\n
(b)   and  (e)\tand  the  dividends  actually\tdistributed.
\nExplanation   2\t clarifies  what  is  meant  by\t  “statutory
\npercentage”  and  provides that the  prescribed\t percentages
\nshould\tbe applied separately with reference to the  amounts
\nof  profits and gains attributable to the two parts  of\t the
\ncompany’s   business,\t“as  if\t the   said   amounts\twere
\nrespectively the total income of the company in relation  to
\neach  of  its parts……. for the purposes  of\t sub-section
\n(1)”.\tThe  fiction  created by  the  Explanation  is\tthus
\nexpressly  limited  to the purposes of sub-section  (1)\t and
\nthere  is no justification for pursuing the fiction  to\t its
\nlogical conclusion so As to permit it to operate beyond\t the
\nlimited\t purpose  of  sub-section  (1).\t  Under\t the  scheme
\ncontained  in section 23A, where a company has\ta  composite
\nbusiness  it  is  necessary at the outset to  find  out\t the
\nprofits attributable to the two parts of its busi-
\n(1)  Willis v. Thorp (1875) L.R. 10 Q.B. 383, 386, gee\talso
\nCraies in Statute Law, Sixth Ed., p, 529-530.\n<\/p>\n
\t\t\t    106<\/span><\/p>\n
ness.  The statutory percentages a prescribed by Explanation
\n2  have then to be applied separately to the profits of\t the
\ntwo parts.  By reason of the fiction created by\t Explanation
\n2  the profits of each part have for this purpose, and\tthis
\npurpose\t alone,\t to  be treated as if they  were  the  total
\nincome\tof  that part of the company’s\tbusiness.   By\tsub-
\nsection\t 1,  the company becomes liable\t to  pay  additional
\nsuper-tax if the dividends distributed by it are “less\tthan
\nthe statutory percentage of the total income”.\t Explanation
\n2  creates the fiction that for the purposes of\t sub-section
\n1,  the income of the respective parts is to be regarded  as
\nthe  total  income  of\teach  part  so\tthat  the  statutory
\npercentages can be applied separately to the income of\teach
\npart.  The fiction operates in this limited field and is  in
\nterms created for this limited purpose.\n<\/p>\n
The levy of additional super-tax under section 23A (1) is  a
\nsingle\tlevy.\tThe  super-tax\thas to\tbe  levied  “on\t the
\nundistributed  balance of the total income of  the  previous
\nyear”.\tSub-section (1) itself clarifies that by these words
\nis  meant “total income as reduced by the amounts,  if\tany,
\nreferred to in clause (a), clause (b) or clause (c) and\t the
\ndividends  actually  distributed, if any”.   The  additional
\nsuper-tax   has\t therefore  to\tbe  levied  on\tthe   entire
\nundistributed balance of the net income of the company.\t  In
\nother  words, even if the Income-tax Officer finds that\t the
\napportioned  dividend in any part of the company’s  business
\nis  less than the dividend that ought to have been  declared
\nby  application of the statutory percentage, the  additional
\nsupertax has to be levied on the whole of the  undistributed
\nprofits\t of  the company.  The High Court was  therefore  in
\nerror  in holding that the profits of the two parts  of\t the
\ncompany’s  business  should be treated as if they  were\t the
\ntotal  income of the company for all purposes.\t In taking
\nthis view, the High Court overlooked the concluding words of
\nExplanation 2 by reason of which the legal fiction has to be
\nlimited to its duly appointed purpose.\n<\/p>\n
In  the result we set aside the order of the High Court\t and
\nallow the appeal with costs.\n<\/p>\n
Appeal allowed.\n<\/p>\n
P.B.R.\n<\/p>\n
107<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India C.I.T. Madras vs T. V. Sundram Iyengar (P) Ltd on 9 April, 1975 Equivalent citations: 1976 AIR 255, 1975 SCR 93 Author: Y Chandrachud Bench: Chandrachud, Y.V. PETITIONER: C.I.T. MADRAS Vs. RESPONDENT: T. V. SUNDRAM IYENGAR (P) LTD. DATE OF JUDGMENT09\/04\/1975 BENCH: CHANDRACHUD, Y.V. BENCH: CHANDRACHUD, Y.V. SARKARIA, RANJIT SINGH GUPTA, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-246940","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nC.I.T. Madras vs T. V. 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