{"id":44995,"date":"1958-10-09T00:00:00","date_gmt":"1958-10-08T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/rajputana-agencies-ltd-vs-commissioner-of-i-t-bombay-on-9-october-1958"},"modified":"2015-11-02T12:31:47","modified_gmt":"2015-11-02T07:01:47","slug":"rajputana-agencies-ltd-vs-commissioner-of-i-t-bombay-on-9-october-1958","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/rajputana-agencies-ltd-vs-commissioner-of-i-t-bombay-on-9-october-1958","title":{"rendered":"Rajputana Agencies Ltd vs Commissioner Of I. T., Bombay on 9 October, 1958"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Rajputana Agencies Ltd vs Commissioner Of I. T., Bombay on 9 October, 1958<\/div>\n
Equivalent citations: 1959 AIR 265, \t\t 1959 SCR Supl. (1) 142<\/div>\n
Author: P Gajendragadkar<\/div>\n
Bench: Gajendragadkar, P.B.<\/div>\n
           PETITIONER:\nRAJPUTANA AGENCIES LTD.\n\n\tVs.\n\nRESPONDENT:\nCOMMISSIONER OF I. T., BOMBAY\n\nDATE OF JUDGMENT:\n09\/10\/1958\n\nBENCH:\nGAJENDRAGADKAR, P.B.\nBENCH:\nGAJENDRAGADKAR, P.B.\nAIYYAR, T.L. VENKATARAMA\nSARKAR, A.K.\n\nCITATION:\n 1959 AIR  265\t\t  1959 SCR  Supl. (1) 142\n CITATOR INFO :\n D\t    1960 SC1016\t (18)\n D\t    1966 SC 279\t (4)\n\n\nACT:\n       Income-tax-Assessment of company-Declaration of dividend\t in\n       excess of statutory limit-Additional income-tax-Computation\"\n       Rate  applicable\t to  the total income  of  the\tcompany\t \",\n       Meaning of --Indian Finance Act, 1951, First Schedule  Para.\n       B, proviso (ii), explanation (ii)(b).\n\n\n\nHEADNOTE:\nThe  assessee, a private limited company in Saurashtra,\t was\nassessed  for the assessment year 1952-53 on a total  income\nof Rs. 26,385.\tIt was assessable at the rate of four  annas\nper rupee but in view of the provisions of the Part B States\n(Taxation Concession) Order, 1950, it was actually  assessed\nat  the\t rate of sixteen pies per rupee.  The  assessee\t had\ndeclared dividend of Rs. 30,000 out of which Rs. 15,159\t was\nfound  to be excess dividend.  On this excess  dividend\t the\nassessee  was  liable to pay additional income-tax  and\t the\ndispute\t was  regarding\t the rate at which  tax\t was  to  be\ncomputed.   Clause (ii) of the proviso to para.\t B of  Part.\nI  of  the First Schedule to the Finance  Act,\t1951,  which\napplied to the case, provided that the additional income-tax\nwas to be equal to the sum by which the aggregate amount  of\nincome-tax actually borne by the excess amount fell short of\nthe amount Calculated at the rate of five annas per rupee on\nthe  excess  dividend.\tSub-clause (b) of cl.  (ii)  to\t the\nsecond explanation to proviso to para.\tB provided that\t the\naggregate amount of income-tax actually borne by the  excess\ndividend was to be determined at the rate applicable to\t the\ntotal  income of the company.  The assessee  contended\tthat\nthe words 'at the rate applicable to the total income of the\ncompany'  meant the rate prescribed by para. 8 of  the\tAct,\ni.e.  four annas per rupee, and not the rate as\t reduced  by\nthe  Order at which the income-tax had actually and in\tfact\nbeen  levied  and  that consequently it was  liable  to\t pay\nadditional income-tax on the excess dividend at the rate  of\none anna per rupee only.\nHeld,  that  the expression 'rate applicable  to  the  total\nincome of -the company' meant the rate actually applied\t and\nthat the assessee was rightly charged at the rate of  forty-\nfour  pies  per rupee being the rate by which  the  rate  at\nwhich  the assessee was actually assessed fell short of\t the\nrate  of five annas per rupee.\tThe clause referred  to\t the\nspecific  or  definite\trate which  -was  determined  to  be\napplicable  to\tthe taxable income of the company  for\tthat\nspecific year and not to the rate prescribed by the Act\t for\nthe  relevant  year  generally in reference  to\t incomes  of\ncompanies.\n143\nElphinstone  Spinning and Weaving Mills Co. Ltd. v.  Commis-\nsioner of Income-tax, Bombay City, [1955] 28 I.T.R. 81, con-\nsidered.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE, JURISDICTION: Civil Appeal No. 91 of 1957.
\nAppeal from the judgment and order dated March 29, 1956,  of
\nthe Saurashtra High Court at Rajkot in Civil Reference No. I
\nof 1955.\n<\/p>\n
Shankarlal G. Bajaj and P. C. Aggarwal, for the appellant.
\nK.   N.\t Rajagopala Sastri, R. H. Dhebar and D.\t Gupta,\t for
\nthe respondent.\n<\/p>\n
1958.  October 9. The Judgment of the Court was delivered by
\nGAJENDRAGADKAR,\t J.-This appeal arises from  the  assessment
\nproceedings taken against the appellant, Rajputana  Agencies
\nLtd., Lavanpur, for its income for the assessment year 1952-
\n53,  the accounting period being the  corresponding  Marwadi
\nYear  ending in October, 1951.\tThe appellant is a’  private
\nlimited company and it was assessed to income-tax and super-
\ntax  by\t the Income-tax Officer, Morvi Circle, Morvi,  on  a
\ntotal  income  of Rs. 26,385.  The  appellant  had  declared
\ndividend  of Rs. 30,000.  The Income-tax Officer  held\tthat
\nout  of the said amount of dividend, Rs. 15,159\t was  excess
\ndividend.   On this basis the Income-tax Officer  determined
\nthe  additional income-tax payable by the appellant  at\t the
\nrate  of  forty-four  pies in a rupee  on  the\tsaid  excess
\ndividend.    The  additional  income-tax  payable   by\t the
\nappellant  in  that behalf was computed at  Rs.\t 3,473-15-0.
\nThis order was passed on November 25, 1952.
\nThe appellant filed an appeal against this order before\t the
\nAppellate  Assistant Commissioner of Income-tax\t at  Rajkot.
\nThe appellate authority determined the additional income-tax
\npayable\t by  the appellant at Rs. 2,084-12-0 on\t August\t 29,
\n1953.  An appeal was preferred by the appellant against\t the
\nappellate  order before the Income-tax\tAppellate  Tribunal,
\nBombay, but the appellate tribunal confirmed the order under
\nappeal on November 27, 1954.  The
\n144<\/span>
\nappellant  then moved the appellate tribunal under s.  66(1)
\nof  the\t Income-tax Act and the appellate tribunal,  by\t its
\norder  passed on April 25, 1955, referred two  questions  to
\nthe  High  Court  at Saurashtra for  its  opinion.   In\t the
\npresent\t appeal,  we are concerned with ,the second  of\t the
\nsaid two questions.  This question as framed by the tribunal
\nwas: Whether the expression ” at the rate applicable to\t the
\ntotal income of the company ” as appearing in sub-cl. (b) of
\nel. (ii) to the second explanation to proviso to paragraph B
\nof  Part I of the First Schedule to the Indian Finance\tAct,
\n1952,  means the rate at which a company’s total  income  is
\nactually  assessed or the rate prescribed by the  respective
\nFinance\t Act  without taking into consideration\t the  rebate
\nallowed\t in  the  respective years in  accordance  with\t the
\nprovisions  of the Part ‘ B ‘ States (Taxation\tConcessions)
\nOrder,\t1950 (hereinafter called the Order).  Section  2  of
\nthe Finance Act, 1952, provides that the provisions of s.  2
\nof,  and the First Schedule to the Finance Act, 1951,  shall
\napply  in  relation  to income-tax  and\t super-tax  for\t the
\nfinancial  year\t 1952-53 as they apply in  relation  to\t the
\nincome-tax and super-tax for the financial year 1951-52 with
\nthe  modification  that,  in the  said\tprovisions  for\t the
\nfigures 1950, 1951 and 1952 wherever they occur, the figures
\n1951, 1952 and 1953 shall be respectively substituted ;\t and
\nso  in\tthe present case we are really\tconcerned  with\t the
\nmaterial provisions of the Finance Act, 1951 (herein.  after
\ncalled the Act).\n<\/p>\n
By its judgment delivered on March 29, 1956, the High  Court
\nanswered  this question against the appellant and held\tthat
\nthe expression ” at the rate applicable to the total  income
\nof the company ” means the rate at which the company’s total
\nincome is actually assessed.  The appellant then applied for
\nand  obtained a certificate from the High Court\t under\tArt.
\n133(1)(c)  of  the Constitution read with s. 66A(2)  of\t the
\nIncome-tax Act that the case is a fit one for appeal to this
\nCourt.\tIt is with this certificate that the present  appeal
\nhas been brought to this Court; and the only point which  it
\nraises\tfor our decision relates to the construction of\t the
\nexpression ” at the rate applicable
\n145<\/span>
\nto  the\t total\tincome of the company  ”  appearing  in\t the
\nrelevant provision of the Act.\n<\/p>\n
 The  appellant\t does  not  dispute  its  liability  to\t pay
\nadditional  income-tax\tunder  cl. (ii) of  the\t proviso  to
\nparagraph B of Part I of the First Schedule to the Act.\t The
\ndispute\t between  the parties is in regard to  the  rate  at
\nwhich  the additional income-tax has to be charged.   I\t The
\nappellant  has\tpaid income-tax on its total income  in\t the
\nrelevant  assessment year at the rate of sixteen pies  in  a
\nrupee in accordance with the computation prescribed by para.
\n6  of  the Order; and it is urged on its  behalf,  that\t the
\nrebate\tto which it is entitled under the provisions of\t the
\nsaid  Order is irrelevant in determining the rate  at  which
\nthe  additional income-tax can be computed against  it.\t  On
\nthe other hand, the respondent contends that the  additional
\nincome-tax  has\t to  be computed at the rate  at  which\t the
\nappellant’s  income  has been actually assessed and  so\t the
\nrebate granted to the appellant under the said Order must be
\ntaken  into  account  in determining the said  rate  of\t the
\nadditional tax.\n<\/p>\n
It  would  be  relevant,  at this stage,  to  refer  to\t the
\nprovisions  of\tthe  Order under  which\t the  appellant\t has
\nadmittedly  obtained  rebate as a company  carrying  on\t its
\nbusiness   in  Saurashtra.   By\t the  Order,   the   Central
\nGovernment  made exemptions, reductions in the rate  of\t tax
\nand modifications specified in the Order in exercise of\t the
\npowers\tconferred  by s. 60A of the  Income-tax\t Act.\tThis
\nOrder applied to Part ‘B’ states which included all Part ‘B’
\nStates other than the State of Jammu and Kashmir.  Paragraph
\n5  of  the  Order  deals with  income  of  a  previous\tyear
\nchargeable  in the Part ‘B’ States in  1949-50.\t  Sub-clause
\n(3)  of\t paragraph 5 shows that the  State  assessment\tyear
\n1949-50\t means\tthe assessment year which commences  on\t any
\ndate  between April 1, 1949 and December 31, 1949.   We\t are
\nnot  concerned\twith  the  provisions  of  this\t  paragraph.
\nParagraph 6(iii) applies to the present case.  The effect of
\npara. 6(1), (ii) and (iii) is that in respect of so much  of
\nthe  income, profits and gains included in the total  income
\nas accrue or arise in any State other
\n19<\/span>
\n146<\/span>
\n   than\t the States of Patiala and East-Punjab States  Union
\nand Travancore-Cochin\n<\/p>\n
(i)  the  tax  shall be computed (a) at the Indian  rate  of
\ntax;  and (b) at the State rate of tax in force\t immediately
\nbefore the appointed day;\n<\/p>\n
(ii) where the amount of tax computed under subclause (a) of
\nclause,\t (1) is less than or is equal to the amount  of\t tax
\ncomputed under sub-clause (b) of clause (1)  the  amount  of
\nthe first mentioned tax shall be the tax     payable;\n<\/p>\n
(iii)  where the amount of tax computed under subclause\t (a)
\nof clause (1) exceeds the tax computed. under sub-clause (b)
\nof clause (1), the excess shall be allowed as a rebate\tfrom
\nthe  first  mentioned  tax  and\t the  amount  of  the  first
\nmentioned tax as so reduced shall be the tax payable.
\nThus under el. (iii) the amount of income-tax levied against
\nthe appellant is not the amount computed at the Indian rate;
\nit represents the difference between the amounts  calculated
\nat  the Indian rate of tax and that calculated at the  State
\nrate of tax.  The excess of the first amount over the second
\nis allowed as a rebate.\t In other words, the Indian rate  of
\ntax  prescribed by the relevant provisions of the  Act\tdoes
\nnot  by\t itself determine the amount of tax payable  by\t the
\nappellant for the relevant year.\n<\/p>\n
It  is\twell  known that when different Part ‘\tB  ‘  States
\nmerged with the adjoining States or Provinces and were\tmade
\ntaxable territories under the Income-tax Act, the  operation
\nof  the\t Indian\t rate of tax was introduced  by\t phases\t and
\nrebates\t on a graduated scale were allowed to the  assessees
\nunder  the  provisions of this Order.  As  we  have  already
\nmentioned,  it\tis  common ground  that\t the  appellant\t was
\nentitled  to and has obtained rebate under sub-cl. (iii)  of
\nparagraph  6 of ‘the Order, with the result that  his  total
\nincome\thas been taxed to income-tax at the rate of  sixteen
\npies  in  a rupee.  The point for determination\t is  whether
\nthis rebate is relevant in determining the rate at which the
\nadditional   income-tax\t has  to’  be  levied  against\t the
\nappellant under the relevant provisions of the Act.\n<\/p>\n
147<\/span><\/p>\n
Let  us\t now consider the relevant provisions  of  the\tAct.
\nSection\t 3  of\tthe Income-tax Act  which  is  the  charging
\nsection\t provides that ” where any Central Act\tenacts\tthat
\nincome-tax  shall  be charged for any year at  any  rate  or
\nrates, tax at that rate or those rates shall be charged\t for
\nthat year in accordance with, and subject to the  provisions
\nof, this Act in respect of the total income of the  previous
\nyear  of  the’\tassessee “. Thus,  when\t levying  income-tax
\nagainst the total income of the assessee, the rate at  which
\nthe  tax has to be levied is prescribed by the Act  for\t the
\nrelevant year.\tSection 2 of the Act provides that,  subject
\nto  the provisions of sub-ss. (3), (4) and  (5),  income-tax
\nshall  be charged at the rates specified in Part I  -of\t the
\nFirst  Schedule;  and  sub-s. (7) provides that\t ”  for\t the
\npurpose\t of  this section, and of the rates of\ttax  imposed
\nthereby, the expression ” total income ” means total  income
\nas  determined for the purposes of income-tax or  super-tax,
\nas the case may be, in accordance with the provisions of the
\nAct  “. So we must turn to the First Schedule to the Act  to
\nfind  the  rate\t at which the  appellant  can  be  assessed.
\nParagraph B of the said Schedule deals with companies and it
\nprovides that, in the case of every company, on the whole of
\ntotal  income the tax is leviable at the rate of four  annas
\nin the rupee.  There is a proviso to this paragraph and\t the
\nclause\twhich  calls  for our construction  in\tthe  present
\nappeal\toccurs\tin  the\t explanation to\t el.  (ii)  of\tthis
\nproviso.   This\t proviso deals with the case  of  a  company
\nwhich in respect of its profits liable to tax under the\t Act
\nfor  the relevant year has made the prescribed\tarrangements
\nfor  the  declaration and payment within  the  territory  of
\nIndia  excluding  the  State of Jammu  and  Kashmir  of\t the
\ndividends  payable out of such profits and has deducted\t the
\nsuper-tax   from  the  dividends  in  accordance  with\t the
\nprovisions of  sub-s. (3D) or (3E) of s. 18 of that Act; and
\nin that connection, it provides:\n<\/p>\n
(1)  where  the total income, as reduced by seven  annas  in
\nthe rupee and by the amount, if any, exempt from  income-tax
\nexceeds\t the  amount of any dividends  (including  dividends
\npayable at a fixed rate) declared
\n148<\/span>
\nin  respect of the whole or, part of the previous  year\t for
\nthe assessment for the year ending on the 31st day of March,
\n1951,  and  no order has been made under subsection  (1)  of
\nsection\t 23A  of  the Income-tax Act,,\ta  rebate  shall  be
\nallowed, at  the rate of one anna per rupee on the amount of
\nsuch excess\n<\/p>\n
(ii) where  the\t amount of dividends referred to  in  clause
\n(1i)  above  exceeds the total income as  reduced  by  seven
\nannas  in the rupee and by the amount, if, any, exempt\tfrom
\nincome-tax,  there shall be charged on the total  income  an
\nadditional income-tax equal to the sum, if any, by which the
\naggregate amount of income-tax actually borne by such excess
\n(hereinafter  referred to as ” the excess dividend “)  falls
\nshort of the amount calculated at the rate of five annas per
\nrupee on the excess dividend.\n<\/p>\n
It would thus be seen that the object of the legislature  in
\nenacting  this proviso is to encourage companies  to  plough
\nback  some  of\ttheir  profits\tinto  the  industry  not  to
\ndistribute unduly large portions of their. profits to  their
\nshareholders  by  declaring unreasonably high  or  excessive
\ndividends.   In order to give effect to this  intention\t the
\nlegislature  has offered an inducement to the  companies  by
\ngiving\tthem  a\t certain  rebate.  If  a  company  does\t not
\ndistribute as dividends more than roughly nine annas of\t its
\nprofits which is specified as distributable, then the rebate
\nof  one anna is given to the company to the extent that\t the
\ndividend  paid\tby  it\twas  less  than\t the   distributable
\ndividend.   If the company pays more than the  distributable
\namount\tof  dividend then it was not entitled to  claim\t any
\nrebate;\t but, on the contrary, it becomes liable to  pay  an
\nadditional  income-tax\tas  provided  in  cl.  (ii)  of\t the
\nproviso.   In other words, the intention of the\t legislature
\nappears to be that companies should no doubt declare reason-
\nable  dividend and thereby invite the investment of  capital
\nin  business;  but  they should\t not  declare  an  excessive
\ndividend  and should plough back part of their profits\tinto
\nthe industry.  It is with this object that the provision for
\nrebate\thas  been  made.   It would  be\t noticed  that,,  in
\naddition  to the rebate received by the appellant under\t the
\nrelevant provisions of the
\n\t\t  149<\/span>
\nOrder,\tit  would have been entitled to receive\t the  rebate
\nunder el. (1) of the proviso to paragraph B if the  dividend
\ndeclared by it had not exceeded the specified  distributable
\namount.\t In fact the dividend declared by the appellant\t has
\nexceeded  the said amount and the appellant has thus  become
\nliable to pay additional income-tax in respect of the excess
\ndividend under cl, (ii) of the proviso to paragraph B. Under
\nthis  clause, ” the appellant shall be charged on the  total
\nincome an additional income-tax equal to the sum, if any, by
\nwhich  the aggregate amount of income-tax actually borne  by
\nsuch  excess  (hereinafter  referred  to  as  ”\t the  excess
\ndividend “) falls short of the amount calculated at the rate
\nof  five  annas\t per rupee on the excess  dividend  “.\tThis
\nprovision  raises the problem of determining  the  aggregate
\namount of income-tax actually borne by the excess  dividend;
\nand  it\t is  to help the solution of this  problem  that  an
\nexplanation  has been added which says, inter alia,  that  ”
\nfor the purposes of cl. (ii) of the above proviso the aggre-
\ngate  amount  of  income tax actually borne  by\t the  excess
\ndividend shall be determined as follows:\n<\/p>\n
(i)  the  excess dividend shall be deemed to be out  of\t the
\nwhole  or such portion of the undistributed profit,% of\t one
\nor  more  years immediately preceding the previous  year  as
\nwould  be just sufficient to cover the amount of the  excess
\ndividend and as have not likewise been taken into account to
\ncover an excess dividend of a preceding year;\n<\/p>\n
(ii) such portion of the excess dividend as is deemed to  be
\nout  of the undistributed profits of each of the said  years
\nshall  be deemed to have borne tax(a) if an order  has\tbeen
\nmade under sub-section (1) of section 23A of the  Income-tax
\nAct,  in respect of the undistributed profits of that  year,
\nat the rate of five annas in the rupee, and\n<\/p>\n
(b)  in respect of any other year, at the rate applicable to
\nthe total income of the company for that year reduced by the
\nrate   at  which  rebate,  if  any,  was  allowed   on\t the
\nundistributed profits.”\n<\/p>\n
Clause (1). explains what shall be deemed to be the
\n150<\/span>
\nexcess\tdividend and how it, should be ascertained.   Clause\n<\/p>\n
(ii) lays down how the portion of the excess dividend as  is
\ndeemed to be out of the undistributed profits of each of the
\nyears  mentioned in cl. (ii) of the proviso shall be  deemed
\nto have borne tax.  Sub. clause (a) of cl. (ii) is concerned
\nwith cases where an order has been made under s. 23A (1)  in
\nrespect\t of  the undistributed profits of that year  at\t the
\nrate  of five annas in a rupee.\t We are not  concerned\twith
\nthis clause in the present appeal.  It is sub-cl. (b) of el.\n<\/p>\n
(ii)  of the explanation to the proviso to paragraph B\tthat
\nfalls for consideration in the present appeal.
\nThe  appellant’s case is that the expression ” at  the\trate
\napplicable  to the total income ” means the rate  prescribed
\nby paragraph B of the Act and not the rate at which  income-
\ntax  has actually and in fact been levied.  This  contention
\nhas been rejected by the High Court and the appellant  urges
\nthat the High Court was in error in rejecting its case.\t The
\nargument  is that the words ” at the rate applicable to\t the
\ntotal income of the company ” must be strictly and literally
\nconstrued  and\treliance  is placed on\tthe  principle\tthat
\nfiscal\tstatutes must be strictly construed.  On  the  other
\nhand,  as  observed  by Maxwell ”  the\ttendency  of  modern
\ndecisions  upon\t the  whole  is\t to  narrow  materially\t the
\ndifference  between what is called a strict  and  beneficial
\nconstruction  (1) “. Now the words ” the rate  applicable  ”
\nmay  mean either the rate prescribed by paragraph B  or\t the
\nrate actually applied in the light of the relevant statutory
\nprovisions.    “Applicable”,   according   to\tits    plain
\ngrammatical  meaning,  means  capable of  being\t applied  or
\nappropriate;   and  appropriateness  of\t the  rate  can\t  be
\ndetermined only after considering all the relevant statutory
\nprovisions.   In this sense it would mean the rate  actually
\napplied.   In the present case, if sub-cl. (b) is read as  a
\nwhole, and all the material words used are given their plain
\ngrammatical  meaning,  its  construction  would\t present  no
\nserious\t difficulty.   When the clause refers  to  the\trate
\napplicable,  it is necessary to remember that it  refers  to
\nthe rate applicable to- the total income of the company\t for
\n(1)  Maxwell on ” Interpretation of Statutes “, 10th Ed.  p.\n<\/p>\n
284.
\n151<\/span>
\nthat year. In other words, the clause clearly refers to\t the
\nspecific  or  definite\trate  which  is\t determined  to\t  be
\napplicable  to\tthe taxable income of the  company  for\t the
\nspecific year; and it is not the rate prescribed by the\t Act
\nfor  the relevant year generally in reference to incomes  of
\ncompanies.    The  result  is  that,  for  determining\t the
\naggregate amount of income-tax actually borne by the  excess
\ndividend, the department must take into account the rate  at
\nwhich the income of the company for the specific year has in
\nfact been applied or levied.\n<\/p>\n
Besides, in construing the words “I the rate applicable ” we
\nmust  bear in mind the context in which they are used.\t The
\ncontext\t shows that the said words are intended\t to  explain
\nwhat  should. be taken to be ” the tax actually borne “.  If
\nthe  legislation  had intended that the tax  actually  borne
\nshould in all, cases be determined merely by the application
\nof  the\t rate  prescribed  for\tcompanies  in  general,\t the
\nexplanation  given by the material clause would\t really\t not
\nhave  been  necessary.\t That is why  in  our  opinion,\t the
\ncontext justifies the construction which we are inclined  to
\nplace on the words ” the rate applicable “.\n<\/p>\n
The same position is made clear by the further provision  in
\nsub-cl. (b) itself which requires that the relevant rate has
\nto  be reduced by the rate at which the rebate, if any,\t has
\nbeen allowed on the undistributed profits; which means that,
\nfor determining the rate in sub-cl. (b), it is necessary  to
\ntake into account the rebate which may have been allowed  to
\nthe company under el. (1) of the proviso to paragraph B,  so
\nthat  in such a case the rate applicable cannot be the\trate
\nprescribed in paragraph B of the Act; it must be the rate so
\nprescribed reduced by the rate at which the rebate has been
\ngranted under cl. (1) of the proviso to paragraph B.  It  is
\nthus clear that the words ” rate applicable  in\t such  cases
\nmean  the  rate\t determined after deducting  from  the\trate
\nprescribed by paragraph B the rate of rebate allowed by\t el.
\n(1)  of\t the proviso to the said paragraph.   Therefore,  at
\nleast  in  these  cases, the material words  mean  the\trate
\nactually  applied.  If that be the true position,  the\trate
\napplicable must in
\n152<\/span>
\nall  cases mean the rate actually applied.  The\t same  words
\ncannot have two different meaning,% in the same clause.
\nIncidentally we may point out that the provision of the\t Act
\nin regard to the payment of additional income-tax appears to
\nbe  intended to impose a penalty for distributing  dividends
\nbeyond\tthe  distributable.limit mentioned by  the  statute.
\nThe  method  prescribed for determining the amount  of\tthis
\nadditional income-tax is this.\tCalculate the amount at\t the
\nrate  of  five annas per rupee on the  excess  dividend\t and
\ndeduct from the amount so determined the aggregate amount of
\nincome-tax  actually  borne  by such  excess  dividend;\t the
\nbalance\t is  the amount of  additional\tincome-tax  leviable
\nagainst\t the  company.\tIn adopting this method,  if  rebate
\nadmissible under cl. (1) of the proviso to para. graph B has
\nto be deducted from the rate prescribed, it is difficult  to
\nunderstand  why a rebate granted under paragraph  6(iii)  of
\nthe  Order should not likewise be deducted.  We\t accordingly
\nhold that the rate applicable in sub-cl. (b) of cl. (ii)  of
\nthe  explanation  read\twith  cl. (ii)\tof  the\t proviso  to
\nparagraph  B  of  Schedule  I of the  Act  means  the,\trate
\nactually applied in a given case.  On, this construction the
\nrate at which the appellant is liable to pay the  additional
\nincome-tax would be the difference between the rate of\tfive
\nannas  and the rate of sixteen pies in a rupee at which\t the
\nappellant has in fact paid income-tax in the relevant  year.
\nThat is to say, the additional income-tax is leviable at the
\nrate of forty-four pies in a rupee.\n<\/p>\n
In  its judgment, the High Court of Saurashtra has  referred
\nwith  approval to the decision of the Bombay High  Court  in
\nElphinstone   Spinning\tand  Weaving  Mills  Co.,  Ltd.\t  v.
\nCommissioner  of Income-tax, Bombay City<\/a>(1).  In this  case,
\nChagla\tC. J. and Tendolkar J. have held that if  a  company
\nhas no taxable income at all for the assessment year 1951-52
\nand in that year it pays dividends out of the profits earned
\nin the preceding year or years, additional income-tax cannot
\nbe  levied on the company by reason of the fact that it\t has
\npaid an excess dividend within the meaning of that
\n[1955] 28 I.T.R. 811.\n<\/p>\n
153<\/span><\/p>\n
expression  in, the proviso to paragraph B of Part I of\t the
\nAct.  We are not concerned with this aspect of the matter in
\nthe  present appeal.  However, in dealing with the  question
\nraised\tbefore\tthem, the learned judges  have\tincidentally
\nconstrued  the relevant words ” rate applicable” as  meaning
\nthe rate actually applied; and their observations do support
\nthe  view taken by the Saurashtra High Court in the  present
\ncase.\n<\/p>\n
The result is the appeal fails and is dismissed with costs.\n<\/p>\n
\t\t\t      Appeal dismissed.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Rajputana Agencies Ltd vs Commissioner Of I. T., Bombay on 9 October, 1958 Equivalent citations: 1959 AIR 265, 1959 SCR Supl. (1) 142 Author: P Gajendragadkar Bench: Gajendragadkar, P.B. PETITIONER: RAJPUTANA AGENCIES LTD. Vs. RESPONDENT: COMMISSIONER OF I. T., BOMBAY DATE OF JUDGMENT: 09\/10\/1958 BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. AIYYAR, […]<\/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-44995","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nRajputana Agencies Ltd vs Commissioner Of I. 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