1962 (10) TMI 53 - SC - Income Tax

Whether the assessee company having distributed dividends of over 60% of the company s total income less income-tax and super-tax payable thereon is entitled to the rebate of 1 anna per rupee on the undistributed balance of profits as provided in clause (i) of the proviso to item B of Part I of the First Schedule to the Finance Act of 1955 ? Held that - Appeal dismiised. High Court was right in holding that the company was entitled to the rebate claimed by it.

Summary

Issues:
Interpretation of provisions of Finance Act (15 of 1955) regarding rebate for private limited companies under section 23A of the Income-tax Act.

Detailed Analysis:

1. Claim for Rebate by Private Limited Company:
- Afco Private Ltd. earned income for the year ending March 31, 1955, and distributed dividends exceeding 60% of its total income. The company claimed a rebate under Schedule I, Part I, item B of the Finance Act (15 of 1955).
- Income-tax authorities initially rejected the claim, stating that section 23A provisions could be applicable to the company. However, the Income-tax Appellate Tribunal held that the company was entitled to the rebate if conditions under section 23A(1) were met.

2. Interpretation of Section 23A of Income-tax Act:
- Section 23A empowered the Income-tax Officer to order a company to pay super-tax on undistributed income if dividends were less than 60% of total income. The provision aimed to prevent tax evasion by certain types of companies.
- The Tribunal and High Court interpreted the phrase "cannot be made applicable" in relation to section 23A as dependent on circumstances justifying an order by the Income-tax Officer, rather than an automatic exclusion for private limited companies.

3. Legislative History and Intent:
- The legislative history revealed that rebate provisions were amended in the Finance Act of 1955 to simplify procedures and avoid delays. The intent was not to deprive private limited companies of rebate benefits available under earlier Acts.
- Comparison with subsequent Finance Acts showed that rebate restrictions were explicitly imposed on public companies, not private limited companies, indicating a legislative intent to differentiate between the two.

4. Court's Decision:
- The Supreme Court upheld the High Court's decision, ruling in favor of the private limited company's entitlement to the rebate claimed. The Court emphasized that the legislative language and historical context supported the interpretation allowing private limited companies to benefit from the rebate under the Finance Act (15 of 1955).

Therefore, the appeal was dismissed, affirming the private limited company's right to the rebate as claimed under the relevant provisions of the Finance Act.