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Calculation of rebate in income tax assessment based on paid-up share capital and premium received on shares. Interpretation of provisions of the Finance Act, 1956 and section 78 of the Companies Act, 1956. Applicability of section 78 of the Companies Act, 1956 to banking companies. Analysis: The judgment pertains to a reference under section 66(1) of the Indian Income-tax Act, 1922, for the assessment year 1956-57. The primary issue revolves around the calculation of rebate in income tax based on the paid-up share capital and premium received on shares by the assessee-company. The Income-tax Officer had not considered the premium received on shares in the calculation of the paid-up share capital for the purpose of rebate. The Appellate Assistant Commissioner and the Appellate Tribunal, however, held that the premium amount formed an identifiable part of the company's reserves and should be added to the paid-up share capital for calculating the rebate. The interpretation of the provisions of the Finance Act, 1956, specifically the Explanation to Paragraph D of the First Schedule, was crucial in determining whether the premium amount should be included in the paid-up share capital. Additionally, the judgment delved into the applicability of section 78 of the Companies Act, 1956, which deals with the treatment of share premium account and its utilization by companies. The Tribunal's findings emphasized that the premium amount received on shares was identifiable and formed part of the company's reserves, aligning with the provisions of the Finance Act and the Companies Act. The court analyzed the application of section 78 of the Companies Act, 1956, to banking companies. It was established that unless expressly excluded by the Banking Companies Act, the provisions of the Companies Act, including section 78, applied to banking companies. The judgment highlighted the retrospective nature of section 78(3) in dealing with premiums received before the enactment of the Companies Act, 1956, and the requirement for maintaining a share premium account for companies receiving share premiums. In conclusion, the court affirmed the Tribunal's decision, stating that the premium received on shares was an identifiable part of the company's reserves and should be added to the paid-up share capital for calculating the rebate. The judgment provided a detailed analysis of the provisions of the Finance Act, 1956, and the Companies Act, 1956, in the context of income tax assessment and rebate calculations.
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