1983 (8) TMI 35 - HC - Income Tax

Summary

Issues:
1. Interpretation of Section 104 of the Income Tax Act, 1961 regarding the levy of penal super tax.
2. Applicability of exemptions under Section 11 of the Income Tax Act, 1961 to a charitable institution.
3. Impact of previous court decisions on the current case.

Analysis:

The judgment pertains to a case where the assessee, a private limited company, was assessed for the assessment year 1963-64. The Income Tax Officer (ITO) initiated action under Section 104 of the Income Tax Act, 1961, as the dividends declared fell short of the required percentage to be distributed by the company as it was an investment company. The assessee contended that a charitable trust holding 75% of the share capital should exempt it from penal super tax. The ITO, however, rejected this argument and levied penal super tax.

The assessee appealed to the Appellate Tribunal, which upheld the contention that no order under Section 104(1) of the Act could be made, citing an earlier decision exempting the trust under Section 11(2) of the Act for previous assessment years. The Revenue challenged this decision, leading to a reference on the question of law regarding the Tribunal's ruling.

The High Court analyzed previous decisions regarding the trust's exemption under Section 11(2) of the Act and its classification as a charitable institution under Section 11(1). The court held that since the trust was considered charitable in previous assessments, it qualified for exemption under Section 104(2)(iii) of the Act, preventing the levy of penal super tax. Therefore, the court answered the question in the affirmative, ruling in favor of the assessee and against the Revenue, with no order as to costs.