1969 (4) TMI 23 - HC - Income Tax

Carry forward of unabsorbed reduction of rebate - question of vires of any of the provisions of the Income-tax Act, cannot be examined by the Appellate Tribunal constituted under the Act or in a reference to the High Court or in an appeal therefrom to the Supreme Court

Summary

Issues Involved:
1. Deductibility of Rs. 8,731.10 from the rebate under the Finance Act, 1959.
2. Competence of the Tribunal, High Court, or Supreme Court to consider the vires of the Finance Acts.
3. Validity of the specific provision under consideration.

Detailed Analysis:

1. Deductibility of Rs. 8,731.10 from the Rebate Under the Finance Act, 1959
The Income-tax Officer, during the assessment for the year 1959-60, computed the corporation tax payable by the assessee, including a reduction in rebate of Rs. 8,731.10. The assessee objected to this reduction, but the Appellate Assistant Commissioner decided against the assessee. The Tribunal, however, held that the assessee was entitled to the full rebate of super-tax without the reduction of Rs. 8,731.10. The Tribunal reasoned that since there was a net loss in the assessment year 1958-59, there was no reduction of super-tax applicable to the company, and thus, the reduction in rebate would have exhausted itself. Consequently, the rebate for the year 1959-60 could not be reduced by Rs. 8,731.10.

2. Competence of the Tribunal, High Court, or Supreme Court to Consider the Vires of the Finance Acts
The court discussed the competence of the Appellate Tribunal, High Court, and Supreme Court to consider the vires of the Finance Acts. It referred to the Supreme Court's observations in K. S. Venkataraman and Co. (P.) Ltd. v. State of Madras, which stated that the Tribunal, being a creature of the statute, can only decide disputes in terms of the provisions of the Income-tax Act and cannot entertain questions of ultra vires. This principle was reiterated in subsequent Supreme Court cases and followed by the Calcutta High Court. The court concluded that the question of vires of any provisions of the Income-tax Act or the Finance Acts could not be entertained by the Tribunal, High Court, or Supreme Court.

3. Validity of the Specific Provision Under Consideration
The court examined whether the specific provision under the Finance Act, 1959, which provided for the reduction of rebate, was valid. The relevant provision was Paragraph D of Part II of the First Schedule to the Finance Act, 1959, which outlined the rates of super-tax and the conditions for rebates and reductions. The court noted that these provisions did not levy tax on any income but only determined the rebates and reductions to ascertain the income chargeable to super-tax. The court referred to the Madras High Court's decision in Papanasam Mills Co. (Private) Ltd. v. Commissioner of Income-tax, which upheld the validity of similar provisions in the Finance Act, 1956. The court agreed with the Madras High Court's view that it was within the legislature's competence to prescribe the basis for granting rebates and to correlate rebates to excess dividends.

Conclusion:
The court concluded that the Tribunal was correct in allowing the rebate of super-tax in full without reducing it by the sum of Rs. 8,731.10. The court answered the questions in the reference as follows:
1. Yes, but this court has no jurisdiction to deal with this matter.
2. Yes.

Each party was ordered to bear its own costs of the reference.