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TMI Blog1962 (10) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... by it. The company then claimed rebate at the rate of one anna in the rupee on the amount computed according to Schedule I, Part I, item B, read with section 2 of the Finance Act (15 of 1955). The Income-tax Officer and the Appellate Assistant Commissioner rejected the claim because in their view the claimant was a company to which the provisions of section 23A of the Income-tax Act could not be made applicable. In appeal, the Income-tax Appellate Tribunal, Bombay, reserved the order of the income-tax authorities. The Tribunal opined that the expression "cannot be made applicable" in item B of Part I of Schedule I of the Finance Act (15 of 1955) must be read in conjunction with section 23A of the Income-tax Act, and the benefit of rebate provided by the Finance Act, 1955, cannot be denied to a private company if the conditions prescribed in section 23A(1) are fulfilled. The following question referred by the Tribunal to the High Court of Judicature at Bombay was answered in the affirmative: "Whether, on the facts and in the circumstances of the case, the assessee company having distributed dividends of over 60% of the company's total income less income-tax and super-tax payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nths immediately following the expiry of that previous year were less than 60% of the total income of the company of that year as reduced by the amounts aforesaid; unless the Income-tax Officer was satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable. It is manifest that the order under section 23A, clause (1) would (excluding certain procedural conditions) be ordinarily made if the company has distributed by way of dividend within the twelve months immediately following the expiry of the accounting year less than the prescribed percentage of the total income as reduced by the amount of taxes paid in the case of non-banking companies and reserve fund in addition thereto in the case of banking companies. By the first paragraph of sub-section (9) of section 23A it is provided that "Nothing contained in this section shall apply to any company in which the public are substantially interested or to a subsidiary company of such company if the whole of the share capital of such subsidiary company has been held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act (15 of 1955) on its undistributed balance. To reduce the rigour of this provision the legislature has provided for inducement in the form of rebate on the difference between nine annas in every rupee of the total net income and the amount of dividend declared, to companies which have cleared dividends so as not to attract the application of an order under section 23A. But that benefit is admissible only in favour of companies to which the provisions of section 23A of the Act cannot be made applicable. The income-tax authorities held that the expression "company to which the provisions of section 23A of the Income-tax Act cannot be made applicable" is descriptive of a class of companies against which in no circumstances can an order under section 23A of the Indian Income-tax be made, and private limited companies being companies in respect of which an order under section 23A of the Income-tax Act can be made if the conditions prescribed relating to distribution of dividend are fulfilled, the benefit of rebate is not admissible in their favour. The Tribunal and the High Court held that the expression "cannot be made applicable" only refers to a state of affairs in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to rebate arose under those Finance Acts if no order under section 23A was made. The Income-tax Officer had therefore to decide even before completing the assessment of the company whether the circumstances justified the making of an order under section 23A, and unless an order under section 23A was made the assessee became entitled automatically to the rebate of one anna in the rupee. Such a provision led to delay in the disposal of assessment proceedings and caused administrative inconvenience. It appears that the legislature modified the scheme of granting rebate in enacting the Finance Act of 1955, with a view to simplify the procedure and avoid delays, and not with the object of depriving the private limited companies as a class, of the benefit of rebate which was permissible under the earlier Acts. Counsel for the Income-tax Commissioner invited our attention to the Finance Acts 1956 and 1957 and contended that the legislature in dealing with the right to rebate under Part II relating to the rates of super-tax used phraseology which restricted the right of rebate only to public companies. It must be noticed that even under the Finance Act of 1955 by Part II of Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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