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TMI Blog1969 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... and the premium received in cash aggregated to Rs. 45,50,000. In each of the account years 1955 and 1956 the company distributed Rs. 5,49,000 as dividend. In proceedings for assessment for each of the assessment years 1956-57 and 1957-58 the Income-tax Officer reduced by Rs. 61,000 the rebate in super-tax admissible under the Finance Act, 1956, on the view that the company had distributed dividend exceeding 6% of its paid-up capital. In reducing the rebate the Income-tax Officer did not take into consideration share premium amounting to Rs. 45,50,000 received by the company. The Appellate Assistant Commissioner held that the company's share premium was liable to be added to the capital of Rs. 30,50,000 in computing the reduction in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed arrangements for the declaration and payment within the territory of India, of the dividends payable out of such profits and for the deduction of super-tax from dividends in accordance with the provisions of subsection (3D) of section 18 of that Act, and . . . (ii) a rebate at the rate of four annas per rupee of the total income shall be allowed in the case of any company which satisfies condition (a) but not condition (b) of the preceding clause ; ... Provided further that--- (i) if the amount of the rebate under clause (i) or... of the preceding proviso shall be reduced by the sum, if any, equal to the amount or the aggregate of the amounts, as the case may be, computed as hereunder :--- . . . (b) in addition, in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second proviso. In the relevant years of account, the share premium formed an identifiable part of the reserves of the company but was not shown in a separate share premium account apart from the reserves. The Commissioner contends : (1) that the expression " share premium account " in the definition of " paid-up capital " in the Explanation to Paragraph D of Part II of the Finance Acts of 1956 and 1957 means an account apart from the reserves maintained by the company ; and (2) that in any event since the enactment of the Companies Act, 1956, " share premium " not maintainable as a separate account cannot be taken into consideration in dealing with the claim for rebate in the payment of super-tax and reduction in the rate thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be included in the share premium account. " Clause (1) is in terms prospective : it requires a company to transfer premiums received in cash or otherwise on shares to the share premium account. By clause (3) any premium received prior to the coming into force of the Companies Act, 1956, less that part of the premium which had been so applied so that it did not, at the commencement of the Act, form an identifiable part of the company's reserves, had also to be transferred to the share premium account as if the shares had been issued after the commencement of the Act. Section 78 was apparently borrowed from section 56 of the English Companies Act, 1948 (11 12 Geo. 6, Ch. 38). Before the Companies Act of 1956 there was no provision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956-57, the share premium account maintained as an identifiable account within the reserves qualified for being included in the paid-up capital within the meaning of this expression in the Explanation to Paragraph D of Part II of the Finance Act, 1956. For the assessment year 1956-57, therefore, rebate in super-tax was liable to be reduced, if the company had distributed dividend exceeding six per cent. of the paid-up capital inclusive of share premiums maintained as an identifiable account. The contention raised by the Commissioner must therefore fail in respect of the assessment year 1956-57. Counsel for the Commissioner contends that in any event in the Finance Act, 1957 (2 of 1957), the expression " share premium account " has o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e account within the reserves, reduction in the rebate in super-tax is liable to be computed after excluding share premium. The Explanations requires that in determining the paid-up capital for the purpose of rebate in super-tax, share premium standing to the credit of a share premium account shall be excluded : it does not make maintenance of an account outside the reserve a condition of its inclusion in the paid-up capital. Again if under the Finance Act, 1956, the expression " standing to the credit of the share premium account " did not mean that the share premiums shall be maintained in a separate account apart from the reserve, is there any reason why, under an identical scheme of reducing rebate in super-tax in the year 1957-58, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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