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TMI Blog1969 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1959-60. Its paid-up capital during the relevant years was Rs. 1,65,000. The Income-tax Officer was of the view that the dividends declared in each of the years were in excess of 6 per cent. of the paid-up capital of the company and he worked out the super-tax payable in accordance with the particular Schedule to the Finance Act, which we shall presently refer to, and withdrew the rebates to which the company laid a claim. On appeal it was contended that the dividends declared during the two years were out of the profits of the previous year ending December 31, 1956, and the percentage of rebate to be allowed and disallowed has to be worked on the basis of the nature and quantum of profits so earned out of which the dividends were declared and the mere accident of the date of distribution of the dividend alone ought not to weigh to consider the nature and quantum of entitlement of the assessee to rebate in accordance with the Finance Acts. The Appellate Assistant Commissioner accepted in principle the assessee's contention that the components of the dividend should be considered with reference to the profits of the previous year. He found on verification that the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of working out the quantum of rebate in such super-tax made available in the Finance Act. The word " distribution " has a distinct meaning of its own and has an impact on the time at which it was done. So understood, the year of distribution, namely, the accounting year, is the only basis for the calculation of the rebate. Learned counsel for the assessee, contending contra, would say that it would be unreal if the year in which profits have been admittedly earned has to be ignored and reliance placed for calculation of rebate on the ministerial act of distribution. He sought to rest his case on the text of the Finance Act itself and on Papanasam Mills Co. (Private) Ltd. v. Commissioner of Income-tax . In addition to the income-tax charged for any year, a company, amongst others, is bound to pay a super-tax at the rate for that year as laid down by the relative Finance Act (section 55 of the Indian Income-tax Act, 1922). Under the Finance Act of 1958, which has been referred to before us in connection with the cases under review, super-tax shall be charged at the rates specified in Part II of the First Schedule and, in the cases to which Paragraphs A, B and C of that part ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaration of such interim dividends and a nominal entry in the books of account in favour of the shareholders does not tantamount to distribution, was repelled by the court. The ratio turned on its peculiar facts. Apparently, the learned judges came to that conclusion because the company adopted the mercantile system and the entry as such operated as an admission of the liability of the company towards the shareholders. This decision, however, does not throw any light on the discussion before us. Papanasam Mills Co. (Private) Ltd. v. Commissioner of Income-tax, though not directly on the point, contains useful observations made by the Supreme Court in Commissioner of Income-tax v. Khatau Makanji Spinning and Weaving Co. Ltd. Said the Supreme Court in that decision, while considering the effect of the Finance Act, 1951 : " By the first proviso (to Part I-B) a rebate of one anna per rupee is given to a company which pays dividends less than 9 annas in the rupee out of its profits. By the second proviso, the rebate disappears, and an additional income-tax has to be paid on dividends in excess of that limit, paid in the year. The Explanation says that 'the excess dividend shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits earned by the company in an earlier year, may be in the accounting year or even in the previous year or years thereto. Distribution follows declaration of dividends. Declaration is anterior at some point of time to the factum of distribution. Declaration of dividends invariably is referable to a resolution of the general body or that of the board of directors in certain circumstances. Such a resolution invariably can only be made on the basis of profits earned during the year or years previous to the date of declaration. A fortiori, therefore, distribution, which is a later event and which necessarily has an impact on such profits, can only be of profits earned not in the year of assessment when distribution is made, but at some anterior point of time. As distribution springs from declaration, both cannot be read in pari materia. But the words have to be understood naturally and their meaning attributed accordingly. If, therefore, " distribution " is thus to be understood as a ministerial act resulting from the indoor management of the company, can that be the sine qua non to decide the question of quantum of rebate to which the company would be entitled under a Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istributed from and out of profits earned. It is, therefore, essential to see when such profits were earned and take that year in which profits accrued and from which dividends were declared, as the basic year for the computation of the quantum of rebate as provided in Paragraph D, Part II, of the Finance Act, 1958. We, therefore, agree with the view expressed by the Tribunal. We are not called upon to work out the details and the quantum of rebate as attempted by the Tribunal. We answer both the questions in both the tax cases in the affirmative and against the department with costs. Counsel's fee Rs. 250. Petitions (T.C.M.P. Nos. 73 and 74 of 1969) filed to review the above. judgment on the ground that the petitioner had omitted to bring to the notice of the court the decision in George Oakes Private Ltd. v. Commissioner of Income-tax, came up for orders before their Lordships the Chief Justice and Mr. Ramaprasada Rao on November 21, 1969, when the court passed the following order : The point is whether the omission to bring to the notice of the court a particular authority having relevance can be basis for review. We are not satisfied that this is a proper ground for revi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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