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TMI Blog1971 (8) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... ? " The assessee is the Kerala Financial Corporation constituted under the State Financial Corporations Act of 1951 (Act LXIII of 1951). Section 43 of the said Act declares that for the purposes of the Income-tax Act the financial corporation shall be deemed to be a company within the meaning of that Act and shall be liable to income-tax and super-tax accordingly on its income, profits and gains. For the assessment year 1964-65, the accounting year being the year ending with March 31, 1964, the total income of the assessee for purposes of income-tax was determined at Rs. 4,76,258 and income-tax at the rate of 25% on the total income was levied. In pursuance of section 6 of the State Financial Corporations Act, 1951, the Kerala. State Government has at the time of issuing the shares by the notification dated November 23, 1963, issued with the approval of the Central Government, guaranteed payment of annual dividend at the rate of 3 1/2 % to the shareholders of the assessee. In the year of account, the State Government paid Rs. 1,40,923.54 as " subvention " to enable the assessee to declare a dividend at the rate of 31% to its shareholders. Section 2(1)(b) of the Finance Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year or previous years, as the case may be, of every person, not being a registered firm, an additional duty of income-tax (in this Act referred to as super-tax), at the rate or rates laid down for that assessment year by any Central Act : Provided that, where by virtue of any provision of this Act super-tax is to be charged in respect of the income of a period other than the previous year, super-tax shall be charged accordingly. " In the Finance Act of 1964 (Act 5 of 1964), the levy of income-tax on companies was regulated by Part I, Paragraph D, and the levy of super tax was regulated by Part II, Paragraph D, of the First Schedule read with section 2(1)(b) of that Act. Section 2(1)(b) of the Finance Act, 1964, reads : 2. Income-tax and super-tax.-(1) Subject to the provisions of sub-sections (2), (3), (4) and (5), for the assessment year commencing on the 1st day of April, 1964,-... (b) super-tax shall, for the purposes of section 95 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to 'as the Income-tax Act'), 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 apply, shall be incre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of annual dividend at the rate of 3 1/2 % or whether the reduction in the rebate has to be confined to the sum of Rs. 2,09,076.46 being the profits of the assessee set apart for payment of dividend. Section 2, sub-section (22), of the Income-tax Act, contains only an inclusive definition of " dividend ". The said definition is not exhaustive and it cannot help us to understand or to interpret the word " dividend " used in Part II of the First Schedule of the Finance Act, 1964. Counsel for the revenue relied on section 205 of the Companies Act, 1956, to support his plea that the reduction in rebate has to be on the sum of Rs. 3,50,000. Section 205 of the Companies Act, 1956, reads : " 205. Dividend to be Paid only out of Profits.--No dividend shall be declared or paid except out of the profits of the company or out of moneys provided by the Central or a State Government for the payment of the dividend in pursuance of a guarantee given by such Government." It is clear that the above provision enables a company to declare dividend not only out of its profits but also out of moneys provided by the Central or a State Government in pursuance of a guarantee given by such Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 96 of the Income-tax Act the sum of Rs. 1,40,924.54 does not form part of the total income for super-tax also. In annexure A which is IL-he assessment order of the Income-tax Officer dated December 23, 1964, the total income in the assessment year in question for levy of income-tax and super-tax was determined at Rs. 4,76,258. It is agreed that the sum of Rs. 4,76,258 does not include the amount paid by the State Government. The liability to tax is not imposed by the Finance Act, but by the Income-tax Act. As already observed the levy of super-tax has been authorised by section 95 of the, Income-tax Act and the rate alone is prescribed by the Finance Act, 1964. The quantum of the amount to suffer reduction in the rebate in the rate of super-tax should therefore depend on an interpretation of the provisions in Part II of the First Schedule to the Finance Act, 1964. Counsel for the revenue contended, whether or not a portion of the dividend came out of the total income of the previous year, the quantum of dividends regulates only the rebate claimable in the rate of super-tax and not the super-tax itself. It was therefore argued that in the matter of claiming the rebate the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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