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TMI Blog1962 (12) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing tabular statement shows the names of the assessees, the number of shares of the company held by them, the amounts received by them referable to the share capital, the amount received by them referable to capital profit, the amount of accumulated profits treated as dividend, the amount of total distribution and the amounts referable to accumulated profits of six previous years of the company preceding the date of liquidatio : S.No. Name of the assessee No. of shares Share capital capital profit Amount of accumulated profits treated as dividend Total distribution Amount of accumulated profits of past six years to be treated as dividend (1) (2) (3) (4) (5) (6) (7) (8) Rs. Rs. Rs. Rs. Rs. 1. Shri Gautam Sarabh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company fell within the category of dividend under section 2(6A)(c) of the Indian Income Tax Act, 1922, as it stood prior to the amendment made therein by the Finance Act, 1955, and were liable to be taxed as dividend. The matter was carried in appeal before the Appellate Assistant Commissioner who upheld the decision of the Income Tax Officer and dismissed the appeal. The matter was carried further before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal upheld the decision of the Income Tax Officer and dismissed the appeal. The matter has now been referred to us for the determination of the following question : (1) Whether for the assessment years 1955-56, any portion of the amount received by the applicant from the liquidator of Kawampe Cotton Co. Ltd. is at all taxable as 'dividend' by virtue of section 2(6A)(c) of Indian Income Tax Act? (2) If the answer to the above question is in the affirmative, whether the said clause (c) as it stood before its amendment by the Finance Act, 1955, or as it stood after such amendment, is applicable to the present case? 3. Section 2(6A)(c), as it stood before the amendment made therein by the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each shareholder was a part of his annual profits or gains and so subject to super-tax. In considering this question the Master of Rolls observed that it was a misapprehension, after the liquidator had assumed his duties, to continue the distinction between surplus profits and capital. He quoted with approval, the remarks of Lord Justice Lindley in the case of In re Armitage, at page 346 where it had been observed that the moment the company got into liquidation there was an end of all power of declaring dividends and of equalizing dividends, and the only thing that the liquidator had to do was to turn the assets into money, and divide the money among the shareholders in proportion to their shares. The Master of Rolls further observed that it was not right to split up the sums received by the shareholders into capital and income, by examining the accounts of the company when it carried on business, and disintegrating the sum received by the shareholders subsequently into component parts, based on an estimate of what might possibly have been done, but was not done, Lord Justice Atkin, in the course of his judgment, observed that when the company capitalizes undivided profits and dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a division of capital and profits is necessary or in many cases possible. It thereafter proceeds to consider that when distribution is made on the dissolution of a firm the nature of such distribution is distinct and different from the distribution made on the winding up of a company by the liquidator. The question which we will now proceed to consider, having regard to the use of inapt language by the legislature's intent has been expressed with sufficient certainty to make the provisions applicable to any set of circumstances. As observed in the speech of Viscount Simon in the case of Rex v. General Commissioners of Income Tax for the City of Londo : Ex parte Gibbs, at page 244, our duty is to find out what the legislature must be taken to have really meant by the expression which it has used, without necessarily attribution to it a precise appreciation of the technical appropriateness of its language. We have to read the language of the proviso and see what light is thrown upon the earlier words used by the legislature having regard to what is stated in the proviso. The proviso makes it abundantly clear that only the accumulated profits which have been distributed, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lord Simonds in the case of Wolfson v. Commissioners of Inland Revenue, in his speech where he has observed that it is not the function of a court of law to give to words a strained and unnatural meaning because only thus will a taxing section apply to a transaction which, had the legislature though of it, would have been covered by appropriate words. 8. It the present case, what we are seeking to do is not to strain the language which has been used by the legislature or to give the language an unnatural meaning. The meaning sought to be given by the legislature to the words used by the legislature has been clearly stated by the legislature when enacting the proviso. The proviso in express terms lays down that only the accumulated profits which arose during the six previous years of the company preceding the date of liquidation which constitute the accumulated profits referred to in the earlier part of the section. 9. Our attention was drawn by the learned Advocate-General, who appears on behalf of the Commissioner, to two decisions in the case of Sheth Haridas Achratlal v. Commissioner of Income Tax, and the case Hariprasad Jayantilal Co. Ltd. v. Income Tax Officer, Ahmed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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