9911796707
TMI Blog1991 (6) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the subject-matter of appeal, and, in that view, was correct in holding that the Commissioner of Income-tax lacked jurisdiction under section 263 for the assessment year 1978-79 directing the inclusion of Rs. 6,60,000 as income from dividend ?" At the instance of the assessee, the following questions have also been referred: " 1. Whether, on the facts and in the circumstances of the case, and in view of the finding of the Tribunal that the Commissioner of Income-tax, West Bengal-V, had no jurisdiction to pass an order under section 263 of the Income-tax Act, 1961, the Tribunal was legally justified in giving its decision on merits as to whether the sum of Rs. 6,60,000 is liable to be included in the assessment of the assessee-company for the assessment year 1978-79 and also in upholding the order of the Commissioner on merits ? 2. Whether, on the facts and in the circumstances of the case and on a true and proper construction of the order of the Calcutta High Court dated May 12, 1977, passed in Company Petition No. 16 of 1977 connected with Company Application No. 304 of 1976, the Tribunal was justified in law in holding that the order of the Calcutta High Court amounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax, appearance was put in on behalf of the assessee and two legal objections were raised on its behalf. It was contended that, since the assessment for the assessment year 1978-79 was made by the Income-tax Officer under section 143(3) read with section 144B, the Commissioner of Income-tax cannot have jurisdiction under section 263 inasmuch as the assessment order ceased to be an order made by the Income-tax Officer after giving effect to the order of the Inspecting Assistant Commissioner under section 144B(4). The other legal objection raised by the assessee was that, since the assessment order was appealed against and the appellate order was passed on December 8, 1982, the order of assessment passed by the Income-tax Officer got merged with the order of the Commissioner of Income-tax (Appeals) and that, for this reason, the Commissioner of Income-tax could not assume jurisdiction under section 263. On the merits, it was contended on behalf of the assessee before the Commissioner of Income-tax that there was no error on the part of the Income-tax Officer in not including the sum of Rs. 6,60,000 in the assessment of the assessee for the assessment year 1978-79. It was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er appeal, there was no accrual of dividend income in favour of the assessee-company. It was further submitted that the order of the Calcutta High Court dated May 12, 1977, a portion whereof has been extracted by the Commissioner of Income-tax in his order, does not amount to declaration, distribution or payment of dividend within the meaning of section 8. In this connection, the attention of the Tribunal was also invited to Circular No. 3/1/ 24/75-CLV, dated November 22, 1976, issued by the Department of Company Affairs, Government of India, which says that the Department agrees that the dividend becomes a liability only when it is approved by the shareholders in the annual general meeting. While considering the submissions made on behalf of the parties regarding the merits of the case, the Tribunal extracted the following portion of the order of the Calcutta High Court dated May 12, 1977, passed in Company Petition No. 16 of 1977 connected with Company Application No. 304 of 1976 : " It is further directed that instead of the directors of the Associated Power Company Limited, the director of Dishergarh Power Supply Company Limited shall arrange for the preparation and audit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pal, learned advocate appearing for the assessee, submitted that the questions suggested by the assessee were properly referred by the Tribunal in view of the decision of the Supreme Court in CIT v. V. Damodaran [1980] 121 ITR 572. As matter of fact, this contention was also raised before the Tribunal and the Tribunal, following the aforesaid decision of the Supreme Court in V. Damodaran's case [1980] 121 ITR 572, came to the conclusion that the questions suggested by the assessee in the respondent's reply could be referred to the court. The Supreme Court in V. Damodaran's case [1980] 121 ITR 572, observed as follows (at page 578) " Section 256(1) of the Income-tax Act, 1961, entitles the assessee or the Commissioner, as the case may be, to apply to the Appellate Tribunal to refer to the High Court any question of law arising out of the order made by the Appellate Tribunal under section 254. A period of limitation for making such application is prescribed. If the application is rejected by the Appellate Tribunal, the applicant is entitled to apply to the High Court, again within a prescribed period of limitation, and the High Court may, if it is not satisfied with the correctnes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty the basis of his claim that a question of law sought by him should be referred. The second category consists of cases where the order made by the Appellate Tribunal under section 254 operates entirely in favour of one party, although in the course of making the order the Appellate Tribunal may have negatived some points of law raised by that party. Not being a party aggrieved by the result of the appeal, it is not open to that party to file a reference application. But on a reference application being filed by the aggrieved party it is open to the non-applicant, in the event of the Appellate Tribunal agreeing to refer the case to the High Court, to ask for a reference of those questions of law also which arise on its submissions negatived in appeal by the Appellate Tribunal. It is, as it were, recognising a right in the winning party to support the order of the Appellate Tribunal also on the grounds raised before the Appellate Tribunal but negatived by it. " In view of the aforesaid decision, we are afraid that we cannot accept the contention of the Revenue that the questions suggested by the assessee in the respondent's reply were not properly referred to this court. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Income-tax Act, 1961, provides that, for the purposes of inclusion in the total income of an assessee, any dividend declared by a company or distributed or paid by it within the meaning of sub-clause (a), (b), (c), (d) or (e) of clause (22) of section 2 of the Act shall be deemed to be the income of the previous year in which it is so declared, distributed or paid, as the case may be. Section 2(22) of the Income-tax Act, 1961, is an inclusive definition which only extends the meaning of dividend. The word "includes" is often used in interpretation clauses in order to enlarge the meaning of the word or phrase occurring in the body of the statute. When it is so used, these words and phrases must be construed as comprehending not only such things as they signify according to their nature and import, but also those things which the interpretation clause declares that they shall include. It is, therefore, submitted that section 8 of the Income-tax Act is applicable only in cases where section 2(22) of the Act, by an inclusive definition, extends the meaning of the expression "dividend". It is submitted that none of the sub-clauses of section 2(22) of the Act is applicable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated Power Company Limited and to retain out of the profits of that year such sum so as to pay dividend not exceeding 13 per cent. after deduction of tax to the shareholders of the company for the said year. In such a case, it was not necessary, nor was it possible for the Associated Power Company Limited to hold any annual general meeting for the purpose of formal declaration of dividend on the basis of the recommendation of the board of directors. On the basis of the directions contained in the scheme of amalgamation, the dividend must be deemed to have been declared but retained by the assessee-company. On the facts and in the circumstances of the case, it must be held that the dividend must be deemed to have been declared, distributed and paid to the assessee within the meaning of section 8 of the Income-tax Act, 1961. As a matter of fact, the accounts of Messrs. Associated Power Co. Ltd. were finalised on August 24, 1977, and in the balance-sheet for the assessment year ending March 31, 1977, a sum of Rs. 6,60,000 was shown as proposed dividend. Messrs. Associated Power Co. Ltd. was amalgamated with the assessee-company with effect from March 31, 1977, and, therefore, the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
