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TMI Blog1980 (6) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and in the circumstances of the case and in view of the provisions contained in the First Schedule, Part I, Paragraph F(1)(B) read with Explanation 1 and other relevant provisions of the Finance Act, 1966, the Income-tax Appellate Tribunal is correct in law in holding that the provisions relating to the levy of additional tax under the Finance Act, 1966, are not attracted ? " The assessee is a public limited company in liquidation. The company was engaged in the business of exploitation of minerals in Kerala. It declared for the first time a dividend in the year ended March 31, 1960, which was distributed in the accounting year March 31, 1961. Subsequently, dividend at the rate of 5% of the paid up capital were declared and distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee during the accounting year relevant to the said assessment year had been wrongly omitted to be subjected to tax as required under the Finance Acts, 1965 and 1966. On this basis, tax at the rate of 7 1/2% on the dividend distributed aggregating to Rs. 2.5 lakhs was levied against the company under liquidation. The tax so levied amounted to Rs. 18,750. Though the company took up the matter in appeal before the AAC, that appeal was dismissed. Thereafter, it carried the matter before the Tribunal in second appeal. The Tribunal held that levy of additional tax under Paragraph F(1)(B) of Part I of the First Schedule of the Finance Act, 1966, would be warranted only if the dividend distributed by the assesseecompany was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced some substantial changes in the matter of levy of income-tax on companies. The object and purpose of the effectuation of such changes has been explained thus in paras. 27 and 28 of the memorandum explaining the provisions in the Finance Bill, 1966, published along with the Finance Bill, 1966 : " 27. Simplification of the rate schedule of income-tax in the case of companies. The mechanics of calculations of tax in the case of companies has been simplified by drafting the rate schedule of income-tax applicable to them on a basis which is altogether different from that adopted in the Finance Acts of 1965 and earlier years. Under the Finance Act of 1965, the gross rate of income-tax on the total income of every company was prescribed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idends " has been defined in Expln. 1. Clause (a) of the said Explanation alone is relevant for the purpose of this case and that reads: " The amount of dividends, other than dividends on preference shares, declared or distributed by the company during the previous year relevant to the assessment year commencing on the 1st day of April, 1964, or the 1st day of April, 1965, with reference to which the amount of the rebate arrived at under the first proviso to Paragraph D of Part 11 of the First Schedule to the Finance Act, 1964 (V of 1964), or, as the case may be, the first proviso to Paragraph F of Part I of the First Schedule to the Finance Act, 1965 (X of 1965), is required to be reduced under the second proviso to the said Paragraph D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant amount of distributions of dividends ". Clause (a) of Expln. 1 also makes it clear that only such amount distributed by way of dividends is to be taken into account with reference to which a reduction of the rebate already allowed is required to be effected under the first proviso to Paragraph D of Part II of the First Schedule to the Finance Act, 1964, or the first proviso to Paragraph F of Part I of the First Schedule to the Finance Act, 1965, as the case may be. When we, turn to Paragraph D of Part II of the First Schedule to the Finance Act, 1964, we find that under cl. (i) of the proviso to the said Paragraph the grant of a rebate is contemplated only where the company has earned profits liable to tax under the Act for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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