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TMI Blog1979 (1) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... prepare an income and expenditure statement for submission to the Reserve Bank of India. For the year in question, namely, the assessment year 1963-64, the taxable income of the assessee was determined by the ITO at Rs. 5,79,678. The officer was of the view that this amount would attract liability for super profits tax. As the assessee had not submitted any return under the Super Profits Tax Act, a notice under s. 9(a) of the Act calling for the return was issued. The assessee submitted the return showing the chargeable profits as " nil ". The return was sought to be supported by the contention that there was no chargeable profit after considering the " standard deduction" allowable to the assessee and hence no liability to super-tax. It was the assessee's contention that if the standard deduction be calculated on the share capital and reserve as on the date of liquidation, there would be a deficiency of Rs. 23,411. The ITO overruled this contention pointing out that the official liquidator was making disbursements to creditors in instalments from the commencement of liquidation proceedings, and it is unreasonable to believe that the general reserves and other reserves stood at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as computed in accordance with the provisions of the Second Schedule, or an amount of fifty thousand rupees, whichever is greater : Provided that where the previous year is longer or shorter than a period of twelve months, the aforesaid amount of six per cent. or as the case may be, of fifty thousand rupees shall be increased or decreased proportionately : Provided further that where a company has different previous years in respect of its income, profits and gains, the aforesaid increase or decrease, as the case may be, shall be calculated with reference to the length of the previous year of the longest duration. " Section 4 is the charging section, which reads: " 4. Charge of tax.-Subject to the provisions contained in this Act, there shall be charged on every company for every assessment year commencing on and from the 1st day of April, 1963, a tax (in this Act referred to as the super profits tax) in respect of so much of its chargeable profits of the previous year or previous years, as the case may be, as exceed the standard deduction, at the rate or rates specified in the Third Schedule." And s. 27 is the exemption section which provides that the Act shall no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be computed in accordance with the Second Schedule, with respect to the share capital and the reserve of the company in the modes sanctioned by r. 1 of the Schedule. In the case of a company in liquidation, it is clear on an analysis of the provisions of ss. 210 and 211 of the Companies Act and rr. 298 and 299 of the Companies (Court) Rules that the concept of share capital is unknown to a company in liquidation and that, after liquidation, the liquidator is to file accounts, merely showing receipts and payments and that the accounts do not show the capital or reserve with respect to which the capital of the company is to be worked out as provided in the Schedule. It appears to us, therefore, that the view taken by the Tribunal is correct having regard to the provisions of the Act. The Tribunal based its conclusions on the English decision in IRC v. George Burrell [1924] 9 TC 27; [1924] 2 KB 52 (CA). We do not propose to examine the case in full or in detail. We think the decision supports the reasoning and the conclusion of the Tribunal. It is enough for us to refer to the decision of the Supreme Court in Girdhardas case [ 1967] 63 ITR 300, where this English decision is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wound up could not be included in the expression dividend': [see Seth Haridas Achratlal v. Commissioner of Income-tax [1955] 27 ITR 684 (Bom)]. By the Finance Act, 1955, the proviso to clause (c) was deleted and in consequence thereof the limitation relating to the period during which the profits were accumulated ceased to apply in the determination whether the amount distributed by the liquidator was dividend. Even after the amendment by the Finance Act, 1955, the language of the clause was found to be somewhat inapt and the legislature, by the Finance Act, 1956, recast clause (c)... The language used by the legislature in section 2(6A)(c), as amended by the Finance Act, 1956, is fairly clear. There is in the hands of the liquidator only one fund. When a distribution is made out of the fund, for the purpose of determining tax liability, and only for that purpose, the amount distributed is disintegrated into its components capital and accumulated profits-as they existed immediately before the commencement of liquidation. In any distribution made to the shareholders of a company by the liquidator, that part which is attributable to the accumulated profits of the company immediatel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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