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TMI Blog1974 (7) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... iew that as the dividend declared was less than the minimum percentage fixed under section 23A(1) of the Act the provisions of the said section were applicable in the present case. Before the Income-tax Officer two alternative contentions were urged on behalf of the assessee. First, it was urged that as the dividend income of Rs. 17,027 was exempt from payment of super-tax under the provisions of section 56A that item had to be excluded from the total income of the assessee and the reduced total income, therefore, amounted to Rs. 48,948. After deducting therefrom the income-tax of Rs. 25,433 the distributable surplus came to Rs. 23,515 as against which dividends declared were Rs. 21,000. This, according to the assessee, was more than the statutorily prescribed percentage for distribution of dividends as contemplated by section 23A(1) of the Act. Secondly, it was contended in the alternative that if the amount of Rs. 17,027 was not excluded from the total income it should in any event be excluded from the distributable surplus which was liable to super-tax under section 23A(1) of the Act because according to the assessee having regard to the provisions of section 56A this was an amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 23A which could operate by its own fiat; that section 56A makes it clear that the dividends exempted under section 56A must be an integral part of the total income of the assessee-company; that in computing the amount of super-tax payable by the assessee-company under section 23A(1) of the Act the amount of Rs. 17,027 representing dividends which were exempt from super-tax under section 56A must be excluded from the distributable surplus before levying super-tax under section 23A(1). In view of this finding according to the Tribunal an amount of Rs. 2,515 became chargeable to super-tax under section 23A(1) of the Act. On these facts the questions that are referred for our determination both at the instance of the assessee and the revenue are as under : " 1. Whether, on the facts and in the circumstances of the case, the levy of super-tax under section 23A could be made without the issue of a notice under section 34 ? 2. If the answer to the first question is in the affirmative, whether on the facts and in the circumstances of the case, the amount of Rs. 17,027 representing dividend not liable to super-tax under section 56A was includible in the total income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not accepted by this court, in any event in determining the amount of income over which super-tax is payable by the assessee company under section 23A of the Act, the dividend income which is exempt from payment of super-tax under section 56A of the Act ought to be deducted and it is on the remaining amount that the liability for payment of super-tax should be imposed. To support this contention he urged that it will not be proper to look to the provisions of section 23A in isolation. He urged that the question of levy and payment of super-tax has been discussed at more than one place in the Act and all the provisions of the Act must be borne in mind before any liability for payment of super-tax can ever arise. According to his submission section 56A was a declaratory section which provided that no super-tax shall be payable by a company in respect of income by way of dividends which complied with the conditions laid down in that section, and that such provisions were general and cannot be overlooked or ignored whenever a question of payment of super-tax has to be considered in any provisions of the Act including those of section 23A. He further urged that the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amily, company, etc., an additional duty of income-tax (in this Act referred to as super-tax) at the rate or rates laid down for that year by a Central Act. There are two provisos to this section but it is unnecessary to refer to them for the purpose of the present case. The operative part of section 55 makes it clear that what is described as super-tax in this Act is an additional duty of income-tax. How the total income for the purpose of super-tax is to be calculated is laid down in section 56. Under that section, except in cases to which section 15A applies or to which by clause (a) of the proviso to sub-sections (3) and (4) of section 25 those sub-sections do not apply and subject to the provisions of this Chapter, the total income of any individual, Hindu undivided family, company, etc., shall, for the purposes of super-tax, be the total income as assessed for the purposes of income-tax, and where an assessment of total income has become final and conclusive for the purposes of income-tax for any year, the assessment shall also be final and conclusive for the purposes of super-tax for the same year. Under this section, therefore, total income as assessed for the purposes of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer felt that this was a case where undistributed profits of the assessee-company were not distributed in the requisite statutory percentage referred to in section 23A of the Act and the provisions of the said section were applicable and attracted. Primarily, the provisions of section 23A shall apply to a company in which the public are not substantially interested. As the assessee-company is a private limited company it is not even controverted that the provisions of section 23A do apply in the present case. Upon application of section 23A two rival contentions are urged before us. The contention on behalf of the revenue is that its provisions are self-contained and nothing contained in Chapter IX including section 56A of the Act has to be taken into account for determining liability for payment of super-tax by the assessee-company under section 23A of the Act. On the other hand, on behalf of the assessee-company the argument is that whenever a question of levy of super-tax has to be considered by any taxing authority, the provisions of section 23A cannot be considered in mere isolation; all the relevant provisions contained in the Act which pertain to and are germane to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the previous year the statutory percentage of the total income of the company as reduced by the taxes and levies prescribed therein ; he has also to determine whether, having regard to the losses incurred by the company in the earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable. It is after making these enquiries that the Income-tax Officer may make the order directing payment of additional super-tax at the rates prescribed. The process to be followed is not the process of assessment, but of determining whether the liability should be charged and imposed. Though strong reliance is placed by Mr. Hajarnavis upon this decision, we fail to see how the observations in this case are of any assistance in determining the controversy that arises between the parties in the present case. Ordinarily, if the same topic is discussed at different places in a statute, then all the provisions pertaining to that topic in the statute should be taken into account before any question in relation thereto is finally determined. Section 23A deals with liability to pay super-tax on undist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this section within twelve months immediately following the expiry of the previous year, are less than the statutory percentage of the total income of that company in that previous year as reduced in the manner therein provided. The argument of Mr. Trivedi on behalf of the assessee-company for the purpose of this section is that for determining the total income regard is not to be had merely to the three items which are contained in clauses (a), (b) and (c) which refer to reduction from total income, but he submitted that any item of income which is not subject to super-tax has to be excluded from computation of the total income for the purposes of section 23A. Reliance was placed by him upon the observations of this court in N.M. Raiji's case. In this case at page 185 this court has pointed out that : " The scheme is that wherever one finds an exemption or exclusion from payment of tax, the exemption or exclusion also operates for the purpose of computing the total income. Not only is the sum not liable to tax, but it is also not to form part of the total income for the purpose of determining the rate. When the Legislature intends that certain sums, although not liable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention based on these observations cannot be accepted. Accordingly our answer to question No. 2 is in the affirmative. This takes us to the third question which has been referred to at the instance of the revenue. The answer to this question depends upon the proper interpretation to be placed upon the second part of sub-section (1) of section 23A. Under that provision the Income-tax Officer has, unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profits made in the previous year the payment of a dividend or a larger dividend than that declared would be unreasonable, to make an order in writing that the company shall apart from the sum determined as payable by it on the basis of the assessment under section 23 be liable to pay super-tax at the rate of 50% in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments and at the rate of 37% in the case of any other company on the undistributed balance of the total income of the previous year, that is to say, on the total income as reduced by the amounts, if any, referred to in clauses (a), (b) or (c) and the dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be an apparent conflict between the provisions of section 23A and those of section 56A. If the provisions of section 23A were merely looked at, then the dividend which falls within the provisions of section 56A will be subjected to liability of payment of super-tax even though section 56A states that no super-tax shall be payable by a company on such part of its total income as consists of dividends as specified therein. In our opinion, when such a situation arises, it will not be proper to treat the provisions of one as overriding those of the other and both the provisions should be harmonised together. When looked at from that point of view even in applying the provisions of section 23A the provisions of section 56A shall not be overlooked as both the sections deal with the topic of super-tax. Thus, even though in section 23A no specific reference is made to dividend which is exempt from super-tax under section 56A, as all the provisions of the statute have to be taken into account for determining the liability for payment of super-tax, even in determining the statutory percentage of liability for payment of super-tax under section 23A the dividend which is exempt from super ..... X X X X Extracts X X X X X X X X Extracts X X X X
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