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TMI Blog1965 (11) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 31, 1958, and July 27, 1959, the liquidator distributed diverse other amounts to the shareholders. In respect of each such distribution the liquidator issued an " income-tax refund certificate " certifying that the amount was distributed out of reserves formed out of accumulated profits of earlier years. The Income-tax Officer, Special Investigation Circle-B, Ahmedabad, in exercise of the power under section 35(10) of the Indian Income-tax Act, 1922, passed an order withdrawing the rebate granted in respect of each of the six assessment years 1948-49 to 1953-54 and demanded payment of tax on the amount of the rebate. The appellant then applied to the High Court of Bdmbay for writs quashing the orders of the Income-tax Officer and the notice of demand and directing the Income-tax Officer to withdraw and cancel the order and notice of demand. The petition was dismissed by the High Court. With certificate granted by the High Court, this appeal has been preferred. Two questions are raised for determination in this appeal: (1) Whether section 35(10) authorises the Income-tax Officer to bring to tax rebate granted in assessment years commencing prior to April 1, 1956; and (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 1, 1956. It provides: " Where, in any of the assessments for the years beginning on the 1st day of April, of the years 1948 to 1955 inclusive, a rebate of income-tax was allowed to a company on a part of its total income under clause (i) of the proviso to paragraph B of Part I of the relevant Schedules to the Finance Acts specifying the rates of tax for the relevant year, and subsequently the amount on which the rebate of income-tax was allowed as aforesaid is availed of by the company, wholly or partly, for declaring dividends in any year, the amount or that part of the amount availed of as aforesaid, as the case may be, shall, by reason of the rebate of income-tax allowed to the company and to the extent to which it has not actually been subjected to an additional income-tax in accordance with the provisions of clause (ii) of the proviso to Paragraph B of Part I of the Schedules to the Finance Acts above referred to, be deemed to have been made the subject of incorrect relief under this Act, and the Income-tax Officer shall recompute the tax payable by the company by reducing the rebate originally allowed, as if the recomputation is a rectification of a mistake apparent f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon Inland Revenue Commissioners v. George Burrell. The court in that case held that on the winding up of a limited company the undivided profits of the past year and the year in which winding up occurred were only assets of the company and, on distribution amongst the shareholders, super-tax was not payable on the undivided profits as income. Under the Companies Act, 1956, accumulated profits of the company at the commencement of the winding up of the company undoubtedly come into the hands of the liquidator as assets for the purpose of satisfying liability of the company and for distribution among the shareholders. But the rule in Burrell's case, since the amendment of the definition of dividend " in section 2(6A) by the Finance Act, 1956, no longer applies, when the liability to assessment of income-tax in respect of amounts distributed out of accumulated profits by a liquidator in a winding up falls to be determined. Parliament had devised by the Indian Income-tax (Amendment) Act, 1939 (7 of 1939), a special inclusive definition for the Income-tax Act, 1922, of " dividend in section 2(6A). Being an inclusive definition, the expression " dividend " means dividend as ordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c). It is true that the definition of " dividend " in section 2(6A)(c) will apply only if there is nothing repugnant in the subject or context in which the expression " dividend " occurs in section 35(10), but there is nothing in section 35(10) which suggests that the expression " dividend " was to have a meaning different from the meaning assigned to it by the interpretation clause. It was urged that assuming that accumulated profits of a company distributed by the liquidator may be regarded as dividends, power under section 35(10) cannot be exercised in respect of those profits, because the liquidator is not in distributing the profits " declaring dividends ". But the assumption underlying the argument that the Companies Act provides that dividends may be deemed to be declared only if certain mandatory provisions are complied with is without substance. By section 205 of the Indian Companies Act, 1956 (before it was amended in 1960), it was provided that no dividend shall be declared or paid except out of the profits of the company or out of moneys provided by the Central or a State Government for the payment of the dividend in pursuance of a guarantee given by such Government. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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