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TMI Blog1964 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... he result, we agree with the High Court that the answer to the question referred should be in the affirmative. Appeal dismissed. - - - - - Dated:- 8-5-1964 - Judge(s) : K. SUBBA RAO., J. C. SHAH., S. M. SIKRI JUDGMENT The judgment of the court was delivered by SIKRI J.----These are appeals by the Commissioner of Income-tax on certificates granted by the Rajasthan High Court under section 66A(2) of the Indian Income-tax Act, 1922 (11 of 1922), hereinafter referred to as the Act, against the judgment of the High Court in a consolidated reference under section 66(1) of the Act. The High Court answered the question, reproduced below, in the affirmative. The reference was made by the Income-tax Appellate Tribunal in the following circumstances. The respondent, Anant Rao B. Kamat, hereinafter referred to as the assessee, had received in the previous years ( 1950-51 and 1951-52) dividends from two companies, Associated Stone Industries (Kotah) Ltd. and Rajputana Mining Agencies Ltd. For the assessment years 1951-52 and 1952-53, the assessee claimed before the Income-tax Officer that the dividends received by him should be " grossed up " under section 16(2) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addressing ourselves to the contentions at the Bar, it is necessary to reproduce the relevant statutory provisions. These read thus: " 16. (2) For the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been paid, credited or distributed to him, and shall be increased to such amount as would, if income-tax (but not super-tax) at the rate applicable to the total income of the company (without taking into account any rebate allowed or additional income-tax charged) for the financial year in which the dividend is paid, credited or distributed or deemed to have been paid, credited or distributed, were deducted therefrom, be equal to the amount of the dividend: Provided that when the sum out of which the dividend has been paid, credited or distributed or deemed to have been paid, credited or distributed includes---- (i) any profits and gains of the company not included in its total income, or (ii) any income of the company on which income-tax was not payable, or (iii) any amount attributable to any allowance made in computing the profits and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant Finance Act of the Central Government, by the amount of such total income." Paragraph 3(v) of the Concessions Order: " The expression 'State rate of tax' means the rate determined by dividing the amount of income-tax and super-tax payable on the total income according to the rates of tax in force in the State immediately before the appointed day, or for the year in question, as the case may be, by the amount of such total income and where under any State law, the rates of tax in force in the State are prescribed with reference to the total income including agricultural income, the State rate of tax shall be the rate determined by dividing the amount of income-tax and super-tax on the total income including the agricultural income without taking into account any reduction of tax allowed on the agricultural income by the State law by the amount of such total income. Explanation.---Where there was no State law relating to charge of income-tax and super-tax, the rates of income-tax and super-tax in force in that State immediately before the appointed day shall, for the purposes of this clause, be deemed to be the rates specified in the Schedule." Paragraph 6 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholder. In this setting, let us examine what is the true construction of section 16(2) of the Act. It is common ground that " grossing up " has to be effected in this case. The real point of controversy between the parties is regarding the rate at which it is to be done. The learned counsel for the appellant relying on the decision of this court in Rajputana Agencies Ltd. v. Commissioner of Income-tax, urged that the same meaning should be attributed to the expression " rate applicable to the total income of the company " in section 16(2), as was attributed by this court to the same expression occurring in sub-clause (b) of clause (ii) to the second explanation to proviso to paragraph B of Part I of the First Schedule to the Indian Finance Act, 1951. We are unable to accept this argument. It is true that the same expression occurs in section 16(2) and the sub-clause above referred to, but as pointed out by the High Court, the words " without taking into account any rebate allowed or additional income-tax charged " occur in section 16(2) and not in the said sub-clause, and effect must be given to these words. If we ignore these words, we would be rewriting section 16(2). It will be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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