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TMI Blog1960 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... is not achieved. Indeed, the Finance Act continues to say that the tax shall be on the total income, as defined in the Indian Income-tax Act and as determined under that Act. It is impossible to say that the additional income-tax was properly laid upon the total income, because what was actually taxed was never a part of the total income of the previous year. The High Court was right in answering the question, which it had framed, in the negative. Appeal dismissed. - - - - - Dated:- 4-5-1960 - Judge(s) : HIDAYATULLAH., KAPUR., S. K. DAS JUDGMENT The judgment of the court was delivered by HIDAYATULLAH, J.--This is an appeal against the judgment and order of the High Court of Bombay dated August 3, 1956, in a reference un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be referred to briefly, hereinafter, as the Finance Act. The Income-tax Officer found that the assessee company had declared excess dividends amounting to Rs. 1,87,691. He calculated additional income-tax on it at 5 annas in the rupee after deducting income-tax borne by the profits of the previous year at 4 annas per rupee, a surcharge of 5 per cent. less rebate of one anna in the rupee as allowed by the Finance Act. This additional tax amounted to Rs. 21,115-4-0. The appeals of the assessee company under the Income-tax Act failed. The Tribunal held that the excess dividends were deemed to be paid out of undistributed profits of the earlier year ending June 30, 1951, amounting to Rs. 6,60,720 on which a rebate of 1 anna in the rupee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be found in the Finance Act. The Finance Act merely provides the rate applicable to the income so found. According to the High Court, the Finance Act in providing that additional income-tax should be paid upon the accumulated profits of the previous years goes beyond the purpose for which the Central Act is passed every year, and cannot stand by itself without the support of section 3 of the Indian income-tax Act. The High Court held that the Finance Act had "misfired", because it did not resort to legislation which would have conformed to the object for which the Finance Act was passed every year. The learned Chief Justice, who delivered the judgment of the High Court, stated that there were several methods open to the Legislature to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 3 of the Income-tax Act. The point that was argued here was that it was not necessary to look only to section 3 of the Indian Income-tax Act but also to the provisions of the Finance Act, through which Parliament could impose a new tax, if it so pleased. Other arguments involved modifications of language suitable to sustain the tax independently of section 3 of the Indian Income-tax Act a procedure which we do not think is open, for reasons which we have given in Civil Appeal No. 427 of 1957, decided today. These modifications, which were suggested, involve a recasting of the entire relevant paragraph of the Finance Act to make it independent of section 3 of the Indian Income-tax Act, a course which is only open to a Legislature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 18 of that Act- (i) where the total income, as reduced by seven annas in the rupee and by the amount, if any, exempt from income-tax, exceeds the amount of any dividends (including dividends payable at a fixed rate) declared in respect of the whole or part of the previous year for the assessment for the year ending on the 31st day of March, 1954, and no order has been made under sub-section (1) of section 23A of the Income-tax Act, a rebate shall be allowed, at the rate of one anna per rupee on the amount of such excess; (ii) where the amount of dividends referred to in clause (i) above exceeds the total income as reduced by seven annas in the rupee and by the amount, if any, exempt from income-tax, there shall be charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the second proviso, the rebate disappears, and an additional income-tax has to be paid on dividends in excess of that limit, paid in the year. The explanation says that "the excess dividend shall be deemed to be out of the whole or such portion of the undistributed profits of one or more years immediately preceding the previous year as would be just sufficient to cover the amount of the excess dividend and as have not likewise been taken into account to cover an excess dividend of a preceding year". This fiction, as we have already pointed out, provides only that the dividends shall be deemed to be out of the profits not of the previous year under assessment but of some other years. What the Finance Act fails to do is to make them " total ..... X X X X Extracts X X X X X X X X Extracts X X X X
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