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TMI Blog1983 (7) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... n the manufacturing or processing of goods. (d) For the year under appeal, the assessee filed two returns wherein originally it had shown total income of Rs. 20,26,540 which was revised to Rs. 13,89,329. (e) The ITO framed the assessment on total income of Rs. 24,91,027 vide his order dated 30-3-1979. (f) The assessee did not distribute any dividend within 12 months immediately following the expiry of the previous year. 4. On the aforesaid facts, the ITO enquired of the assessee as to why an order under section 104 should not be passed requiring it to pay additional income-tax for not distributing the income by way of dividend to its shareholders. In its letter, dated 8-9-1979, addressed to the ITO, the assessee stated as under : "This has reference to the proposed action which you desire to take under section 104. In this respect, we submit as under : (1) That the company returned a figure of total income at Rs. 13,89,329 which was increased to Rs. 24,91,027 in the assessment passed. If the tax payable and other deductions are considered as mentioned in your letter, the distributable surplus comes to nil. (2) Further, being expanding concern, the company thought it fit to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly only to the accounting year ended after 1-4-1976." Apart from making oral submissions, the assessee also filed elaborate written submission dated 23-12-1980 before the Commissioner (Appeals), wherein it took up a stand that as the amended provisions of sub-section (4) of section 104 came into force from 1-4-1976, i. e., well after the end of the previous year relevant to the assessment year under consideration, the same was not applicable to it. Therefore, the ITO could not have raised additional income-tax of Rs. 7,54,059 by passing an order under section 104. According to the assessee, the provisions of sub-section (1) of section 104 refer to only 'previous year', the amendment made by the Amendment Act, 1975, would be applicable to the previous year beginning or following after 1-4-1976 and not to the assessment year commencing from 1-4-1976. The Commissioner (Appeals) forwarded the written submissions of the assessee to the ITO for his comments. The ITO communicated his comments to the Commissioner (Appeals) vide his letter dated 4-3-1981. Thereafter, the Commissioner (Appeals) sent a copy of the ITO's comments to the assessee for further elucidation of the matter. Vide its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned irrespective of the date on which the previous year ended. In support of these submissions, he relied on the decisions in the cases of CIT v. T. V. Sundaram Iyengar & Sons (P.) Ltd. [1976] 102 ITR 264 (Mad.), CIT v. Ramchand Kundanlal Saraf [1975] 98 ITR 474 (MP), CGT v. C. Muthukumaraswamy Mudaliar [1975] 98 ITR 540 (Mad.), CIT v. Tezpur Automobiles [1970] 75 ITR 722 (Assam & Nagaland), Gobald Motor Service (P.) Ltd. v. CIT [1966] 60 ITR 417 (SC), CIT v. Gangadhar Banerjee & Co. (P.) Ltd. [1965] 57 ITR 176 (SC), M. M. Sugar Mills (P.) Ltd. v. ITO [1965] 56 ITR 322 (All.) and Gautam Sarabhai v. CIT [1964] 52 ITR 921 (Guj.). He, therefore, urged that the order of the Commissioner (Appeals) be set aside and that of the ITO be restored. 9. The learned counsel for the assessee, on the other hand, strongly supported the order of the Commissioner (Appeals). In this connection, he explained to us the scheme of the provisions of section 104 and submitted that section 104 was neither charging section nor procedural section but it is in the nature of substantive or penal provision and, therefore, it cannot be applied to the assessment year but is applicable to the relevant previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in the case of Bombay Photo Stores (P.) Ltd. and at first blush, it appeared to us that the assessee's case is fully covered by the said decision. However, looking closely to the facts and circumstances obtaining in that case, we are of the view that the ratio laid down in that decision has no application to the facts and circumstances obtaining in the present case. In order to appreciate the ratio laid down in that case, it would be necessary to refer to the facts summarised which reads as under : ". . . The assessee, Bombay Photo Stores (P.) Ltd., is a private limited company to which the provisions of section 23A are applicable. In the present case, the assessment year is 1960-61 for which the previous year ended on June 30, 1959. The assessee's net profit accounts came up to Rs. 72,959. The Income-tax Officer determined the assessee's total income at Rs. 87,103 and tax payable thereon at Rs. 39,196, leaving a balance of Rs. 47,907 available for distribution as dividend. According to the Income-tax Officer, the effective statutory percentage applicable to the company was 57.5 per cent and on this basis the minimum distribution of dividend required for complying with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry justification to treat the exposure of the film itself as part of the proceeding. On that basis the assessee's net profit consisted of Rs. 67,006 arising from processing and Rs. 5,953 for trading. The Tribunal applied 45 per cent and 60 per cent to these two activities of the business, and came to the conclusion that the shortfall worked out to be less than 5 per cent of the distributable surplus. The conclusion of the Tribunal, there was that the assessee should be afforded an opportunity to make a further distribution of dividends to raise it up to the requisite statutory percentage . . ." After going through the provisions of section 23A of the Indian Income-tax Act, 1922, as well as the relevant provisions of the Finance Act, 1959, the Hon'ble High Court held that since the statutory percentages were substituted from 1-4-1960 and since the assessee's previous year in that case ended on 30-6-1959, the old statutory rates were applicable in that case. On the reading of that decision of the Hon'ble Calcutta High Court, we are of the view that the assessee in that case got the benefit as the higher statutory rates were substituted after the end of the relevant previous year. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the provisions of the Income-tax Act after giving the relevant allowances and deductions therefrom. If during the assessment year an individual is assessable to tax, the fact that during the previous year he was not liable to tax at all because there was no Income-tax Act in the area to which the Act was extended or because that under an Income-tax Act in force therein during that year his income was exempted from tax or because of any other law, including International law, he was so exempt from tax, would not be of any relevance.'" 11. It would, thus, appear from the above, that the amendment made in a particular section would be applicable to the assessment year concerned irrespective of the fact as to when the relevant previous year ended or whether such amendment made in the Act came into force prior or subsequent to the end of the relevant previous year. In this view of the matter, we are of the considered opinion that the amendment made by the Amendment Act, 1975 in sub-section (4) of section 104 would be applicable to the year under appeal and, therefore, the Commissioner (Appeals) was not justified in accepting the submissions made on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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