Appeal No 433 of 1957
Appeal from the judgment and order dated August 24 1956 of the Rajasthan High Court at Jodhpur in Civil Misc
Case No 17 of 1955
B D Sharma for the appellant
A N Kripal R H Dhebar and D Gupta for the respondent 1958
October 17
The Judgment of the Court was delivered by VENKATARAMA AIYAR J
This is an appeal against the judgment of the High Court of Rajasthan in a reference under section 661 of the Indian Income tax Act 1922 hereinafter referred to as the Act
The facts so far as they are material are these The appellant is a resident of what was once the independent State of Udaipur
There was in that State a Company called the Mewar Industries Ltd registered under the provisions of the law in force in that State and the appellant held 266 shares in that Company
On January 18 1950 the Company went into liquidation and on April 22 1950 the liquidator distributed a portion of the assets among the shareholders and the appellant was paid a sum of Rs 26000 under this distribution
It is common ground that this sum represents the undistributed profits of the Company which had accrued during the six accounting years preceding the liquidation
It should be mentioned that there was in the State of Udaipur no law imposing tax on income and that it was only under the Indian Finance Act 1950 that the residents of the State of Rajasthan in which the State of Udaipur had merged became liable for the first time to pay tax on their income
That Act came into force on April 1 1950
We are concerned in these proceedings with the assessment of tax for the year 1951 52 and that under section 3 of the Act has to be on the income of the previous year ie 1950 51
Now the dispute in the present case relates to the sum of Rs 26000 paid by the liquidator to the appellant on April 22 1950
By his order dated July 3 1952 the Income tax Officer held 206 that this was dividend as defined in section 26Ac of the Act and included it in the taxable income of the appellant in the year of account
The appellant took this order in appeal to the Appellate Assistant Commissioner who by his order dated January 12 1953 confirmed the assessment
There was a further appeal by the appellant to the Appellate Tribunal who also dismissed it on November 10 1953
On the application of the appellant the Appellate Tribunal referred the following question for the decision of the High Court  Whether on the facts and in the circumstances of this case the aforesaid sum of Rs 26000 was liable to be taxed in the assessee s hands as dividend within the meaning of that term in section 26Ac of the Indian Income tax Act
 The reference was heard by Wanchoo C J and Modi J who by their judgment dated August 24 1956 answered it in the affirmative
It is against this judgment that the present appeal has been preferred on a certificate granted by the High Court under section 66A2 of the Act
The sole point for determination in this appeal is whether the sum of Rs 26000 received by the appellant on April 22 1950 is dividend as defined in
section 26Ac of the Act
That definition as it stood on the relevant date and omitting what is not material was in these terms  6A dividend  includes a any distribution by a company of accumulated profits whether capitalised or not if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company  c any distribution made to the shareholders of a company out of accumulated profits of the company on the liquidation of the company Provided that only the accumulated profits so distributed which arose during the six previous years of the company preceding the date of liquidation shall be so included
207 The definition of  previous year  as given in section 2l 1 omitting what is not material is as follows  Previous year  means in respect of any separate source of income profits and gains a the twelve months ending on the 31st day of March next preceding the year for which the assessment is to be made  On these provisions the contention of the appellant is that under the definition in section 26Ac the assets of a company distributed after it has gone into liquidation will be dividend only if they represented the profits thereof accumulated during the six previous years preceding the date of the liquidation and that in the present case though the amounts distributed came out of the accumulated profits of the Company those profits had not been accumulated within the six previous years of the liquidation of the Company
It is not in dispute that the profits which were distributed had been accumulated during the years 1943 44 to 1948 49 ie during the six years preceding the liquida tion
The point in controversy is whether those years can be said to be  previous years  within section 26Ac of the Act
The appellant contends that  previous year  as defined in section 2l 1 of the Act means the year which is previous to the assessment year that accordingly when there is no year of assessment there can be no previous year that construing the words  six previous years  in section 26Ac in the light of the definition of previous year in section 2l 1 of the Act the years 1943 44 to 1948 49 cannot be held to be previous years because the Indian Income tax Act came into force in the State of Rajasthan only on April 1 1950 and prior to that date there was at no time any law imposing tax on income in the State of Udaipur that there was therefore no year of assessment and that in consequ ence the sum of Rs 26000 received by the appellant on April 22 1950 is not a dividend as defined in section 26Ac
The contention of the respondent which has been accepted by the Income tax authorities and by the learned Judges in the Court below is that the expression  six previous years is used in section 26Ac not in the technical and restricted sense in which the 208 words  previous year  are used in section 211 of the Act and that in the context it means six consecutive accounting years preceding the liquidation of the company
The question is which of these two interpretations is the right one to be put on the language of section 26Ac
The argument of Mr Sharma for the appellant is that section 211 having defined the meaning which the expression previous year has to bear in the Act that meaning should according to the well settled rules of construction be given to those words wherever they might occur in the statute and that that is the meaning which must be given to the words  six previous years  in section 26Ac
It is to be noticed that the definitions given in section 2 of the Act are as provided therein to govern  unless there is anything repugnant in the subject or context 
Now the appellant contends that the words  unless there is anything repugnant  are much more emphatic than words such as  unless the subject or context otherwise requires  and that before the definition in the interpretation clause is rejected as repugnant to the subject or context it must be clearly shown that if that is adopted it will lead to absurd or anomalous results
And our attention was invited to authorities in which the above rules of construction have been laid down
It is unnecessary to refer to these decisions as the rules themselves are established beyond all controversy and the point to be decided ultimately is whether the application of the definition ins
2l 1 is repelled in the context of section 26Ac
Turning to the language of section 2II we have this that according to the definition contained therein  previous year  is the year which is previous to the year of assessment and that means that there can be only one previous year to a given year of assessment
When section 26A c speaks of six previous years it is obvious that it uses the expression  previous year  in a sense different from that which is given to it in section 2l 1 because it would be a contradiction in terms to speak of six previous years in relation to any specific assessment year
It was argued that under section 132 of 209 the  words in the singular should be read as including the plural and that therefore the definition of previous year in section 2l 1 could be read as meaning  previous years 
But section 13 only enacts a rule of construction which is to apply  unless there is anything repugnant in the and to read a  previous year  in section 2l 1 would be to nullify the previous year  enacted therein and such a construction must therefore be rejected as repugnant to the context
It was then suggested that all the six previous years might be regarded as previous each to the next following year if that was itself a year of assessment and that such a construction would consistently with the contention of the appellant give full effect to the definition in section 211 of the Act
But this argument overlooks that while there may be several preceding years to a given year of assessment there can be only one previous year in relation to it and that it would make no sense to speak of six previous years with reference to a year of assessment
We are satisfied that it would be repugnant to the definition of  dividend  in section 26Ac to import into the words  six previous years  the definition of previous year in section 2l 1 of the Act
An examination of the policy underlying section 26Ac also leads to the same conclusion
When a company makes profits and instead of distributing them as dividend accumulates them from year to year and at a later date distributes them to the shareholders the amounts so distributed would be dividend under section 26A a but when a company which has so accumulated the profits goes into liquidation before declaring a dividend and the liquidator distributes those profits to the shareholders it was held in Commissioners o Inland Revenue vs Burrell 1 that such distribution was not a dividend because when once liquidation intervenes there was no question of distribution of dividends and all the assets of the company remaining after the discharge of its obligations were surplus divisible among 1 210 the shareholders as capital
It was to remove this anomaly that the Indian legislature following similar legislation by British Parliament in the year 1927 enacted section 26A 1 in 1939
The effect of this provision is to assimilate the distribution of accumulated profits by a liquidator to a similar distribution by a company which is working but subject to this limitation that while in the latter the profits distributed will be dividend whenever they might have been accumulated in the former such profits would be dividend only in so far as they came out of profits accumulated within six years prior to liquidation
Now the reason of it requires that those years must be a cycle of six years preceding the liquidation arid that is what is meant by the words  previous years 
It was argued for the appellant that if that was what was intended by the legislature that was sufficiently expressed by the words  preceding the liquidation  and that the words previous years  would be redundant
But the words preceding years  would have meant calendar years whereas the accounting years of the company for ascertainment of profits and loss might be different from the calendar years and the words  previous year  would be more appropriate to connote the financial year of a company
Now it should be mentioned that when a company in liquidation distributes its current profits that would also be not dividend as held in Burrell s case 1 and the law to that extent has been left untouched by section 26Ac
And it has accordingly been held by the High Courts that the current profits of a company in liquidation which are distributed to the shareholders are not dividend within section 26Ac Vide Appavu Chettiar vs Commissioner of Income tax 2 and Girdhardas  Co Ltd vs Commissioner of Incometax 3
Therefore accumulated profits which are sought to be caught in section 26A c would be the profits accumulated in the financial years preceding the year in which the liquidation takes place and it is this that is sought to be expressed by the words  previous years  in section 26A c
In the present case as the Company went into liquidation on January 18 1950 1 2 3 211 excluding the current year which commenced on April 1 1949 the six previous years will be the years 1943 44 to 1948 49
So far we have considered the question on the language of section 26Ac and the policy underlying it
On behalf of the respondent certain authorities were cited as supporting his contention that the expression it previous years  in section 26A c is not to be interpreted in the sense in which the expression  previous year is defined in section 2l 1 of the Act
It is sufficient to refer to one of them and that is the decision of this Court in Commissioner of Income tax Madras vs K Srinivasan and K Gopalan 1
There the point for decision was as to the interpretation to be put on the words  end of the previous year  in section 25 sub sections
3 and 4 of the Act which dealt with discontinuance of or succession to a business and it was held that the expression  previous year  in those provisions meant an accounting year expiring immediately preceding the date of discontinuance or succession
The decision is not itself relevant to the present discussion but certain observations therein are relied on as bearing on the point now under consideration
Mahajan J delivering the judgment of the Court observed  The expression previous year  substantially means an accounting year comprised of a full period of twelve months and usually corresponding to a financial year preceding the financial year of assessment
It also means an accounting year comprised of a full period of twelve months adopted by the assessee for maintaining his accounts but different from the financial year and preceding a financial year
For purposes of the charging sections of the Act unless otherwise provided for it is co related to a year of assessment immediately following but it is not necessarily wedded to an assessment year in all cases and it cannot be said that the expression previous year  has no meaning unless it is used in relation to a financial year
In a certain context it may well mean a completed accounting year immediately preceding the happening of a contingency I  501 212 The learned Judges in the Court below have relied on these observations and quite rightly as supporting their conclusion that the expression  six previous years  in
section 26A c means only the six accounting years of a company preceding the date of liquidation
The appellant sought to raise one other contention and that is that the Indian Companies Act came into operation in the Udaipur territory on April 1 1951 only by force of the Part B Stater Laws Act 111 of 1951 that during the relevant period the Mewar Industries Ltd was not a company as defined in section 25A of the Act and that therefore the distribution of assets made by that Company on April 22 1950 could not be held to be a dividend as defined in section 2 6A c
But that is not a question which was referred for the opinion of the High Court under section 661 of the Act nor is it even dealt with by the Tribunal and therefore cannot be said to arise out of its order
Moreover whether the Mewar Industries Ltd is a Company as defined in the Indian Income tax Act is itself a question over which the parties are in controversy
The definition of  Company  under the Indian Income tax Act has undergone several changes from time to time and on the relevant date it stood as follows  26 Company  means i any Indian Company or ii any association whether incorporated or not and whether Indian or non Indian which is or was assessable or was assessed as a company for the assessment for the year ending on the 31st day of March 1948 or which is declared by general or special order of the Central Board of Revenue to be a company for the purposes of this Act
 It is contended for the respondent that the Mewar Industries Ltd was an association which was assessable as a Company for the year ending March 31 1948 and that it was in fact assessed but the appellant disputes this
As the point turns on disputed question of fact
 it cannot be allowed to be raised at this stage
213 In the result we hold that the sum of Rs 26000 received by the appellant on April 22 1950 as dividend as defined in section 26A c of the Act and is chargeable to tax
The appeal fails and is dismissed with costs
Appeal dismissed


Summary:
The appellant a registered Housing Co operative Socie ty acquired about 70 acres of land during the period 1973 to 1975
After the enactment of UP Industrial Area Development Act 1976 the State Government constituted an Industrial Development Authority called NOIDA
Soon after the constitu tion of the said authority notifications were issued under the Land Acquisition Act acquiring certain lands including that of the appellant Society
The appellant and several other societies demanded land in lieu of the land acquired
A sub Committee was constitut ed and it was proposed to offer developed plots to the bona fide members of the societies whose lands were acquired
An approximate rate of Rs 130 per square metre was fixed
It was also stipulated that 30 of the price would have to be deposited before a tripartite agreement between NOIDA Co operative Societies and individual members is made after finalisation of lay out plan
The appellant society filed a Writ Petition in the High Court alleging that the action taken by NOIDA was arbitrary and challenging the notifications issued under Sections 4 and 6 of the Land Acquisition Act
Meanwhile the authority had intimated the appellant society that it was finally decided to offer lands and that 20 of the amount had to be deposited within a stipulated time
The Society requested for extension of time
Time was not extended and the Society was not allotted the land
It was contended before the High Court that the authori ty acted mala fide and its not extending the time was arbitrary and discrimi 65 natory
The land price fixed by the authority was also challenged
The High Court dismissed the Writ Petition holding that the appellants Society had no legal right to get a particular land and that it did not avail the conces sion granted by the authority
This appeal by special leave is against the order of the High Court
Disposing of the appeal this Court
HELD 1
The interim orders of this court dated 30583 19384 30484 and 8585 will merge in this Order
70B 2
The Judgment of the High Court dated 6583 is set aside
The total number of persons entitled to allotment will be confined to those persons who were eligible members of the Society on 1st May 1976 not exceeding 600
The total area to be allotted to the members of the Society will be 288 acres in the form of developed plots
This amounts to 40 of the total 72 acres of land acquired by the Society in the villages Chhalera Bangar and Suthari between January 1973 and September 1975
The allotment shall be made in Sectors 40 41 and 42 and if sufficient number of plots are not available in these Sectors then from the adjacent sectors
The plots to be allotted are to be developed by NOIDA within a period of nine months beginning from 1st May 1990 and ending on 31st January 1991 by which date the plots shall be allotted to the entitled members of the Society
NOIDA shall be permitted to charge the price of the allotted plots at the rate of Rs 1000 per square metre
Every member who has deposited any sum of money with NOIDA against proposed allotment shall be entitled to 12 per cent interest on such amount from the date of deposit till the actual allotment and such interest accrued in favour of the persons shall be entitled to adjustment of such interest against actual price of the land to be worked out at the rate of Rs1O00 per square metre
Balance amount if any shall have to be paid by every eligible member of the Socie ty as on1576 not exceeding 600 in all within three months from now in three equal monthly instalments
The 1st instal ment will be paid on or before May 31 1990
The second instalment to be paid on or before June 30
1990 and the third instalment to be paid on or before July 31 1990
It shall be obligation of the Society to duly notify every member of these directions and the time factor forthwith as failure to pay any of these instalments within the time limit indicated above shall disqualify such person from allotment and NOIDA will thereafter be only obliged to refund the money lying to the credit of the defaulter with bank rate of interest
In case the Review Petition in Hira lal Chawla s case is allowed the parties herein shall be at liberty to apply for review of this judgment 66 on similar extent
Each allottee shall furnish an affidavit to the effect that neither heshe or spouse nor dependent children owns any other plot or house or flat within NOIDA
All the norms laid down by NOIDA in the matter of develop ment shall be strictly followed
Supervision of this opera tion of course shall be by NOIDA
The society would cooper ate with NOIDA in this regard
70B H 71A B Hiralal Chawla and Anr
vs State of U P  Ors 1990 1JTSC 194 applied