Case: Commissioner of Income Tax, Madhya Pradesh Vs. M/s. Binodiram Balchand, Indore

whether the dividend income of the assessee should have been assessed both for the purpose of income-tax as well as super-tax at the rates prescribed in the Schedule to the Order.5. The High Courts finding that the dividend income accrued or received by the assessee in Madhya Bharat is subject to super-tax as well as its finding that a part of dividend income is subject to income-tax had not been appealed against. Hence it is not necessary to go into that question. Therefore the question that remains for examination is whether the High Court was right in holding that the income-tax and super-tax leviable on the dividend income is at the concessional rates mentioned in the Order.6. It may be noted that in Madhya Bharat till April 1, 1950, there was no State law relating to the charge of income-tax and super-tax. Paragraph 3 (v) of the Order defines the expression "State rate of tax". The explanation to that definition says: "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 (in the present case 1st day of April, 1950), shall, for the purpose of this clause, be deemed to be the rates specified in the Schedule". Paragraph 4 (i) says that the provisions of paragraphs 5, 6, sub-paragraph (1) of paragraph 11, 12 and 13 of this Order shall apply . . . . . ."(iii) in the case of any other assessee who is not resident in the previous year in the taxable territories or in the taxable territories other than Part B States, to so much of the income, profits and gains included in his total income as accrue or arise in any Part B State and are not deemed to accrue or arise, or are not received or deemed to be received within the meaning of clause (a) of sub-section (1) of Section 4 of the Act, in the taxable territories other than the Part B States."7. The assessee in the relevant "previous year" was a resident of Madhya Bharat. His income with which was are concerned in this appeal exclusively accrued or arose in Madhya Bharat. Therefore the assessee is entitled to the benefit of paragraphs 5, 6, sub-paragraph (1) of paragraph 11, 12 and 13 of the Order.8. Paragraph 5 deals with the income of a "previous year" chargeable in the Part B State in 1949-50. The assessees case does not fall within its scope. Paragraph 6 deals with income of a "previous year" which does not fall under paragraph 5. That paragraph to the extent it is material for our present purpose reads :"The income, profits and gains of any previous year ending after the 31st day of march, 1949, which does not fall within paragraph 5 of this order shall be assessed under the Act for the year ending on the 31st day of March, 1951 or on the 31st day of March, 1952, as the case may be, and the tax payable thereon shall be determined as hereunder :In respect of so much of the income, profits and gains included in the total income as accrue or arise in any State other than the States of Patiala East Punjab States Union and Travancore Cochin -(i) the tax shall be computed (a) at the Indian rate of tax and (b) at the State rate of tax in force immediately before the appointed day;(ii) where the amount of tax computed under sub-clause (a) of clause (i) is less than or is equal to the amount of tax computed under sub-clause (b) of clause (i), the amount of the first mentioned tax shall be the tax payable;(iii) where the amount of tax computed under sub-clause (a) of clause (i) exceeds the tax computed under sub-clause (b) of clause (i) the excess shall be allowed as a rebate from the first mentioned tax and the amount of the first mentioned tax as so reduced shall be the tax payable."9. The provisos to that paragraph are not relevant for our present purpose.10. In view of clauses 1 to 3 of paragraph 6 read with explanation to paragraph 3 (v), the tax payable by the assessee, income-tax as well as super-tax has to be computed on the basis of the formulae given in paragraph 6. In other words, the assessment will have to be made at the concessional rate mentioned in the Schedule to the Order.11. Paragraph 12 of the Order deals with dividends. It reads :"Where the total income of an assesee chargeable to tax for the assessment for the year ending on the 31st day of March, 1951, includes any income from dividends paid by a company registered in a State in which there was no State law relating to the charge of income-tax and super-tax and the dividend is paid out of profits which were not liable to be taxed, in whole or in part, either in the State or in the taxable territories, no income-tax shall be payable by the assessee on such proportion of the dividend as the non-taxable profits of the company arising in the State bear to the total income of the company."12. The income with which we are concerned in this case is dividend income. It was paid by a company registered in a B State in which there was no State law relating to the charge of income-tax and super-tax. The department does not dispute that the dividend income of Rs. 2,28,392/- is only subject to super-tax and no income-tax is leviable thereon. In other words it does not contest the finding that the dividend income falls within the scope of paragraph 12 of the Order. Once that is conceded, as has been done, then there can be no doubt, in view of paragraph 6 of the Order that on that amount super-tax has to be levied only at the concessional rate prescribed in the Schedule to the Order.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]o far as the first question is concerned viz., whether the assessee was entitled to take the financial year as the relevant previousyear, the same is concluded by our decision in Commr. of Income-tax, Madhya Pradesh v. Kanchanbai, (Civil Appeal No. 19 of 1969 (SC)) just now delivered. For the reasons mentioned therein the decision of the High Court on this point is confirmed.The High Courts finding that the dividend income accrued or received by the assessee in Madhya Bharat is subject to super-tax as well as its finding that a part of dividend income is subject to income-tax had not been appealed against. Hence it is not necessary to go into that question. Therefore the question that remains for examination is whether the High Court was right in holding that the income-tax and super-tax leviable on the dividend income is at the concessional rates mentioned in the Order.The assessee in the relevant "previous year" was a resident of Madhya Bharat. His income with which was are concerned in this appeal exclusively accrued or arose in Madhya Bharat. Therefore the assessee is entitled to the benefit of paragraphs 5, 6, sub-paragraph (1) of paragraph 11, 12 and 13 of the Order.In view of clauses 1 to 3 of paragraph 6 read with explanation to paragraph 3 (v), the tax payable by the assessee, income-tax as well as super-tax has to be computed on the basis of the formulae given in paragraph 6. In other words, the assessment will have to be made at the concessional rate mentioned in the Schedule to the Order.The income with which we are concerned in this case is dividend income. It was paid by a company registered in a B State in which there was no State law relating to the charge of income-tax and super-tax. The department does not dispute that the dividend income of Rs. 2,28,392/- is only subject to super-tax and no income-tax is leviable thereon. In other words it does not contest the finding that the dividend income falls within the scope of paragraph 12 of the Order. Once that is conceded, as has been done, then there can be no doubt, in view of paragraph 6 of the Order that on that amount super-tax has to be levied only at the concessional rate prescribed in the Schedule to the Order.