Case: War Profits Tax Commissioner, Madhya Pradesh,Indore Vs. M/S. Rinodram Balchand Of Ujjain

on a business" and before the words "to the whole of which" and shall be always deemed to be there from the date from which the said Ordinance came into force."7. The High Court felt no difficulty holding that the explanation applied, and that on its plain terms the dividend income which the assessees received from the profits of Binod Mills Ltd. was not liable to be included in the taxable income. The High Court observed :"The language of the explanation is very plain, and it means that if income is received by way of dividends or profits from a company carrying on a business, to the whole of which the section of the Ordinance imposing the War Profits Tax applies, then the income has to be excluded in the assessment to War Profits Tax of the assessee receiving that income. The object of the explanation is clearly to avoid double taxation. Here it is not disputed that the dividend income which the assessee received was from the profits of the Binod Mills Limited and the Mills were subject to the burden of the War Profits Tax under the Ordinance. That being so, the explanation in terms applies to the case, and the assessee is entitled to claim that the dividend income of Rs. 11,09,332 received from Binod Mills could not be included in the computation of its profits for the purposes of War Profits Tax and was consequently not chargeable under the War Profits Tax Ordinance. Learned Advocate-General appearing for the State did not dispute this positions."8. Mr. Shroff, the learned counsel for the Commissioner, contends, first, that the explanation was not in existence at the relevant time, and, therefore, cannot be taken into consideration; secondly, that the explanation is an explanation to R. 3 (2) and not to R. 3 (1) and, therefore, cannot be used to explain R. 3 (1). Mr. Shroff complains that the High Court was wrong in thinking that the explanation formed part of Ordinance 2001, as it was originally promulgated. The High Court seems to have been under this impression because in the order refusing leave to appeal to this Court the High Court observed :"There was no omission at all on our part to consider the question whether the explanation was prospective or not. Indeed, this question was never raised by the learned Advocate-General, appearing for the Department and it was rightly not raised as the Explanation was not added subsequent to the promulgation of the Ordinance and the very basis of the assessment of the income of the assessee was that R. 3 of Schedule I of the Ordinance together with the Explanation applied to the income received by the assessee during the period from 1st July 1944 to 16th October 1944."9. It seems that Ordinance 2002 and Ordinance 2004 were not placed before the High Court and for this reason it assumed that the explanation was not added subsequent to the promulgation of the Ordinance.10. But even if it was added Subsequently, in our opinion, the explanation applies to the computation of the profits of the chargeable accounting period July 1, 1944 to October 16, 1944. If we read Ordinance 2002 and Ordinance 2004 together the legislative intention to make the explanation retrospective becomes clear. Apart from Ordinance 2004, it would have been very arguable that the explanation inserted by Ordinance 2002 was retrospective because it dealt with the computation of profits and would apply to all computation of profits made by the Taxing authorities after February 28, 1946. But we need not go into this question because Ordinance 2004 expressly assumes that the explanation was in existence from the date when the Ordinance came into force and no other meaning can be given to S. 2 of Ordinance 2004 because by deeming that the comma shall he deemed to be there from the date from which the Ordinance came into force it expressly assumes that the explanation was also in force from that date. Accordingly we are not inclined to accept the first contention of Mr. Shroff and we must hold that the explanation applies to the computation of profits of the chargeable accounting period July 1, 1944 to October 16, 1944.11. Regarding the second contention Mr. Shroff says that Ordinance 2002 expressly provides that the explanation shall be added in R. 3 (2) of the First Schedule to the Ordinance. He further says that this explanation is referred in Ordinance 2004 as "explanation of sub-r. (2) of R. 3 of Sch. 1".There is no doubt that Ordinance 2002 did purport to add this explanation to R. 3 (2) but it seems to us that if we look at the language of the explanation it was meant to be an explanation not only to R. 3 (2) but to R. 3 (1) also. First, the words "the income from investments to be included in the profits of the business under the provisions of this rule" are comprehensive and include income from investments both under R. 3 (1) and R. 3 (2). Secondly, there is no reason why any distinction should have been made between investments mentioned in R. 3 (1) and investments mentioned in R. 3 (2).Rule 3 (1) is general and deals with all investments from profits of all businesses and would include investments mentioned in R. 3 (2). Rule 3 (2) deals with investments of a certain business, i.e., business which consists wholly or mainly in the dealing in or holding of investments. We have not been able to appreciate why, if Mr. Shroff is right, was it necessary to distinguish between income from investments mentioned in R. 3 (1) and income from investments mentioned in R.3 (2). At any rate, the language of the explanation is quite clear and it seems to us that by the words "in R. 3 (2) of the First Schedule to the Ordinance, the following shall be added" what was really meant was to add the explanation below R. 3 (2).

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

Explanation:
0[ds]9. It seems that Ordinance 2002 and Ordinance 2004 were not placed before the High Court and for this reason it assumed that the explanation was not added subsequent to the promulgation of the Ordinance.10. But even if it was added Subsequently, in our opinion, the explanation applies to the computation of the profits of the chargeable accounting period July 1, 1944 to October 16, 1944. If we read Ordinance 2002 and Ordinance 2004 together the legislative intention to make the explanation retrospective becomes clear. Apart from Ordinance 2004, it would have been very arguable that the explanation inserted by Ordinance 2002 was retrospective because it dealt with the computation of profits and would apply to all computation of profits made by the Taxing authorities after February 28, 1946. But we need not go into this question because Ordinance 2004 expressly assumes that the explanation was in existence from the date when the Ordinance came into force and no other meaning can be given to S. 2 of Ordinance 2004 because by deeming that the comma shall he deemed to be there from the date from which the Ordinance came into force it expressly assumes that the explanation was also in force from that date. Accordingly we are not inclined to accept the first contention of Mr. Shroff and we must hold that the explanation applies to the computation of profits of the chargeable accounting period July 1, 1944 to October 16,is no doubt that Ordinance 2002 did purport to add this explanation to R. 3 (2) but it seems to us that if we look at the language of the explanation it was meant to be an explanation not only to R. 3 (2) but to R. 3 (1) also. First, the words "the income from investments to be included in the profits of the business under the provisions of this rule" are comprehensive and include income from investments both under R. 3 (1) and R. 3 (2). Secondly, there is no reason why any distinction should have been made between investments mentioned in R. 3 (1) and investments mentioned in R. 3 (2).Rule 3 (1) is general and deals with all investments from profits of all businesses and would include investments mentioned in R. 3 (2). Rule 3 (2) deals with investments of a certain business, i.e., business which consists wholly or mainly in the dealing in or holding of investments. We have not been able to appreciate why, if Mr. Shroff is right, was it necessary to distinguish between income from investments mentioned in R. 3 (1) and income from investments mentioned in R.3 (2). At any rate, the language of the explanation is quite clear and it seems to us that by the words "in R. 3 (2) of the First Schedule to the Ordinance, the following shall be added" what was really meant was to add the explanation below R. 3 (2).