Case: Messrs. Dhandhania Kedia &amp; Co Vs. The Commissioner Of Income-Tax

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 Burrells case, (1924) 9 Tax Cas 27 and the law to that extent has been left untouched by S. 2(6A) (c). 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 S. 2(6A) (c),Vide Appavu Chettiar v. Commr. of Income-tax, 1956-29 I. T. R. 768 :(A. I. R, 1956 Mad 474) and Girdhardas and Co. Ltd. v. Commr. of Income-tax, 1957-31 I. T. R. 82 : (A. I. R, 1957 Bom. 4 . Therefore, accumulated profits which are sought to be caught in S. 2 (6A) (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 S. 2(6)(c). In the present case, as the Company went into liquidation on 18th January 1950, excluding the current year which commenced on 1st April 1949 the six previous years will be the years 19943-44 to 1948-49 8. So far, we have considered the question on the language of S. 2 (6A)(c) and the policy underlying it. On behalf of the respondent, certain authorities were cited as supporting his contention that the expression previous years in S. 2 (6A) (c) is not to be interpreted in the sense in which the expression previous year is defined in S. 2(11) of the Act, It is sufficient to refer to one of them, and that is the decision of this Court in Commr. of Income-tax, Madras v. K. Srinivasan,1953 S. C. R. 485 at p. 501 : (A. I. R. 1953 S. C. l13 at p. 118. ). There, the point for decision was as to the interpretation to be put on the words end of the previous year in S. 25 sub-ss. (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 at 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 asessee 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 it, 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 it relation to a financial year. In a certain context it may well mean a completed accounting year immediately preceding the happening of a contingency. 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 S. 2 (6A) (c) means only the six accounting years of a company preceding the date of liquidation 9. The appellant sought to raise one other contention, and that is that the Indian Companies Act came into operation in the Udaipur territory on 1st April 1951, only by force of the Part B States Laws Act (III of 1951 that during the relevant period the Mewar Industries Ltd. was not a company as defined in S. 2 (5A) of the Act, and that therefore the distribution of assets made by that Company on 22-4-1950, could not be held to be a dividend as defined in S 2 (6A) (c).But that is not a question which was referred for the opinion of the High Court under S. 66 (1) 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 : 2(6) 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 31-3-1948, 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. 10. In the result, we hold that the sum of Rs. 26,000 received by the appellant on 22-4-1950 was dividend as defined in S. 2 (6A) (C) of the Act and is chargeable to tax.

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

Explanation:
0[ds]6. Turning to the language of S. 2 (11), we have this that according to the definition contained therin, 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 S. 2 (6A) (c) speaks of six previous years, it is obvious that it uses the expressions previous year in a sense different from that which is given to it in S. 2( 11), because it would be a contradiction in terms to speak of six previous years in relation to any specified assessment year. It was argued that under S. 13 (2) of the General Clauses Act, 1897, words in the singular should be read as including the plural and that, therefore, the definition of previous year in S.2(11) could be read as meaning previous years . But S. 13 only enacts a rule of construction which is to apply unless there is anything repugnant in the subject or context, and to read a previous year as previous years in S.2 (11) would be to nullify the very definition of a previous year enacted therein, and such a construction must therefore be rejected as repugnant to the context.It was then suggested that 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 S. 2 (11) 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 defination of dividend in S. 2(6A) (c) to import into the words six previous years the definition of previous years in S. 2 (11) of the Act8. So far, we have considered the question on the language of S. 2 (6A)(c) and the policy underlying it.On behalf of the respondent, certain authorities were cited as supporting his contention that the expression previous years in S. 2 (6A) (c) is not to be interpreted in the sense in which the expression previous year is defined in S. 2(11) of the Act, It is sufficient to refer to one of them, and that is the decision of this Court in Commr. of, Madras v. K. Srinivasan,1953 S. C. R. 485 at p. 501 : (A. I. R. 1953 S. C. l13 at p. 118. ).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 S. 2 (6A) (c) means only the six accounting years of a company preceding the date of liquidation9. The appellant sought to raise one other contention, and that is that the Indian Companies Act came into operation in the Udaipur territory on 1st April 1951, only by force of the Part B States Laws Act (III of 1951 that during the relevant period the Mewar Industries Ltd. was not a company as defined in S. 2 (5A) of the Act, and that therefore the distribution of assets made by that Company on, could not be held to be a dividend as defined in S 2 (6A)t that is not a question which was referred for the opinion of the High Court under S. 66 (1) 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 Indianx Act is itself a question over which the parties are in controversy10. In the result, we hold that the sum of Rs. 26,000 received by the appellant on0 was dividend as defined in S. 2 (6A) (C) of the Act and is chargeable to tax.