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

2. The assessee is a Hindu Undivided Family with its Head Office at Indore and branches at several other places in some of the former B States including the State of Madhya Bharat. It derived its income from several sources such as property, businesses, managing agency commission, shares in partnership firms etc. The assessees family at one time was carrying on business at Bombay and was assessed in the status of non-resident Hindu Undivided Family. Its business in Bombay was, however, closed down sometime in 1945 and no assessment was made on it for the year 1948-49 and 1949-50. Till the assessment year 1947-48, the "previous year" adopted by the assessee was the appropriate Diwali year. For the assessment year 1950-51, the assessee claimed that in respect of its income by way of commission from the managing and selling agency of the Binod Mills Ltd., Ujjain, its "previous year" was one ending on March 31, 1950 and on that basis it contended that the commission accrued to it during the calendar year 1948 could not be brought to tax. This contention was not accepted by the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal. They took the view that the case of the assessee is covered by the proviso to Section 2 (11) (i) (a) of the Income-tax Act, 1922 (in short "the Act"). According to their view, the assessee had "once been assessed". Therefore it was not open to it to vary its "previous year". In view of that finding, the assessee was assessed on the basis that the Diwali year beginning from 2nd November, 1948 and ending on October 21, 1949 is the relevant account year. In that account year, the assessee derived net dividend income of Rs. 2,62,860/- from the Binod Mills Ltd., Ujjain. Out of this income Rs. 34,468/- were attributable to the profits that accrued or that could be deemed to have been accrued to the Binod Mills in Part A State. But the remaining amount of Rs. 2,28,392/- was held to be attributable to profits which accrued in Part B State viz., Madhya Bharat. As the dividend income attributable to profits accruing in Part A State was subject to tax under the Act, the Income-tax Officer grossed up the net dividend of Rs. 34,468/- to Rs. 50,137/- under Section 16 (2) of the Act. This income was subjected to income-tax and super-tax at the rates prescribed by the Finance Act, 1950, rejecting the claim of the assessee for concession in regard to this income under the Order. The balance of Rs. 2,28,392/- was not subjected to any income-tax in view of the provisions contained in paragraph 12 of the Order. It was, however, subjected to super-tax at the concessional rates mentioned in the Order. The Tribunal rejected the contention of the assessee that the divided income of Rs. 2,28,392/- was not subject to super-tax under paragraph 12 of the Order and that the amount of Rs. 2,62,860/- should not have been apportioned as the Income-tax Officer had done as neither income-tax nor super-tax was leviable on those profits and in any case, super-tax was payable on the entire dividend income, only at the concessional rates. On a reference made under Section 66 (1) of the Act, the High Court held that the "previous year" in respect of the managing agency and selling agency sources of income is the financial year ending March 31, 1950. With regard to the other question, the High Court held that the income-tax payable on the entire dividend income included in the total income after exclusion of the non-taxable dividend under paragraph 12 of the Order would be at the concessional rates prescribed in the Order and further that the assessee is liable to pay super-tax at the concessional rates mentioned in that Order on the entire dividend income. Hence this appeal.

Reasoning:
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.