Case: Rajputana Agencies Ltd Vs. Commissioner Of I. T., Bombay

1. This appeal arises from the assessment proceedings taken against the appellant, Rajputana Agencies Ltd., Lavanpur, for its income for the assessment year 1952-53,the accounting period being the corresponding Marwadi Year ending in October, 1951. The appellant is a private limited company and it was assassed to income-tax and super-tax by the Income-tax Officer, Morvi Circle, Morvi, on a total income of Rs. 26,385: The Appellant had declared dividend of Rs. 30,000. The Incometax Officer held that out of the said amount of dividend, Rs. 15,159 was excess dividend. On this basis the income-tax Officer determined the additional income-tax payable by the appellant at the rate of forty-four pies in a rupee on the said excess dividend. The additional income-tax payable by the appellant in that behalf was computed at Rs. 3,473-15-0. This order was passed on 25-11-1952.      2. The appellant filed an appeal against this order before the Appellate Assistant Commissioner of income-tax at Rajkot. The appellate authority determined the additional income-tax payable by the appellant at Rs. 2,084-12-0 on 29-8-1953. An appeal was preferred by the appellant against the appellate order before the Income tax Appellate Tribunal, Bombay, but the appellate tribunal confirmed the order under appeal on 27-11-l954. The appellant then moved the appellate tribunal under S 66 (1) of the income-tax Act and the appellate tribunal, by its order passed on 25-4-1955, referred two questions to the High Court at Saurashtra for its opinion in the present appeal, we are concerned with the second of the said two questions. This question as framed by the tribunal was: Whether the expression "at the rate applicable to the total income of the company" as appearing in sub-cl. (b) of cl. (ii ) to the second explanation to proviso to paragraph B of Part I of the First Schedule to the Indian Finance Act, 1952,means the rate at which a companys total income is actually assessed or the rate prescribed by the respective Finance Act without taking into consideration the rebate allowed in the respective years in accordance with the provisions of the Part B States (Taxation Concessions) Order, 1950 (hereinafter called the Order).Section 2 of the Finance Act,1952, provides that the provisions of S. 2 of, and the First Schedule to, the Finance Act, 1951. shall apply in relation to income-tax and super-tax for the financial year 1952-53 as they apply in relation to the income-tax and super-tax for the financial year 1951-52 with the modification that, in the said provisions for the figures 1950, 1951 and 1952 wherever they occur, the figures 1951, 1952 and 1953 shall be respectively substituted; and so in the present case we are really concerned with the material provisions of the Finance Act, 1951 (hereinafter called the Act).      3. By its judgment delivered on 29-3-1956, the High Court answered this question against the appellant and held that the expression "at the rate applicable to the total income of the company" means the rate at which the companys total income is actually assessed. The appellant then applied for and obtained a certificate from the High Court under Art. 133 (1) (c) of the Constitution read with S. 66A (2) of the income-tax Act that the case is a fit one for appeal to this Court. It is with this certificate that the present appeal has been brought to this Court; and the only point which it raises for our decision relates to the construction of the the expression "at the rate applicable to the total income of the company" appearing in the relevant provision of the Act.      4. The appellant does not dispute its liability to pay additional income-tax under cl. (ii) of the proviso to paragraph B of Part I of the First Schedule to the Act. The dispute between the parties is in regard to the rate at which the additional income-tax has to be charged. The appellant has paid income-tax on its total income in the relevant assessment year at the rate of sixteen pies in a rupee in accordance with the computation prescribed by para. 6 of the Order; and it is urged on its behalf, that the rebate to which it is entitled under the provisions of the said Order is irrelevant in determining the rate at which the additional income-tax can be computed against it. On the other hand, the respondent contends that the additional income-tax has to be computed at the rate at which the appellants income has been actually assessed and so the rebate granted to the appellant under the said Order must be taken into account in determining the said rate of the additional tax.

Reasoning: 6. It is well known that when different Part B Sates merged with the adjoining States or Provinces and were made taxable territories under the Income-tax Act, the operation of the Indian rate of tax. was introduced by phases and rebates on a graduated scale were allowed to the assessees under the provisions of this Order. As we have already mentioned, it is common ground that the appellant was entitled to and has obtained rebate under sub-cl. (iii) of para. 6 of the Order, with the result that his total income has been taxed to income-tax at the rate of sixteen pies in a rupee. The point for determination is whether this rebate is relevant in determining the rate at which the additional income-tax has to be levied against the appellant under the relevant provisions of the Act10. The same position is made clear by the further provision in sub.cl. (b) itself which requires that the relevant rate has to be reduced by the rate at which the rebate, if any, has been allowed on the undistributed profits; which means that, for determining the rate in sub cl. (b), it is necessary to take into account the rebate which may have been allowed to the company under cl. (i) of the proviso to Para. B. so that in such a case the rate applicable cannot be the rate prescribed in Para. B of the Act; it must be the rate so prescribed reduced by the rate at which the rebate has been granted under cl. (i) of the proviso to Para. B. It is thus clear that the words "rate applicable" in such cases mean the rate determined after deducting from the rate prescribed by Para. B the rate of rebate allowed by cl. (i) of the proviso to the said paragraph. Therefore, at least in these cases the material words mean the rate actually applied. if that be the true position, the rate applicable must in all cases mean the rate actually applied. "The same words cannot have two different meanings in the same clauseWe are not concerned with this aspect of the matter in the present appeal. However, in dealing with the question raised before them, the learned judges have incidentally construed the relevant words "rate applicable" as meaning the rate actually applied; and their observations do support the view taken by the Saurashtra High Court in the present case.