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

2. The facts, so far as they are material, are these: The appellant is a resident of what was once the independent State of Udaipur. There was in that State a Company called the Mewar Industries, Ltd., registered under the provisions of the law in force in that State, and the appellant held 266 shares in that Company. On January 18, 1950, the Company went into liquidation, and on April 22, 1950, the liquidator distributed a portion of the assets among theand the appellant was paid a sum of Rs. 26,000 under this distribution. It is common ground that this sum represents the undistributed profits of the Company which had accrued during the six accounting years preceding the liquidation. It should be mentioned that there was in the State of Udaipur no law imposing tax on income, and that it was only under the Indian Finance Act,1950 that the residents of the State of Rajasthan, in which the State of Udaipur had merged, became liable for the first time to pay tax on their income. That Act came into force on April 1,1950. We are concerned in these proceedings with the assessment of tax for the year, and that, under S. 3 of the Act, has to be on the income of the previous year, i.e.. Now, the dispute in the present case relates to the sum of Rs. 26,000 paid by the liquidator to the appellant on April 22, 1950. By his order dated July 3, 1952, thex Officer held that this was dividend as defined in s. 2 (6A) (c) of the Act, and included it in the taxable income of the appellant in the year of account. The appellant took this order in appeal to the Appellate Assistant Commissioner who by his order dated January 12, 1953, confirmed the assessment. There was a further appeal by the appellant to the Appellate Tribunal, who also dismissed it on November 10, 1953. On the application of the appellant, the Appellate Tribunal referred the following question for the decision of the High Court :Whether on the facts and in the circumstances of this case, the aforesaid sum of Rs. 26,000 was liable to be taxed in the assessees hands as dividend within the meaning of that term in S. 2 (6A) (c) of the IndianThe reference was heard by Wanchoo, C. J. and Modi, J. who by their judgment dated August 24, 1956, answered it in the affirmative. It is against this judgment that the present appeal has been preferred on a certificate granted by the High Court under S. 66A (2) of the Act.

Reasoning: 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.