Summarize the following court judgment. Appeals Nos. 158 to 164 of 1960. Appeals from the judgment and order dated October 8	 1958	 of the Bombay High Court in I.T.A. Nos. 7505	 7506	 5046 to 5048	 5149 and 5150 of 1956 57. A. V. Viswanatha Sastri	 section N. Andley	 J. B. Dadachanji	 Rameshwar Nath and P. L. Vohra	 for the. appellants. R. Ganapathy Iyer and D. Gupta	 for the respondent. January 12. The Judgment of the Court was delivered by HIDAYATULLAH	 J. These seven appeals have been filed on a certificate granted by the High Court of Bombay against the judgment and order of the High Court dated October 8	 1958	 in a case referred by the Income tax Appellate Tribunal	 Bombay. The first appellant is the Bhor Industries	 Ltd.	 a Company incorporated in 1944 in the former Bhor State with its registered office also situated in the town of Bhor. It did the business of dyeing	 printing and bleaching cloth	 cloth proofing	 etc.	 in Bhor State. The remaining five appellants are the shareholders of this Company	 which	 admittedly	 was a private Company limited by shares	 at all material times. We are concerned in these appeals with the account years of the Company	 1946 and 1947. During these years	 the income of the Company was as follows: Assessment Total Income accruing Total World year Income or arising in the Income (Sum Indian State of of 2 & 3) Bhor. 1 2 3 4 1947 48 Rs. 4	32	542 Rs. 2	24	542 Rs. 6	57	084 1948 49 Rs. 4	32$709 Rs. 3	47	416 Rs. 7	80	125 412 The Company held its general meetings to declare dividends at Bhor on August 17	1947	 and August 19	 1948	 respectively. For the account years 1946 and 1947 respectively it declared a dividend of Rs. 2	580/and Rs. 1	140/ . Bhor State merged with the Province of Bombay by virtue of the States Merger (Governors ' Provinces) Order	 1949	 which came into force on August 1	 1949. By the Taxation Laws (Extension to Merged States and Amendment) Act	 1949	 which received the assent of the Governor General on December 31	 1949	 the Indian Income tax Act was extended to the merged States with effect from April 1	 1949. That Act also introduced section 60A in the Income tax Act	 by which power was given to the Central Government	 if it considered necessary or expedient so to do	 to avoid any hardship or anomaly or to remove any difficulty in the application of the Income tax Act to merged States	 to make a general or special order granting exemption	 reduction in rate or other modification. Under the power thus conferred	 the Central Government notified the Merged States (Taxation Concessions) Order	 1949. For the assessment years 1947 48 and 1948 49 corresponding to the account years of the Company	 1946 and 1947	 the Income tax Officers assessed the Company as non resident	 and held that the Company was not a public Company within the meaning of section 23A of the Indian Income tax Act. The Income tax Officer who passed the order for the assessment year 1947 48 under section 23A	 held that the assessable income in British India of the Company in 1946 minus the taxes	 must be deemed to be distributed among the shareholders in the proportion of their shareholdings. The Incometax Officer calculated the amount deemed to be distributed as follows: 413 1946 (assessment year 1947 48). Total Income . Rs. 4	32	542 Taxes . Rs. 1	89	237 Amount available for distribution . Rs. 2	43	305 as dividend Dividend declared . Rs. 2	580 Balance of the amount available and deemed to be distributed . Rs. 2	40	725 For the account year 1947	 the Income tax Officer took the total world income less the taxes as the amount available for distribution as dividend. According to him	 that amount was as follows: 1947 (assessment year 1948 49). Total income . Rs. 4	32	709 Income in Bhor State . Rs. 3	47	416 Total world income . Rs. 7	80	125 Taxes . Rs. 2	43	399 Amount available for distribution as dividend . Rs. 5	36	726 Dividend declared . Rs.1	140 Balance of the amount available for distribution . Rs.5	35	586 The Income tax Officer then apportioned it among the shareholders as on August 19	 1948. This worked out at Rs. 539.9 per share. The Income tax Officer then divided this amount of Rs. 539.9 in the proportion the total income bore to the income in Bhor State and taxed the former in the hands of the shareholders	 but the balance was included and considered for purposes of rate only. The Tribunal in the statement of the case illustrated this by citing the case of one of the shareholders (Pushpakumar M. D. Thackersey) as follows: 414 "The portion of Rs. 5	35	586 apportionable to his 90 shares at the rate of Rs. 539.9 per share worked out at Rs. 50	211/ . This amount of Rs. 50	21/was divided into two smaller amounts in the ratio already mentioned and the amount of Rs. 27	851/was actually brought to tax whereas the amount of Rs. 22	360/ attributable to Bhor State income of Rs. 3	47	416/ was merely included in the total income for rate purposes." In computing these " deemed dividends "	 the two Income tax Officers did not deduct the interest charged to the Company under section 18A(8)	 from the assessable income along with income tax and super tax under section 23A(1). The Company as well as the shareholders appealed to the Appellate Assistant Commissioner	 but their appeals were unsuccessful. Their further appeals to the Tribunal were also dismissed. They raised the contentions that section 23A was not applicable to the Company	 that the deemed income arising from a fictional distribution of the dividends could not be taxed in the hands of the shareholders because section 23A did not apply to them	 and that they were protected by the Concessions Order in the same way in which the Company was. They also raised the contention that in. determining the balance of the amount available for distribution	 interest charged under section 18A(8) ought to have been deducted. All these contentions were not accepted by the Department and the Tribunal. At the instance of the Company and the shareholders	 the Tribunal drew up a statement of the case	 and referred three questions to the High Court for its decision. These questions were as follows: " 1. Whether paragraph 12 of the Merged States (Taxation Concessions) Order	 1949	 precluded the Income tax Officer from making an order under Section 23A in the case of the assessee company in respect of its profits and gains of the previous year ended 31st December	 1946 ?/ 31st December	 1947 ? 415 2. Whether in making an order under Section 23A in respect of the profits and gains of the year 1946/1947 the assessable income of that previous year is to be reduced not only by the amount of incometax and super tax payable by the company in respect thereof but also by the amount of interest charged to it in accordance with the provisions of Section 18A ? 3. Having regard to the order passed by the Income tax Officer under Section 23A in respect of the Company 's profits of the year 1947 and having apportioned the sum of Rs. 17	641/ to the shareholder	 Pushpakumar	 as his proportionate share in the distribution made by the Income tax Officer under Section 23A and having regard to the provisions of Section 14(2) (c)	 whether the said sum of Rs. 17	641/has been properly included in his total income for the purpose of charging it to tax ? " The third question was a typical question	 as similar questions also arose in the case of other shareholders with variation in the amount. The amount of Rs. 17	641/ 	 the Tribunal stated	 replaced Rs. 50	211/in view of certain directions given by the Tribunal. The High Court framed one more question as the second part of question No. 1 in disposing of the reference	 which read as follows. : " Whether paragraph 12 of the Merged States (Taxation Concessions) Order	 1949	 precluded the Income tax Officer from making any order under Section 23A so as to affect the assessee shareholders in respect of their profits and gains for the assessment year 1949 50 ? The High Court answered the first and second questions and the question framed by it in the negative	 and the third question	 in the affirmative. The High Court	 however	 granted a certificate under section 66A of the Income tax Act	 and the present appeals have been filed. The contentions raised before the High Court have been raised before us. The Company questions the application of section 23A to the two assessment years	 1947 48 and 1948 49	 while the shareholders 416 question the application of section 23A to the Company and also to them in the assessment year	 1949 50. Both the Company and the shareholders contend that interest under section 18A(8) ought to have been deducted along with the income tax to find out the available surplus. The shareholders claim the benefit of section 14(2) (c) in respect of the entire amount of the balance deemed to be distributed. To begin with	 one must remember that the Indian Income tax Act was applied to Bhor State from April 1	 1949	 and that there was no income tax law in force in Bhor State prior to its merger. This position also obtained in many other Indian States	 which merged with the Provinces in British India. The fact that income tax is charged in an assessment year on the income	 profits or gains of the previous year would have made persons resident in merged States to pay tax on income which	 but for the extension of the Indian Income tax Act	 was either not liable to income tax at all or was liable at a lesser rate. In view of the apprehended difficulties and anomalies	 the Extension Act itself gave power to remove such anomalies and hardships. Section 60A was added to the Income tax Act	 and it read as follows: " If the Central Government considers it necessary or expedient so to do for avoiding any hardship or anomaly	 or removing any difficulty	 that may arise as a result of the extension of this Act to the merged States	 the Central Government may	 by general or special order	 make an exemption	 reduction in rate or other modification in respect of income tax in favour of any class of income	 or in regard to the whole or any part of the income of any person or class o f persons. . " The Concessions Order	 1949	 was passed in furtherance of this power. We are concerned only with paragraph 12 of the Concessions Order	 1949	 which has been relied upon by the Company and the share. holders	 who are appellants before US. It is not necessary to refer to paragraphs 4	 5 and 6 to which passing reference Was made in the arguments	 because 417 they deal with income in an Indian State	 which has not been taxed in these cases at all. Paragraph 12 provided for the application of section 23A to a previous year ending on or after August 1	 1949	 but not to a previous year ending before August 1	 1949. It may be quoted here: "The provisions of section 23A of the Indian Income tax Act shall not be applied in respect of the profits and gains of any previous year ending before 1st day of August	 1949	 unless the State law contains a provision corresponding thereto." Reading the Extension Act	 section 60A and the Concessions Order	 1949	 together	 the following position emerges. The Indian Income tax Act applied to and from the assessment year 1949 50 (April 1	 1949 to March 31	 1950) in the merged States. Corresponding previous years were comprehended. The difficulty which was likely to be felt was with respect to the fact that the merger with the Province of Bombay operated from August 1	 1949	 and not from April 1	 1949. In respect of the exemption under section 14 (2) (c)	 the position was preserved by applying paragraphs 5 and 6 to the exempted income. These two paragraphs made the State rate applicable to that exempted income. Similarly	 previous years ending after March 31	 1948	 were to be assessed to Indian income tax	 but the excess of the tax computed at Indian rates over the tax computed at State rates was to be given away as rebate	 and profits and gains of companies of any previous year ending before August 1	 1948	 earned in an Indian State were saved from section 23A	 unless there was	 in the State	 a provision corresponding to section 23A. It must be remembered that the Income tax Officer in the present case did not seek by his order under section 23A to distribute the Bhor State income of the shareholders of the Company as dividend; he restricted his order to the British Indian income. There was	 in fact	 in the State of Bhor no law of Income tax	 and no order taxing income which arose in Bhor could be passed by the Income tax Officer. 418 By the definition in section 2(5A) of the Indian Incometax Act. a company formed in pursuance of an Act of an Indian State was a company for the purposes of the Act	 and it was open to the Income tax Officer exercising powers under section 23A to declare the income of such a company accruing or arising within the taxable territory as distributed among the shareholders. The right of the Department to pass an order under section 23A(1) of the Indian Income tax Act was not chal lenged before the Tribunal	 and it was not the subject of a decision in the High Court. The argument still has been	 on behalf of the Company as well as the shareholders	 that paragraph 12 of the Concessions Order saved the profits and gains	 whether made in Bhor State or in British India	 from the application of section 23A	 and that indirectly the shareholders were entitled to the same benefit. Paragraph 12 of the Concessions Order depends on whether a company was being assessed under the Indian Income tax Act in respect of its profits and gains in an Indian State for any previous year ending before the first day of August	 1949. By the application of the Indian Act to an Indian State	 the income of a company in an Indian State was likely to be taxed to Indian income tax from the assessment year	 1949 50. For the earlier assessment years a company 's income in the Indian State was exempt without the assistance of the Concessions Order. The exemption granted by the Concessions Order was to operate in respect of those profits and gains which	 but for the exemption	 would have been included in the assessment year	 1949 50 and subsequent years. In so far as paragraph 12 of the Concessions Order was concerned	 it gave exemption in respect of action under section 23A to income of " any previous year " ending before the first day of August	 1949. The date	 August 1	 1949	 was chosen because the merger with the Provinces took place on that date. The word " any " does not refer to all the previous years prior to and ending before August 1	 1949	 but to a previous year in relation to the assessment year	 1949 50 and ending before the first day of August	 1949. The words 419 any previous year mean	 therefore	 only one previous year	 which would be a previous year for the purposes of the assessment year	 1949 50 but which	 to get the exemption	 must end before the first day of August	 1949. The exemption	 therefore	 did not apply to previous years other than the one described	 and in respect of the earlier previous years	 paragraph 12 of the Concessions Order was hardly needed. Otherwise	 there would be no need to mention in the paragraph the date on which the previous year must end. It is thus quite clear that paragraph 12 provided for income	 profits and gains of those previous years which were specially mentioned and in respect of which anomalies were likely to arise by reason of the fact that the merger took place on August 1	 1949	 while the Income tax Act was applied from April 1	 1949. In view of the fact that specific terminii of previous years are expressly mentioned in the Concessions Order	 it is not possible to accept the argument on behalf of the appellants that " all " previous years before the date mentioned were comprehended in paragraph 12. The application of that paragraph must be limited to one previous year only which ended prior to August 1	 1949. The previous years	 with which we are concerned	 ended on December 31	 1946	 and December 31	 1947	 respectively. In the case of this Company	 the previous year which would answer the description in paragraph 12 would be the previous year ending December 31	 1947. To that previous year	 the provisions of section 23A were not applicable	 and the profits and gains made in Bhor State would be protected. The position which obtained in the assessment year 194748 would thus obtain also in the assessment year 1948 49 in so far as the Company was concerned	 and its profits and gains in Bhor State could not be considered for purposes of application of section 23A. The position was	 however	 different in regard to the income in British India which formed the total income of the Company in the taxable territory. It was not contended that the assessable income of the Company in the taxable territories would not attract 420 s.23A	 if the distribution of dividends from that income was below the mark set in section 23A. There is thus no difference between the assessment years 194748 and 1948 49	 and the method of calculation adopted in the first year is also applicable to the second. To this extent	 the answer to the first question (first part) must be deemed to be modified in respect of the previous year ending December 31	 1947. It is next contended that interest that was charged to the Company under section 18A(8) ought to have been deducted along with the income tax before the fictional dividends were computed. Section 18A(8) reads as follows: " Where	 on making a regular assessment	 the Income tax Officer finds that no payment of tax has been made in accordance with the foregoing provisions of the section	 interest calculated in the manner laid down in sub section (6) shall be added to the tax as determined on the basis of regular assessment. " The words of the sub section are clear to show that interest as interest is added to the tax as determined. There is nothing to show that it is to be treated as tax	 and it thus retains its character of interest but is recoverable along with the tax. Indeed	 section 29 of the Income tax Act makes a distinction between tax	 penalty and interest. Since section 23A speaks of deduction only of income tax and super tax	 no deduction could be made in respect of this interest. Question No. 2 was thus correctly answered by the High Court. In so far as the shareholders who were all resident in the taxable territories were concerned	 paragraph 12 of the Concessions Order did not	 in terms	 protect them. Section 23A enjoins that dividends to the extent of 60 per cent. of the assessable income of the Company after deduction of income tax and super tax must be paid. When the assessable income of the Company has been determined and after the necessary deductions have been made	 if dividends are not distributed in accordance with section 23A	 the fiction applies to that portion of the profits and gains which were taxable as assessable income of the Company in the 421 taxable territories and which ought to have been so dis tributed. Section 23A	 as it was before the amendment in 1955	 mentioned 60 per cent. of the assessable income of a company as reduced by the amount of income tax and super tax payable by a company	 and provided further that the undistributed portion of the assessable income of a company as computed and reduced shall	 subject to certain conditions	 be deemed to have been distributed as dividends amongst the shareholders. We have already shown that the benefit of paragraph 12 is not available in respect of these fictional dividends	 in so far as the assessable income of the Company was concerned. It is	 however	 contended that these dividends would be deemed to be declared in Bhor State and to have been received there	 and that unless another fiction is engrafted upon the fiction created by section 23A	 these deemed dividends cannot be taxed in the hands of the shareholders. No doubt	 the section implies a fiction; but if the fiction is given effect to	 such income must be deemed to be distributed to the shareholders	 and the fiction thus transcends all questions of accrual or receipt in the taxable territories. What is deemed to be distributed must be deemed to have accrued and also received by the person to whom it is deemed to be distributed [See sections 4(1)(a) and 4(1)(b)(i) and (ii)]. Paragraph 12 of the Concessions Order saved the Company in respect of income in Bhor State for the assessment year 194849 for the corresponding previous year ending before August 1	 1949	 but it did not save the operation of a. 23A in respect of the assessable income of the Company in the taxable territories and the distribution of dividends to the shareholders from that income. In our opinion	 the High Court was right in holding that the dividends deemed to have been distributed out of the Assessable income of the Company in the taxable territories were ' rightly assessable in the total income of the shareholders resident in the taxable territories. No question has been referred on the method of calculation of the dividends deemed to 422 have been distributed	 and we need	 therefore	 express no opinion on that part of the case. The shareholders (appellants 2 to 6) claim the benefit of a 14(2)(o) of the Act	 which provides: " 14(2). The tax shall not be payable by an assessee (c) in respect of any income	 profits or gains accruing or arising to him within an Indian State	 unless such income	 profits or gains are received or deemed to be received in or are brought into British India in the previous year by or on behalf of the assessee	 or are assessable under Section 12 B or Section 42. " We have already shown that the force of the fiction makes the dividends which ought to have been distributed	 to be so distributed. We have also said that this fiction transcends all questions of accrual and receipt. The effect of section 23A is to make dividends payable out of the British Indian income to the shareholders. Paragraph 4 of the Concessions Order and section 14(2)(c) saved for the shareholders the income of the Company outside the taxable territories only	 that is to say	 the income earned in Bhor State. They do not affect the operation of section 23A on the assessable income of the Company which	 by reason of the application of the Indian Income tax Act even prior to the Extension Act	 was assessable under the Indian Income tax Act. Dividends payable out of that portion of the income will attract section 23A	 and section 14(2)(c) does not apply. Section 14(2)(c) saves only that portion of the income which was not assessable in the taxable territories by reason of its accrual in the State. The Income tax Officer in assessing the income of the shareholders for the assessment year	 1949 50	 ought to have deducted the income which accrued in Bhor State	 while applying section 23A to them. This he	 in effect	 did	 but he adopted a method on which no question has been raised	 and the correctness of the method cannot be examined. The answer to question No. 1 is thus in the negative	 with the modification that section 23A applied only to that 423 portion of the income which was earned in British India and not in Bhor State. The answer to the second question is in the negative. The answer to the third question is in the affirmative. The question posed and answered by the High Court hardly arises	 in view of the answer to the first questions That question and the answer to it are set aside as being not necessary. The appeals thus fail except for a slight modification in the answer to the first question	 and subject to that modification	 are dismissed. The appellants must bear the costs of these appeals. There shall be one hearing fee. Appeals dismissed.

The appellant had been incorporated in 1944 as a private company limited by shares in the former State of Bhor with its registered office in Bhor. The shareholders of the company were at all material times resident in British India. By virtue of the States Merger (Governors ' Provinces) Order	 1949	 the State was merged with the Province of Bombay with effect from August 1	 1949. The provisions of the Indian Income tax Act	 1922	 were extended to the merged State with effect from April 1	 1949. Under the power given by section 60A of the Act which enabled the Central Government to remove any difficulty in the application of the Act to merged States by making a general or special order granting exemption or other modification	 the Central Government notified the Merged States (Taxation Concessions) Order	 1949. Paragraph 12 of that Order stated that " the provisions of section 23A of tile Indian Income tax Act shall not be applied in respect of the profits and gains of any previous year ending before 1st day of August	 1949	 unless the State law contains a provision corresponding thereto. " The total world income of the company for 1946 and 1947 was Rs. 6	57	084 and 7	8o	 125 respectively and for those years the company declared dividends of Rs. 2	580 and Rs. 1140. For the assessment years 1947 48 and 52 410 1948 49	 corresponding to the account years 1946 and 1947	 the Income tax Officers assessed the company as nonresident ; for the assessment year 1947 48	 the Officer held that ' the assessable income of the company in British India for 1946 less the taxes must be deemed to be distributed among the shareholders in the proportion of their shareholdings	 under section 23A of the Act	 while for the account year 1947	 the total world income less the taxes was deemed to be is tributed	 the part proportionate to the income in Bhor State being excluded	 except for purposes of rate. In computing the " deemed dividends " the Income tax Officer did not deduct the interest charged to the company under section 18A (8) from the assessable income along with the income tax and super tax under section 23A(1). The company and the shareholders claimed (1) that para. 12 of the Merged States (Taxation Concessions) Order	 1949	 precluded the Income tax Officer from making an order under section 23A of the Act in respect of the profits and gains of the account years ending December 31	 1946	 and December 31	 1947	 which were previous years ending before August 1	 1949	 and (2) that	 in any case	 interest under section 18A(8) ought to have been deducted along with the income tax before the fictional dividends were computed. A further contention was raised that since the dividends in question would be deemed to have been declared in Bhor State and received there	 unless another fiction was engrafted upon the fiction created in section 23A that the dividends must be deemed to have been received in the taxable territories	 they could not be taxed in the hands of the shareholders. The shareholders also claimed the benefit of s 14(2)(C) in respect of the entire amount of the balance deemed to be distributed. Held: (1) that the expression "any previous year" in para. 12 of the Merged States (Taxation Concessions) Order	 1949	 did not refer to all the previous years prior to and ending before August 1	 1949	 but meant only one previous year	 which would be a previous year for the purposes of the assessment year 194950	 but which	 to get the exemption	 must end before the first day of August	 1949; (2) that the force of the fiction under section 23A of the Indian Income tax Act	 1922	 which makes the dividends which ought to have been distributed to be so distributed	 transcends all questions of accrual and receipt	 and what is deemed to be distributed must also be deemed to have accrued and received by the person to whom it is deemed to be distributed; (3) that section 14(2)(c) of the Act saves only that portion of the income which is not assessable in the taxable territories by reason of its accrual in the State and does not affect the operation of section 23A on the assessable income of the company which	 by reason of the application of the Indian Income tax Act even prior to the extension of the Act to the State after merger	 was assessable under the Act 411 (4) that the wording of section 18A(8) of the Act under which interest is recoverable along with the tax	 does not show that it is to be treated as tax but retains its character as interest	 and since section 23A speaks of deduction only of income tax and supertax	 no deduction could be made in respect of the interest under that section.