The expression "previous years" in S. 2(6A)(c) of the Indian Income-tax Act, 1922, is not to be interpreted in the sense of "previous year" as defined in S. 2(11) of the Act.

Judgement

T. L. YENKATARAMA AIYAR, J. : This is an appeal against the judgment of the High Court of Rajasthan in a reference under S. 66 ( 1) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act.

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 the share-holders, and 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 1951-52, and that, under S. 3 of the Act, has to be on the income of the previous year, i.e. 1950-51. 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, the Income-tax 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 assessee s hands as dividend within the meaning of that term in S. 2 (6A) (c) of the Indian Income-tax Act."

The 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.

3. The sole point for determination in this appeal is whether the sum of Rs. 26,000 received by the appellant on April 22, 1950, is dividend as defined in S. 2 (6A) (c) of the Act. That definition, as it stood on the relevant date and omitting what is not material, was in these terms :

"6 (A) dividend includes-

(a) any distribution by a company of accumulated profits whether capitalised or not, if such distribution entails the release by the company to its share-holders of all or any part of the assets of the company;

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(c) any distribution made to the share-holders of a company out of accumulated profits of the company on the liquidation of the company :

Provided that only the accumulated profits so distributed which arose during the six previous years of the company preceding the date of liquidatio an shall be so included ;"

The definition of "previous year" as given in S. 2 ( 11), omitting what is not material, is as follows :

"Previous year" means in respect of any separate source of income, profits and gains-

(a) the twelve months ending on the 31st day of March next preceding the year for which the assessment is to be made . . ."

4. On these provisions, the contention of the appellant is that under the definition in S. 2 (6A) (c) the asset