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 ta