Judgment

SHAH, J.: The Allahabad Bank Ltd. is a public limited company. The paid up share capital of the Company other than capital entitled to a dividend at a fixed rate was at the relevant time Rs. 30,50,000. The Company had issued before January 1, 1954, shares at premium and the premium received in cash aggregated to Rs. 45,50,000. In each of the account years 1955 and 1956 the Company distributed Rs. 5,49,000 as dividend.

2. In proceedings for assessment for each of the assessment years 1956-57 and 1957-58 the Income-tax Officer reduced by Rs. 61,000 the rebate in super-tax admissible under the Finance Act 1956 on the view that the Company had distributed dividend exceeding 6% of its paidup capital. In reducing the rebate the Income-tax Officer did not take into consideration share premium amounting to Rs. 45,50,000 received by the Company.

3. The Appellate Assistant Commissioner held that the Company s share premium was liable to be added to the capital of Rs. 30,50,000 in computing the reduction in the rebate in super-tax, and directed modification of the order of assessment. The Appellate Tribunal agreed with the Appellate Assistant Commissioner.

4. The Tribunal then submitted a statement of the case and submitted the following question in respect of the year 1956-57 to the High Court of Calcutta:

"Whether on the facts and in the circumstances of the case, the amount of Rs. 45,50,000 should be added to the paidup capital of the assessee as on 1st January, 1955, for the purpose of allowing rebate to the assessee under Paragraph D of Part II of the First Schedule to the Indian Finance Act, 1956."

A similar question relating to the assessment year 1957-58 was so referred by the Tribunal. The High Court of Calcutta agreed with the Tribunal and held that in determining the reduction in rebate in super-tax admissible to the Company the share premium maintained by the Company within the reserves was liable to be included in the paid-up capital.

5. The Finance Act, 1956 prescribed the rate of super-tax in Part II. Paragraph D (in so far as it is relevant) enacted:

"In the case of every company-

Rate

On the whole of total income. Six annas and nine pies in the rupee:

Provided that-

(i) a rebate at the rate of five annas per rupee of the total income shall be allowed in the case of any company which-

(a) in respect of its profits liable to tax under the Income-tax Act for the year ending on the 31st day of March, 1957, has made the prescribed arrangements for the declaration and payment within the territory of India of the dividends payable out of such profits and for the deduction of super-tax from dividends in accordance with the provisions of sub-section (3D) of Section 18 of that Act, and

(b) * * * * * * *

(ii) a rebate at the rate of four annas per rupee of the total income shall be allowed in the case of any Company which satisfied condition (a) but not condition (b) of the preceding clause; Provided further that-

(i) the amount of the rebate under clause (i) or * * * * * of the preceding proviso shall be reduced by the sum, if any, equal to the amount or the aggregate of the amounts as the case may be, computed as hereunder:

(a) * * * * * * *

(b) in addition, in the case of a company referred to in clause (ii) of the preceding proviso which has distributed to its share-holders during the previous year "dividends in excess of six per cent of its paid-up capital not being dividends payable at a fixed rate-

on that part of the said dividends which exceeds 6 per cent but does not exceed 10 per cent of the paidup capital; at the rate of two annas per rupee

on that part of the said dividends which exceeds 10 per cent of the paid-up capital; at the rate of three annas per rupee;

(ii) * * * *

Provided further that * *

Explanation:- For the purposes of Paragraph D of this Part-

(i) the expression "paid-up capital" means the paid-up capital (other than capital entitled to a dividend at a fixed rate) of the Company as on the first day of the previo