Judgment

JAGANMOHAN REDDY, J.:-This appeal is by certificate and though no reasons have been given for the grant of it, the learned advocate for the respondent does not contest that a question of law does arise and has not objected to the certificate. The question that was referred to the High Court by the Tribunal under S. 66 (1) of the Indian Income-tax Act, 1922 (hereinafter called the Act ) is as follows:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in the matter of calculation of undistributed balance of the total income of an assessee for the purpose of levy of super-tax in terms of S. 23-A (1) of the Income-tax Act, 1922, the Income-tax Officer should have taken into consideration dividend declared by the company after the period of 12 months immediately following the expiry of the previous years relevant to the assessment years 1958-59 and 1959-60 but before the date on which the orders under S. 23-A (1) had been made by the Income-tax Officer?

The High Court answered that question in the affirmative and against the department following the reasoning which was obiter in the case of Moore Avenue Properties Private Ltd. v. C. I. T., (1966) 59 ITR 466 (Cal).

2. The respondent is a private company to which it is not disputed, sub-s. (1) of S. 23-A would be attracted if it fulfilled the conditions prescribed therein. The assessment relating to which the Income-tax Officer sought to exercise his jurisdiction under that section was for the years 1958-59 and 1959-60- for which the accounting year ended on 30th June 1957 and 30th June 1958 respectively. The order of the Income-tax Officer was dated October 31, 1961. The contention of the appellant is that the company had declared the dividends after the 12 months following the accounting year and hence the Income-tax Officer had, with the previous sanction of the Inspecting Assistant Commissioner validly subjected the company to super-tax in terms of the latter part of S. 23-A (1). On behalf of the respondent it was submitted that once dividends were declared before an order is made under this section no super-tax can be levied in respect of those dividends. This submission was rejected by the Income-tax Officer who sought to assess the respondent by including Rs. 15,000 and Rs. 90,0000/- declared as dividends at the general meetings held on December 17, 1959 and May 26, 1960 in respect of the relevant assessment years. An appeal to the Appellate Assistant Commissioner was unsuccessful. The Tribunal however on a reading of the relevant parts of the section came to the conclusion that in computing the undistributed balance of the total income not only the income-tax and super-tax payable by the company but also any other tax levied by the local authority etc. are to be deducted but also "dividends actually distributed, if any which are the words used in the latter part of S. 23-A (1). It was also of the view that no time limit was applicable in taking into account the actual distribution of dividends in passing an order under S. 23-A (1) by the Income-tax Officer as such it directed that the sums of Rs. 15,0000 and 90,000/- were to be taken into account in arriving at the undistributed balance of the total income of the respondent company for the purpose of levy of super-tax. Before considering the contention on behalf of the revenue it will be necessary to examine the terms of the section and the object for which it was enacted. Section 23-A (1) after it was re-cast by the Finance Act of 1955 is as follows:

"Where the Income-tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that previous year are less than the statutory percentage of the total income of the company of that previous year as reduced by-

(a) the amount of income-tax and super-tax payable by the company in respect of its total inco