Judgment

HEGDE, J.:- This appeal by certificate arises from the decision of the Calcutta High Court in a reference under Section 66 (1) of the Indian Income-tax Act 1922 (to be hereinafter referred to as the Act ). The question referred to the High Court for its opinion reads:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee. having not been assessed to super-tax for the assessment year 1958-59, the unabsorbed reduction in rebate under clause (i) (a) of the second proviso to Paragraph D of Part II of the First Schedule to the Finance Act, 1957, could not be set off against the rebate available to the assessee under the Finance Act, 1959, and that accordingly the Income-tax Officer was not justified in reducing the rebate of Rs. 16,114/- available to the assessee for the assessment year 1959-60?"

2. Following its earlier decision in Commr. of Income Tax, West Bengal v. Deoria Sugar Mills Ltd. (1971) 80 ITR 408 (Cal), the High Court answered that question in favour of the assessee. Aggrieved by that decision the Commissioner of Income Tax for West Bengal has brought this appeal.

3. The facts material for the purpose of deciding this question as could be gathered from the case stated by the Tribunal may now be set out The assessment year with which we are concerned in this case is 1959-60; the relevant accounting year being the calendar year 1958. The assessee is a Tea Company. For the assessment year 1959-60 it was assessed to a total income of Rs. 55,257/-. The Corporation tax payable by the assessee on that amount was computed at Rupees 26,357/-. On that a rebate of Rupees 16,114/- was allowed under the provisions of the Finance Act 1959; Thereafter that rebate was withdrawn by the Income Tax Officer on the ground that there was an unabsorbed reduction of rebate amounting to Rs. 27,144/in the assessment year 1957-58. While making assessment for the assessment year 1959-60 the Income Tax Officer reduced the rebate to nil by taking into consideration the unabsorbed reduction of rebate in the assessment year 1957-58. At this stage it may be noted that in the assessee s assessment for the assessment year 1958-59 the loss of Rs. 73,920/- was determined and no corporation tax was levied for that year.

4. It was contended before the Income-tax Officer that the unabsorbed reduction in rebate for the year 1957-58 could only be carried forward and set off against the rebate for the assessment year 1958-59 under the provision of the Finance Act,1958, and as there was no rebate available for She assessment year 1958-59, the unabsorbed reduction in rebate exhausted itself and could not be further set off against the rebate available for the assessment year l 959-60. This contention was rejected by the Income-tax Officer. In appeal, the Appellate Assistant Commissioner confirmed the decision of the Income-tax Officer but on a further appeal being taken to the Tribunal, the Tribunal accepted the contention of the assessee and thereafter, at the instance of the Commissioner, the question formulated above was referred to the High Court. As mentioned earlier, the High Court has answered that question in favour of the assessee.

5. We may now read the relevant provisions of the Finance Act, 1959. They are found in Paragraph D of Part II of the First Schedule to the Finance Act, 1959 and are as under:

"In the case of the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (XXXI of 1956),

RATE OF SUPER-TAX

On the whole of its profits and gains from life insurance business. ... 11%

In the case of every other company,-

RATE OF SUPER-TAX

On the whole of the total income ... 50%

Provided that, -

(i) a rebate at the rate of 40 per cent on so much of the total income as consists of dividends from a subsidiary Indian company and a rebate at the rate of 35 per cent on the balance of the total income shall be allowed in the case of any company which-

(a) in respe