Judgment

BALAKRISHNA ERADI, J.:- Whether a company in liquidation is chargeable to super profits tax under the Super Profits Tax Act, 1963 - Act XIV of 1963 (hereinafter called the Act) is the short question arising for determination in this appeal. The answer thereto will depend upon whether during the period subsequent to the date of winding up, any part of. the funds in the hands of the official liquidator can be distinctly classified as representing paid up share capital of the company as on the first day of the year of account relevant to assessment year and whether any portion of the fund can be similarly identified as forming as "reserve",

2. The assessee is a banking company, namely, The Palai Central Bank Ltd., which went into liquidation on August 8, 1960. On that date the Official Liquidator took charge of the assets and liabilities of the company and a balance-sheet had been prepared as on the same date. Thereafter, for every year, the liquidator used to prepare only an income and expenditure statement for submission to the Reserve Bank of India. The assessment year, with which we are concerned is 1963-64 i. e., the year ended March 31, 1963. For the said assessment year the taxable income of the assessee was determined by the Income-tax Officer at Rs. 5,79,678/-. The Officer was of the opinion that this amount would attract liability for superprofits tax also and since the assessee had not submitted any return under the Act, a notice under Section 9 (a) of the Act calling for the return was issued. The assessee thereupon, submitted a return showing the chargeable profits as nil. In support of the said return the. assessee contended inter alia before the Officer that there could be no liability to superprofits tax in respect of a company in liquidation since the formula laid down in the Second Schedule to the Act for calculation of the standard deduction was inapplicable on account of the fact that a company in liquidation could not be said to have paid-up share capital as on the first day of the previous year relevant to the assessment year which was long subsequent to the winding up. Certain other contentions were put forward by the assessee but since they are. not of any material relevance at this stage, it is unnecessary to refer to them

3. The Income-tax Officer overruled the contentions raised by the assessee and worked out the chargeable profits at Rs. 2,04,740/- after adopting minimum amount. of Rs. 50,000/- mentioned in Section 2 (9), of the Act as a standard deduction" applicable to the case. The Appellate Assistant Commissioner, before whom the assessee filed an appeal, confirmed the order of the Income-tax Officer. The assessee carried the matter in further appeal before the Income-tax Appellate Tribunal, Cochin Bench. The Tribunal held that in the hands of the liquidator, there is only one integral fund which could not be split up into share capital, reserve and profits. In the opinion of the Tribunal the exemption provision contained in Section 27 of the Act which states that nothing contained in the Act shall apply to any company which has no share capital was clearly attracted to the case., It was further held by the tribunal that even if the exemption under Section 27 of the Act did not get attracted, section 4 of the Act, which is the charging section would not apply to the assessee company in liquidation as the standard deduction was incapable of ascertainment. The Tribunal, accordingly, allowed the appeal of the assessee and held that no assessment to superprofits tax. could be made on a company in liquidation.

4. Thereafter, at the instance of the revenue, the Tribunal referred the following question of law to. the High Court of Kerala for its opinion :

"Whether, on the facts and in the circumstances of the case, was the Tribunal justified in holding that no assessment under the Super Profits Tax Act 1963, can be made on the assessee company (in liquidation)?"

5. The High Court agreed with the view t