Research › Browse › Judgment

Rajasthan High Court · body

1986 DIGILAW 549 (RAJ)

Jaipur Udyog Limited v. Commissioner of Income

1986-09-01

FAROOQ HASAN, N.M.KASLIWAL

body1986
JUDGMENT 1. The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following questions of law for the opinion of this court under section 256(1) of the Income-tax Act, 1961 : "1. Whether, on the facts and in the circumstances of the case, the withdrawal of the income-tax rebate based and computed on the quantum of dividends declared by the company is opposed to the provisions of sections 4 and 5 of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the various requirements of Para. F of Part I of the First Schedule to the Finance Act, 1965, could be determined in proceedings under section 154 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that there was a mistake apparent from the record in the matter of withdrawal of rebate of income-tax under clause (i)(c)(iii)(B) of the second proviso to Para. F of Part I of the First Schedule to the Finance Act, 1965 ? 4. Whether the Tribunal is justified in holding that the company is one in which the public are substantially interested ? 5. Whether the Tribunal is justified in relying on the regular assessment order for 1964-65 and tax calculations thereof to come to the conclusion that in 1965-66 assessment the company is one in which the public are substantially interested ?" 2. The relevant facts for the determination of the above mentioned questions are that for the accounting year relevant to the assessment year 1965-66, the Income-tax Officer determined the total income of the assessee at Rs. 43,45,236. The total tax demand amounting to Rs. 18,86,271 was worked out as under : Rs. Income-tax on Rs. 43,45,236@80% 34,76,189 Less: Rebate as provided in the Finance Act, 1965, vide clause I(b)(ii) of the first proviso to Part 1 of the First Schedule 15,07,054 Less: Rebate and reliefs in respect of donations and intercorporate dividends. 1,02,864 18,66,271 3. The assessment was completed on February 23, 1970, under section 143(3) of the Income-tax Act. The Income-tax Officer rectified the above order under section 154 of the Act. The Income-tax Officer found that the rebate as provided, vide clause 1(b)(ii) of the first proviso to Para. 1,02,864 18,66,271 3. The assessment was completed on February 23, 1970, under section 143(3) of the Income-tax Act. The Income-tax Officer rectified the above order under section 154 of the Act. The Income-tax Officer found that the rebate as provided, vide clause 1(b)(ii) of the first proviso to Para. F of Part I of the First Schedule of the Finance Act, has not been reduced under the provision of clause (1)(c)(iii)(B) of the second proviso to Para. F of Part I of the First Schedule to the Finance Act, 1965. According to this provision, the rebate of Rs. 15,07,054 allowable under the first proviso was not reduced by an amount of Rs. 1,87,500 worked out at 7.5% of the total amount of dividends on equity shares, viz., Rs. 25,00,000, as worked out under the second proviso. The Income-tax Officer thus held that the assessee should have been given relief of Rs. 13,19,554 only instead of Rs. 15,07,054. The Income-tax Officer held that the above mistake was apparent from the record and being a mistake of calculation only, the same was rectified. It may be mentioned at this stage that the assessee did not file any reply to the notice issued to him as to why a rectification may not be made in the original assessment order. The assessee, aggrieved against the order of the Income-tax Officer, filed an appeal before the Appellate Assistant Commissioner. The appeal was dismissed by the Appellate Assistant Commissioner. Thereafter, the assessee filed a second appeal before the Tribunal and the Tribunal also dismissed the appeal. On an application moved by the assessee for making a reference to this court, the above mentioned questions have been referred by the Tribunal under section 256(1) of the Act. 4. It was contended by learned counsel for the assessee that there was no material on record during the proceedings for rectification to hold that the assessee-company was a company in which the public were substantially interested. It was further submitted that the Tribunal committed a mistake in applying the provisions of clause (i)(c)(iii)(B) of the second proviso to Para. F of Part I of the First Schedule to the Finance Act, 1965, in the present case without having any material on record. It was further submitted that the Tribunal committed a mistake in applying the provisions of clause (i)(c)(iii)(B) of the second proviso to Para. F of Part I of the First Schedule to the Finance Act, 1965, in the present case without having any material on record. It was further submitted by learned counsel for the assessee that it was not a case of rectification of mistake and the proper remedy for the Commissioner was to challenge the original assessment order under sections 263 and 264 of the Act. 5. On the other hand, Mr. Surolia, learned counsel for the Department, submitted that the Income-tax Officer was entitled to see the record of the original assessment proceedings in order to decide the application for rectification. It was further submitted that it was nowhere the case of the assessee-company that the public are not substantially interested in the assessee-company. It was also argued that section 108 of the Act clearly provides that nothing contained in section 104 shall apply to any company in which the public are substantially interested. It was thus submitted by Mr. Surolia that the Tribunal was right in applying sub-clause (iii) of clause (c) of the second proviso to Para. F of Part I of the First Schedule to the Finance Act. It was further submitted in this regard that sub-clause (i) of clause (c) of the second proviso to Para. F of Part I of the First Schedule to the Finance Act also applied to the case of a company as is referred to under section 108 of the Income-tax Act. 6. In order to determine the controversy raised in the present case, it would be proper to reproduce clause (c) of the second proviso of Para. F of Part I of the First Schedule to the Finance Act also applied to the case of a company as is referred to under section 108 of the Income-tax Act. 6. In order to determine the controversy raised in the present case, it would be proper to reproduce clause (c) of the second proviso of Para. F of Part I of the First Schedule to the Finance Act, 1965 : Income on which rebate is to be allowed Rate of rebate Provided further that-- (i)The amount of rebate arrived at under the preceding proviso in the case of a company referred to in item I or item II of that 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:- and (c) in addition, in the case of-- (i) a company as is referred to in section 108 of the income-tax Act, or (ii) a company as is referred to in clause (iii) of sub-section (2) or sub-section (4) of section 104 of the said, Act or (iii) such a company as is exempt from the operation of section 104 of the said act by a notification issued under the problem of sub-section (3) of that section, Which has declared or distributed to its shareholders during the previous year any dividends other than dividends on preference shared--- (A) in the case of a company which since the date of commencement of its activities has declared or distributed any dividends for the first time during the previous year or any one of the four previous years immediately preceding such previous year-- on that part of the dividends other than dividends on preference shares which exceeds ten per cent. of the paid-up equity capital at the rate of 7.5 per cent. (B) in any other case-- on the whole amount of the dividends other than dividends on preference shares at the rate of 7.5 per cent. 7. Para. (i) of the proviso lays down that the amount of rebate arrived at under the preceding proviso in the case of a company referred to in item I or item II of that 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 given below under that provision. A persual of clause (c) mentioned above Clearly goes to show that the whole amount of the dividends other than dividends on preference shares is to be reduced at the rate of 7.5% from the total amount of rebate allowed under the general provision. This reduction of rebate at the rate of 7.5% has to be made on the total amount of the dividends in the case of a company as is referred to under section 108 of the Income-tax Act or any company which is exempt from the operation of section 104 of the said Act by a notification issued under the provisions of sub-section (3) of that section or a company as is referred to in clause (iii) of sub-section (2) or sub-section (4) of section 104 of the said Act. In the present case, in the assessment of the company for the year 1964-65, it was clearly held that the public were substantially interested in the company. That finding was nowhere challenged by the assessee-company and the Income-tax Officer committed no error in taking note of the fact that the assessee-company was a company in which the public were substantially interested. In view of these circumstances, the assessee-company was a company referred to in section 108 of the Income-tax Act and the amount of rebate had to be reduced by 7.5%. Sub-clause (iii) of clause (c) no doubt makes a mention that it must be a company as is exemption from the operation of section 104 of the said Act by a notification issued under the provisions of sub-section (3) of that section, but, in the present case, it was a company where section 104 itself was not applicable as the company was such as is referred to in section 108 of the Income-tax Act. In view of these circumstances, the rebate was bound to be reduced at the rate of 7.5% on the total amount of dividends of Rs. 25,00,000 in the present case. There was thus an apparent mistake on the record in granting the benefit of rebate of Rs. 15,07,054 and in not reducing the said amount by Rs. 1,87,500, being 7.5% of Rs. 25,00,000. The facts in the present case remain undisputed and the Tribunal in these circumstances was right in taking the view that it was a mistake of calculation in not reducing the amount of rebate as provided. 15,07,054 and in not reducing the said amount by Rs. 1,87,500, being 7.5% of Rs. 25,00,000. The facts in the present case remain undisputed and the Tribunal in these circumstances was right in taking the view that it was a mistake of calculation in not reducing the amount of rebate as provided. Under the above, circumstances, the questions referred to us are answered in the following manner. 8. Question No. 1 : It is held that, on the facts and in the circumstances of the case, the withdrawal of the income-tax rebate based and computed on the quantum of dividends declared by the company is not opposed to the provisions of sections 4 and 5 of the Income-tax Act, 1961. 9. Question No. 2 : It is answered in the affirmative. It is held that, on the facts and in the circumstances of the case, the various requirements of Para. F of Part I of the First Schedule to the Finance Act, 1965, can be determined in proceedings under section 154. 10. Question No. 3 : It is answered in the affirmative. It is held that, on the facts and in the circumstances of the case, the Tribunal is right in holding that there was a mistake apparent from the record in the matter of withdrawal of rebate of income-tax in clause (i)(c)(iii)(B) of the second proviso to Para. F of Part I of the First Schedule to the Finance Act, 1965. 11. Question No. 4 : It is answered in the affirmative and it is held that the Tribunal is justified in holding that the company is one in which the public are substantially interested. 12. Question No. 5 : It is also answered in the affirmative and it is further held that the Tribunal is justified in relying on the regular assessment order for 1964-65 and tax calculations thereof to come to the conclusion that for 1965-66 assessment, the company is one in which the public are substantially interested. 13. On the facts and circumstances of the case, there will be no order as to costs. *******