ASHIM KUMAR BANERJEE, J. ( 1 ) ALTOGETHER four writ petitions were filed calling in question the provision of section 115-0 of the Income-tax Act, 1961 (hereinafter referred to as "the said Act of 1961" ). The writ petitions were dismissed by the learned Single judge by judgment and order dated September 20. 2001 reported in 253, income Tax Reports, Page 608 (Jayshree Tea and Industries Ltd. and Anr. vs. Union of India and Ors. ). Hence, these appeals. Since these appeals involve identical question of facts and law these are disposed of by this common judgment. ( 2 ) THE appellants in four appeals are four different tea companies who cultivate tea plants, pick up green tea leaves and thereafter process it in their factory for marketing the same. Cultivation of tea is considered to be an agricultural process whereas processing of tea, in the factory is an industrial process. Agricultural income is within the domain of the State and not the Union. Hence, Union is not empowered to levy tax on agricultural income which is within the domain of the State. In case of tea companies 60% of the income are considered to be an agricultural income and exempt from payment of income-tax. As such, the tea companies are required to pay income tax on 40% of their net income. ( 3 ) BY the Finance Bill, 1997-98 Union proposed an additional income tax on the distributed profits in corporate sector in case any company decides to declare dividend and thereby distributes profits amongst the shareholders. By the said Bill levy of tax on dividend in the hand of the shareholders was withdrawn. ( 4 ) PARAGRAPH 100-101 of the Speech of the Hon'ble Finance Minister on the floor as reported in 224 Income Tax Reporter (Statute), page 23 is quoted below:"100. Another area of vigorous debate over many years relates to the issue of tax on dividends. I wish to end this debate. Hence, I propose to abolish tax on dividends in the hands of the shareholder. 101. Some companies distribute exorbitant dividends. Ideally, they should retain the bulk of their profits and plough them into fresh investments. I intend to reward companies who invest in future growth. Hence, I propose to levy a tax on distributed profits at the moderate rate of 10 per cent on the amount so distributed. 101. Some companies distribute exorbitant dividends. Ideally, they should retain the bulk of their profits and plough them into fresh investments. I intend to reward companies who invest in future growth. Hence, I propose to levy a tax on distributed profits at the moderate rate of 10 per cent on the amount so distributed. This tax shall be an incidence on the company and shall not be passed on to the shareholder. " ( 5 ) PRIOR to the said amendment there had been a grievance of the tax payers with regard to double taxation as the corporate sectors were to pay tax on the net income and as and when such income was distributed amongst the shareholders, the shareholders were also to pay tax on the said amount. By the above amendment the shareholders were relieved of payment of tax. However, the company was imposed an additional tax in case they decide to declare dividend and thereby distribute profit amongst the shareholders. Section 115-O is quoted below:"115-O. (1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise)on or after the 1st day of June, 1997, whether out of current or accumulated profits shall be charged to additional income-tax (hereinafter referred to as tax on distributed profits) at the rate of ten per cent. (2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed hi accordance with the provisions of this act, the tax on distributed profits under sub-section (1) shall be payable by such company. (3) The principal officer of the domestic company and the company shall be liable to pay the tax on distributed profits to the credit of the Central government within fourteen days from the date of - (a) declaration of any dividend; or (b) distribution of any dividend; or (c) payment of any dividend, whichever is earliest. (3) The principal officer of the domestic company and the company shall be liable to pay the tax on distributed profits to the credit of the Central government within fourteen days from the date of - (a) declaration of any dividend; or (b) distribution of any dividend; or (c) payment of any dividend, whichever is earliest. (4) The tax on distributed profits so paid by the company shall be treated as the final payment of tax in respect of the amount declared, distributed or paid as dividends and no further credit therefore shall be claimed by the company or by any other person in respect of the amount of tax so paid. (5) No deduction under any other provision of this Act shall be allowed to the company or a shareholder in respect of the amount which has been charged to tax under sub-section (1) or the tax thereon. " ( 6 ) THE writ petitioners challenged the introduction of section 115-O on the ground that it ultra vires the Constitution. Such submission of the writ petitioners were negated by the learned Single Judge by the judgment and order dated September 20, 2001. Judgment and Order Impugned: ( 7 ) ON perusal of the judgment of the learned Single Judge it appears to us that the learned Single Judge rejected the contentions of the appellants to the extent that imposition of additional income-tax on the dividend was not ultra vires unless it was found that such tax was a tax upon agricultural income in disguise. The learned Judge held that income on dividend declared by a tea company and income of a tea company could not be equated. His lordship relied upon the case of Bacha F. Guzdar, Bombay vs. Commissioner of Income Tax, Bombay, reported in 27, Income Tax Reporter, Page 1. His lordship dismissed the writ petition mainly relying on the principle laid down in Bacha case (supra ). His Lordship also negated the submission of the writ petitioners that levy of such additional income-tax had, in fact, frustrated the object of the legislature to exempt the shareholders from tax on dividend. Contentions of the Appellants: ( 8 ) MR. Debi Prasad Pal, learned Counsel appearing for the appellants contended as follows: (i) Additional tax was in addition to the tax. Contentions of the Appellants: ( 8 ) MR. Debi Prasad Pal, learned Counsel appearing for the appellants contended as follows: (i) Additional tax was in addition to the tax. Once the company was assessed income-tax on its income the additional income-tax could be imposed on the amount for which original tax was imposed. However, in this case such additional income-tax was only upon a portion of income which was to be distributed amongst the shareholders as and by way of dividend. Hence, it was a tax on dividend which was exempt by the said Act. (ii) Once the additional tax was levied on a flat rate of 10% that was to be applied on the income of the company which was contrary to Rule 8 of the Income-tax Rules, 1962 whereby 60% of the income was exempt from tax as and by way of agricultural income. (iii) The rate of tax could only be levied on a total income and it should have a relation with the income of the assessee. Hence, the additional tax imposed only on the amount which was being distributed as profit through dividend to the shareholders was illegal and ultra vires the Constitution. (iv) Even in case of distribution of profit when profits were distributed amongst the shareholders this would include 60% agricultural income which was not taxable. Since such income could not be segregated the imposition of additional tax was beyond the legislative competence of the Parliament under Entry 82 of List 1 of the 7th Schedule to the Constitution. (v) If a company declared profit in a particular year taking into account the accumulated profits carried forward from the previous assessment years such distribution would come within the purview of additional tax and thereby the assessee would have to pay tax not only for that financial year but also for the preceding years which was not permissible. (vi) The amended section was arbitrary, irrational particularly where it directed the company to pay tax within 14 days from the date of distribution or declaration of dividend which was impossible. Cases Cited : ( 9 ) IN support of his contentions, Dr. Pal cited the following decisions : (i) 27, Income Tax Reports, Page 1 (Bacha F. Guzdar, Bombay vs. Commissioner of Income Tax, Bombay) (ii) 30, Income Tax Reports, Page 841 (Khatau Makanji Spinning and weaving Co. Cases Cited : ( 9 ) IN support of his contentions, Dr. Pal cited the following decisions : (i) 27, Income Tax Reports, Page 1 (Bacha F. Guzdar, Bombay vs. Commissioner of Income Tax, Bombay) (ii) 30, Income Tax Reports, Page 841 (Khatau Makanji Spinning and weaving Co. Ltd. vs. Commissioner of Income Tax, Bombay) (iii) 40, Income Tax Reports, Page 189 (Commissioner of Income Tax, bombay City I vs. Khatau Makanji Spinning and Weaving Co. Ltd.) (iv) 48, Income Tax Reports, Page 83. (Karimtharuvi Tea Estates Ltd. and Anr. vs. State of Kerala and Ors.) (v) 124, Income Tax Reports, Page 1 (Empire Jute Co. Ltd. vs. Commissioner of Income Tax) (vi) 173, Income Tax Reports, Page 18 (Tata Tea Limited and Anr. vs. State of West Bengal and Ors.) Contention of the Revenue : ( 10 ) MR. Tapas Hazra, learned Counsel appearing for the respondents contended that imposition of additional income-tax was permitted by the constitution. Union was within its power to impose such additional tax on the assessee. The income from dividend could not have any nexus with agricultural income or industrial income. Hence, the learned Judge was right in dismissing the writ petition relying on the Mrs. Bacha F. Guzdar, bombay ease (supra ). Law as decided in Precedents : ( 11 ) ON a plain reading of the decisions cited before us our understanding of the law is as follows: (i) Agricultural income was not within the purview of legislative competence of the Parliament. (ii) In case of tea companies to avoid complication in accounting procedure rule 8 of the Income-tax Rules provided for a taxing formula suggesting exemption of 60% of the net income as agricultural income and the rest 40% as industrial income on which tax is to be levied. (iii) Income of a tea company and income of a shareholder of a tea company could not be equated as a same class. A shareholder of a tea company gets return of its cash investment on the company not on the field where tea is grown. Hence, no part of such income would be termed as agricultural income. (iv) Under section 3 of the Income-tax Act, income-tax was defined as a tax on the income of the previous year and it could not take into account any income for the earlier years to be tagged with it. Hence, no part of such income would be termed as agricultural income. (iv) Under section 3 of the Income-tax Act, income-tax was defined as a tax on the income of the previous year and it could not take into account any income for the earlier years to be tagged with it. (v) The State has no power to impose tax on any tea company as agricultural income beyond 60% of the total income. Our View on the Issue : ( 12 ) SECTION 115-0 provides additional tax on the company ahd not on the shareholder. It contemplates a situation when there is any declaration of dividend out of current or accumulated profit by the company. If we read this provision coupled with the Speech made by the Hon'ble Finance Minister on the floor quoted (supra) we would find that the intention of the government was to levy additional tax upon the company if they decide not to plough back the profit and thereby distribute the same amongst the shareholders. One the other hand the Government as and by way of policy allowed the company some concession on tax who ploughs back the profit of the company as its additional resource. Hence, any company, if decides to distribute profit, would have to pay additional tax on that. On the other hand if a company decides to use that amount for development of the company they would not be liable to pay any additional tax under section 115-O. Hence, we do not find any illegality in introduction of the section on this score. The appellants also could not show us as to how the provisions of the Constitution on this score were violated. Hence, such plea of the appellants being not tenable is rejected. ( 13 ) NOW comes the question of tea company. The activities of the tea company are different from other commercial sectors. Although all these tea companies are corporate entities their activities have a distinctive feature. It has lot of agricultural activities starting from plantation to picking up green tea leaves. Constitution makers provided that agricultural income would come within the domain of the State. Hence, the Income-tax Act, 1961 being the Central law was not competent to take the agricultural income within its fold as it was beyond the legislative competence of the Parliament. It has lot of agricultural activities starting from plantation to picking up green tea leaves. Constitution makers provided that agricultural income would come within the domain of the State. Hence, the Income-tax Act, 1961 being the Central law was not competent to take the agricultural income within its fold as it was beyond the legislative competence of the Parliament. Hence, if this additional tax is found to have been put on any agricultural income it is liable to be struck down. ( 14 ) IN this backdrop, let us examine section 115-O. As we have observed earlier, additional tax per se was not violative of the provisions of the constitution. It is for the Union to impose income tax upon the assessee. Similarly, it has power to impose additional tax too. On a grammatical construction of this section it would appear that the tax was levied on the company and not on the shareholder. Hence, His Lordship's decision relying on the Mrs. Bacha F. Guzdar, Bombay case (supra) was not the correct proposition of law. Under Rule 8 of the Income-tax Rules the net income of the tea companies for the purpose of Income-tax Act is 40% of the total income meaning thereby 'x' company having various industrial and commercial activities eaxcept tea growing and manufacturing would have to pay tax at the prescribed rate on the total net income whereas 'y1 company being a tea company despite having other activities, would pay tax on 40% of the total net income. ( 15 ) A tea company is liable to pay tax at the prescribed rate on 40% total net income. If there is any additional tax they would pay in the same manner and in the same proportion. For that we do not see any reason to hold the said provision as irrational or unconstitutional. Hence, such plea being not tenable is rejected. ( 16 ) DR. Pal contended that when a tea company decided to declare dividend that profit would not only include profit for the particular financial year but also the accumulated profit for the earlier years which were not available for tax. Such submission in our view is totally illogical. Hence, such plea being not tenable is rejected. ( 16 ) DR. Pal contended that when a tea company decided to declare dividend that profit would not only include profit for the particular financial year but also the accumulated profit for the earlier years which were not available for tax. Such submission in our view is totally illogical. When a company earns profit for a particular year and does not declare dividend such profit is automatically ploughed back to the company's growth and in the next year the profit earned by the company is a profit for that particular year for tax purpose. Hence, the contention of Dr. Pal on that score is rejected. Reference may be had from the observation of the Apex Court in the case of commissioner of Income Tax, Bombay (supra) reported in 40 Income Tax reporter, Page 189. ( 17 ) THE appellant tried to contend that since the additional tax was only on the part of the income which relate to declaration of dividend there could not be any mechanism provided for segregation of such income, as such distribution of profit would also include agricultural income. We are unable to appreciate such contention of the appellants. If a tea company has a net income Rs. 100/-, Rs. 40/- would be liable to income-tax at the prescribed rate and the assessee would be assessed accordingly. By virtue of section 115-0 if the company declares Rs. 50/- for distribution amongst the shareholders it would have a proportionate liability. It is true that in case the company decides to distribute a part of the income it would be impossible to find out whether that part of the income included the whole of the agricultural income or a part of it. This exercise now, in our view, is not at all relevant in view of the provision of Rule 8 of the Income-tax Rules. In such event the company would be charged on Rs. 40/- for income-tax and on rs. 50/- for additional income-tax on proportionate basis. ( 18 ) WE are, however, in agreement with Dr. Pal on a limited issue. We are of the view that Rs. 50/- as a whole could not be taxed at the prescribed rate of additional tax. Such additional tax would be levied on Rs. 20/- being 40% of Rs. 50/ -. 50/- for additional income-tax on proportionate basis. ( 18 ) WE are, however, in agreement with Dr. Pal on a limited issue. We are of the view that Rs. 50/- as a whole could not be taxed at the prescribed rate of additional tax. Such additional tax would be levied on Rs. 20/- being 40% of Rs. 50/ -. Hence, at the end of the day the company would have to pay income-tax at the prescribed rate on Rs. 40/- as well as additional income-tax at the prescribed rate on Rs. 20/ -. Result: ( 19 ) THE judgment and order of the learned Single Judge is set aside. ( 20 ) WE hold that the provision of section 115-0 is Constitutional and we have given the proper interpretation of the subject section as observed hereinbefore. The appeals are disposed of accordingly without any order as to costs. Appeals disposed of.