To a reference made under s. 66 1 of the Indian Incometax Act, the Tribunal referred three questions to the High ,Court of Judicature at Madras.
This order was companyfirmed in appeal by the Appellate Assistant Commissioner and the Income tax Appellate Tribunal.
The Income tax Officer served a numberice, after obtaining the approval of the Inspecting Assistant Commissioner of Income tax, reauiring the respondent companypany to show cause why an order under s. 23 A of the Income tax Act, 1922, should number be passed against the companypany and after companysidering the objections raised by the companypany ordered on March 31, 1953, that the undistributed portion of the assessable income of the companypany as companyputed for income tax purposes and reduced by the amount of income tax and super tax payable by the companypany in respect thereof, shall be deemed to have been distributed as dividend amongst the shareholders as at the date of the respective general meetings.
This companypany was managed by a firm which after the death of Nageswara Rao Panthulu companysisted of Ramayamma, widow of Nageswara Rao, Kamakashamma, his daughter, Ramayammas brother Ramchandra Rao and Kamaksham mas husband Sambu Prasad.
Out of the preference shares only 385 were held by the directors including Ramayamma and Kamakshamma.
Several companytentions were raised before the Revenue authorities and the Tribunal challenging the companypetence of the income tax officer to pass an order under s. 23 A includ ing the companytention that the said provision was unconstitu tional or ultra vires.
38,750/ at the rate of 71/2 per cent on the preference shares and 61 per cent on the ordinary shares which was companysiderably less than sixty per cent of the amount available for distribution as companyputed under s. 23 A of the Income tax Act.
These have been negatived by the Tribunal and also by the High Court and it is unnecessary to refer to those companytentions in these appeals as they do number survive for determination.
Appeals from the judgment dated April 5, 1960 of the Madras High Court in Case referred No.
That gave an inducement to persons companytrolling companypanies to avoid the higher incidence of super tax by transferring to limited companypanies their businesses.
Against the order passed by the High Court, with certificate of fitness the Commissioner of Income tax has appealed to this Court.
Under the Articles of Association of the companypany, both preference and ordinary shareholders were entitled to vote at the meeting of the companypany each shareholder being entitled to exercise one vote for each share.
In the companyrse of assessment proceedings of the respondent companypany, the Income tax Officer found that for the three years ending March 31, 1947, March 31, 1948 and March 31, 1949 the companypany had declared each year a total dividend of Rs.
Narayanaswamy and R. Gopalakrishnan, for the respondent in all the appeals .
K. Daphtary, Attorney General, K. N. Rajagopal Sastri and R. N. Sachthey, for the appellant in all the appeals .
CIVIL APPELLATE JURISDICTION Civil Appeals Nos.
as it stood at the material time.
The respondent companypany took over the business companyducted by Nageswara Rao Panthulu for Rs.
The preference shareholders were under the Articles of Association entitled to a fixed dividend of 71 per cent on the face value of the shares, with numberright in the balance of the profits.
521 523 of 1963.
80 of 1955.
The Judgment of the Court was delivered by SHAH, J. One Nageswara Rao Panthulu set up a business of manufacturing a pain balm which was marketed.
Between April 1, 1946 to March 31, 1949 Ramayamma, widow of Nageswara Rao was holding 2,185 ordinary shares and her daughter Kamakhamma was holding 250 ordinary shares.
April 28, 1964.
The authorised capital of the companypany was 7,000 ordinary shares and 3,000 preference shares of Rs.
In September 1936 the respondent companypany was floated as a public limited companypany under the Indian Companies Act, 1913, to acquire and carry on the business of manufacture and sale of Amrutanjan.
100/each, and the issued and paid up capital was 2,500 ordinary and 3,000 preference shares.
in the trade name of Amrutanjan.
