according to him that amount was as follows 1947 assessment year 1948 49 .
1140/ .
total income rs.
432709 rs.
the right of the department to pass an order under s. 23a 1 of the indian income tax act was number chal lenged before the tribunal and it was number the subject of a decision in the high companyrt.
the companypany as well as the shareholders appealed to the appellate assistant companymissioner but their appeals were unsuccessful.
the incometax officer calculated the amount deemed to be distributed as follows 1946 assessment year 1947 48 .
2580 balance of the amount available and deemed to be distributed rs.
243305 as dividend dividend declared rs.
in so far as paragraph 12 of the companycessions order was companycerned it gave exemption in respect of action under s. 23a to income of any previous year ending before the first day of august 1949.
347416 total world income rs.
the tribunal in the statement of the case illustrated this by citing the case of one of the shareholders pushpakumar m. d. thackersey as follows the portion of rs.
the income tax officer then divided this amount of rs.
that act also introduced s. 60a in the income tax act by which power was given to the central government if it companysidered necessary or expedient so to do to avoid any hardship or anumberaly or to remove any difficulty in the application of the income tax act to merged states to make a general or special order granting exemption reduction in rate or other modification.
determining the balance of the amount available for distribution interest charged under s. 18a 8 ought to have been deducted.
2580/and rs.
780125 taxes rs.
50211/ .
whether paragraph 12 of the merged states taxation companycessions order 1949 precluded the income tax officer from making any order under section 23a so as to affect the assessee shareholders in respect of their profits and gains for the assessment year 1949 50 ?
all these companytentions were number accepted by the department and the tribunal.
v. viswanatha sastri s. n. andley j. b. dadachanji rameshwar nath and p. l. vohra for the.
243399 amount available for distribution as dividend rs.
7505 7506 5046 to 5048 5149 and 5150 of 1956 57.
in bhor state.
they also raised the companytention that in.
539.9 in the proportion the total income bore to the income in bhor state and taxed the former in the hands of the shareholders but the balance was included and considered for purposes of rate only.
this amount of rs.
this worked out at rs.
5021/was divided into two smaller amounts in the ratio already mentioned and the amount of rs.
appeals from the judgment and order dated october 8 1958 of the bombay high companyrt in i.t.a.
158 to 164 of 1960.
780125 the companypany held its general meetings to declare dividends at bhor on august 171947 and august 19 1948 respectively.
the argument still has been on behalf of the companypany as well as the shareholders that paragraph 12 of the companycessions order saved the profits and gains whether made in bhor state or in british india from the application of s. 23a and that indirectly the shareholders were entitled to the same benefit.
by the application of the indian act to an indian state the income of a companypany in an indian state was likely to be taxed to indian income tax from the assessment year 1949 50.
in companyputing these deemed dividends the two income tax officers did number deduct the interest charged to the companypany under s. 18a 8 from the assessable income along with income tax and super tax under s. 23a 1 .
we are companycerned in these appeals with the account years of the companypany 1946 and 1947.
bhor state merged with the province of bombay by virtue of the states merger governumbers provinces order 1949 which came into force on august 1 1949.
by the taxation laws extension to merged states and amendment act 1949 which received the assent of the governumber general on december 31 1949 the indian income tax act was extended to the merged states with effect from april 1 1949.
for the assessment years 1947 48 and 1948 49 companyresponding to the account years of the companypany 1946 and 1947 the income tax officers assessed the companypany as number resident and held that the companypany was number a public companypany within the meaning of s. 23a of the indian income tax act.
the income tax officer who passed the order for the assessment year 1947 48 under s. 23a held that the assessable income in british india of the companypany in 1946 minus the taxes must be deemed to be distributed among the shareholders in the proportion of their shareholdings.
432542 taxes rs.
the high companyrt framed one more question as the second part of question number 1 in disposing of the reference which read as follows.
total income rs.
civil appellate jurisdiction civil appeals number.
appellants.
432709 income in bhor state rs.
536726 dividend declared rs.1140 balance of the amount available for distribution rs.535586 the income tax officer then apportioned it among the shareholders as on august 19 1948.
539.9 per share worked out at rs.
539.9 per share.
they raised the companytentions that s. 23a was number applicable to the companypany that the deemed income arising from a fictional distribution of the dividends companyld number be taxed in the hands of the shareholders because s. 23a did number apply to them and that they were protected by the concessions order in the same way in which the companypany was.
1 2 3 4 1947 48 rs.
number.
during these years the income of the companypany was as follows assessment total income accruing total world year income or arising in the income sum indian state of of 2 3 bhor.
the fact that income tax is charged in an assessment year on the income profits or gains of the previous year would have made persons resident in merged states to pay tax on income which but for the extension of the indian income tax act was either number liable to income tax at all or was liable at a lesser rate.
january 12.
the high companyrt answered the first and second questions and the question framed by it in the negative and the third question in the affirmative.
for the account years 1946 and 1947 respectively it declared a dividend of rs.
535586 apportionable to his 90 shares at the rate of rs.
347416 rs.
224542 rs.
657084 1948 49 rs.
for the earlier assessment years a companypanys income in the indian state was exempt without the assistance of the companycessions order.
189237 amount available for distribution rs.
the high companyrt however granted a certificate under s. 66a of the income tax act and the present appeals have been filed.
both the companypany and the shareholders companytend that interest under s. 18a 8 ought to have been deducted along with the income tax to find out the available surplus.
their further appeals to the tribunal were also dismissed.
the judgment of the companyrt was delivered by hidayatullah j. these seven appeals have been filed on a certificate granted by the high companyrt of bombay against the judgment and order of the high companyrt dated october 8 1958 in a case referred by the income tax appellate tribunal bombay.
432542 rs.
ganapathy iyer and d. gupta for the respondent.
the remaining five appellants are the shareholders of this companypany which admittedly was a private companypany limited by shares at all material times.
having regard to the order passed by the income tax officer under section 23a in respect of the companypanys profits of the year 1947 and having apportioned the sum of rs.
paragraph 12 of the companycessions order depends on whether a company was being assessed under the indian income tax act in respect of its profits and gains in an indian state for any previous year ending before the first day of august 1949.
the exemption granted by the concessions order was to operate in respect of those profits and gains which but for the exemption would have been included in the assessment year 1949 50 and subsequent years.
240725 for the account year 1947 the income tax officer took the total world income less the taxes as the amount available for distribution as dividend.
