High Court Of Gujarat
Commissioner Of Income Tax Vs. Ahmedabad Kaiser-I-Hind Mills Co. Ltd.Section 4, 1968FA 2 SCH. I, PART I PART F-1(B)
Asst. Year 1968-69
M.P. Thakkar & R.C. Mankad, JJ.
IT Ref. No. 61 of 1976
24th March, 1981
Decision in favour of Assessee
Counsel Appeared
N.U. Raval with R.P. Bhatt of M/s R.P. Bhatt & Co., for the Revenue : J.P. Shah, for the Petitioner
THAKKAR, J. :
Five questions have been referred to this Court for its opinion under s. 256(1) of the IT Act, 1961, by the Tribunal, Ahmedabad Bench ‘B’. Out of these five questions, four questions are already concluded by decisions of this Court and only one question, namely, question No. 4, is res integra. The said question has been referred at the instance of the CIT and it reads thus : “Whether the Tribunal was right in holding that since the assessee had sufferred a loss in the asst. yr. 1968-69 and since there was no liability to basic tax, the question of levy of additional tax in respect of excess dividends did not arise under the provisions of the Finance Act, 1968, for the asst. yr. 1968-69 ?”
It is not in dispute that the assessee is a company which falls within the description of a “domestic company” as specified in para. F mentioned in the First Schedule to s. 2 of the Finance Act, 1968. It is provided therein that the rate of income-tax in the case of a company which falls under cl. (i) or (ii) of I(B) on so much of the total income as does not exceed the relevant amount of distribution of dividends by the company will be 7.5per cent. The said paragraph falls within pt.I of the First Schedule which provides the rates of income-tax and surcharge on income- tax in the context of s. 2 of the aforesaid Finance Act of 1968. The question is whether income-tax at the said rate under the said provision is chargeable in respect of a company which has incurred losses. The Tribunal has negatived the contention of the Revenue that income-tax is chargeable under the aforesaid provision even in the case of a company which has incurred a loss. Now, the charging section of the IT Act is s. 4 which, inter alia, provides that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall bbe charged for that year in accordance with and subject to the provisions of the Act in respect of the total income of the previous year or previous years, as the case may be. It is thus evident that income-tax is chargeable provided and only provided there is income. The total income is of course required to be computed in accordance with the provisions of the IT Act. But, in the first place, there must be income. When the total income is computed, the question of charging income-tax at a particular rate may arise. And, it is only when it is established by the Revenue that there was income in the previous year that the provisions of para. F of the First Schedule under s. 2 of the Finance Act, 1968, can arise. Existence of income is a condition precedent to the chargeability to income-tax in respect of the previous year. The view taken by the Tribunal is, therefore, unexceptionable. Question No. 4, referred to this Court, must, therefore, be answered in the affirmative and against the Revenue.
In the result, the question referred to us are answered as under: Questions Answers Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in finding that the payment of betterment charges to the Ahmedabad Municipal Corporation under the provisions of the Town Planning Act, 1954, made by the assessee was allowable as a deduction u/s. 37 of the IT Act, 1961, for the A. Ys. 1968-69 and 1969-70 ?
In the negative and in favour of the Revenue having regard to the decision in Addl. CIT vs. Rustam Jehangir Vakil Mills Ltd. 1976 CTR (Guj) 131 :(1976) 103 ITR 298 (Guj). 2. Whether, on the facts and in the circumstances of the value of perquisites as allowed to the directors was not hit by the provisions of s. 40(c)(i) of the I. T. Act, 1961 ?
4. Whether, the Tribunal was right In the affirmative and against the in holding that since the assessee. Revenue for the reasons had suffered a loss in the asst. yr. specified hereinabove. 1968-69 and since there was no liability to basic tax, the question of levy of additional tax in respect of excess dividends did not arise under the provisions of the Finance Act, 1968, for the asst. yr. 1968-69 ?
5. Whether, on the facts and in the In the affirmative and against the circumstances of the case, the Revenue in view of the decision payment of Rs. 3,560 made to the in Addl. CIT vs. Rustam Jehangir Textile Commissioner under the Vakil Mills Ltd. (supra). provisions of cl. 120(1)(b) of the Cotton Textile (Control) Order, 1948, was business expenditure allowable under s. 28 or under s. 37 of the Act ?
Reference answered accordingly.
No order regarding costs.
the case, the Tribunal was right in coming to the conclusion that the provisions of s. 40(c)(iii)/40(a)(v) were applicable for determining the question of allowance of perquisites allowed to the directors, for the asst. yrs. 1968- 69 and 1969-70, respectively ?
In the affirmative and in favour of the assessee in view of the fact that the point is concluded by a decision in Addl. CIT vs. Tarun Commercial Mills Ltd. 1977 CTR (Guj) 141 : (1978) 113 ITR 745 (Guj). 3. Whether, on the facts and in the . circumstances of the case, the Tribunal was right in holding that Schedule producing the relevant provisions (as they stood at the material time) referred to in the judgment. Sec. 4(1) of the IT Act (in so far as material):
“4. (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person: …… Sec. 2(1) of the Finance Act, 1968 : 2. Income-tax.—(1) Subject to the provisions of sub- ss.
(2) and (3), for the assessment year commencing on the 1st day of April, 1968, income-tax shall be charged at the rates specified in Part I of the First Schedule and, in. the cases of which Paragraphs A, B, C and D of that Part apply, shall be increased by a surcharge for purposes of the Union and a special surcharge for purposes of the Union calculated in either case in the manner provided therein.”
THE FIRST SCHEDULE (See s. 2) PART I Income-tax and surcharges on income-tax. Paragraph F
In the case of a company, other than the LIC of India, established under the LIC Act, 1956 (31 of 1956), Rates of income-tax I. In the case of a domestic company—… (B) in addition, where the company is— (i) a company in which the public are substantially interested, or (ii) a company as is referred to in cl. (iii) of sub-s. (2) or cl. (a) or cl. (b) of sub-s. (4) of s. 104 of the IT Act, or (iii) such a company as is exempt from the operation of s. 104 of the said Act by a notification issued under the provisions of sub-s. (3) of that section, on so much of the total income as does not exceed the relevant amount of distributions of dividends by the company. 7.5 per cent.
Explanation 1.—In cl. (B), the expression ‘the relevant amount of distributions of dividends’ means the aggregate of the following amounts, namely :—… (b) so much of the amount of the dividends, other than dividends on preference shares, declared or distributed by the company during the previous year as exceeds ten per cent. of its paid-up equity share capital as on the first day of the previous year.”
[Citation : 141ITR472]
