M/S. Shri Gopal Paper Mills Co. Ltd v. Commissioner Of Income Tax, Central Calcutta

Hag sal Tara zt fava arqat fafaes ‘aaa MAB AAA, TTT HATHA (M/s. Shri Gopal Paper Mills Company Limited (The Commissioner of Income-tax, Central Calcutta)|(21 WHat, 1970) (Alo So Mo M, Fo Yo RT WT To To Wax) wigtadaz, 1956—AT [SG aH fedla Tega Fae (1) a saaes (m) ate (a@)—araat art afaaaT ATAmt Qua: AATaR ata BeST A sig Bw R fae dar*feat ata Fat areal FT] TAT, 1955 a ara F faBeat gat—atta Fat a fatedsat ama Fatafeataa fear at anat g—alaa Fat al awe Rania awate 30 fearaz, 1954 a aaa gla Fa At awat J—alra‘o Fa RY aT IGag S galta Aer aa F aka a.qrat st wrt fear wat set Wt amat s— ataAtfare’ seal at ae vet daw & fat ata afer fray yaTeal ST AAT feat wat s |ff adendt acai fraifedt 830 fearax,1954 at cH araafqaaa Fea aaa ce aaer nf fer a fe afar afaaeeaa Bl UH ATT BETA A ATA ToT H arealslay FT ATATTqsitga atx faafea fear are fe a ast & eq F gat aware gt aTTTZ att ag fe saa Git at Argel Rawat at cas VAT aTat Farare at are Fad F fauaa ateardfeg fear are aie aHeTque (a) are arpa & fataal at Gia; aed F ETH TAT AT dat AY ova aafeaat & Aa, faas ara area at afgat F 1 saat,(1955 at sa BTufeedtaa g,“ard, faafea, ate waisted” wer& fac faface fot wareBarware gt Fad ct Fae 1 TAgY,19553 A aria TA F sHartg1 31 fearaz, 1955 BraMa srarett genet tar ararafiz faater ag 1956-57 B fae marae afrarety HeT at HT ATT BT TTT Br faa aeara sl atagt Werfaraat at Tawa aaar va fae aaa az fear, fraH faratest weraat arereh gz aH HT;TIAA: HTAAA Vaz, 1956eMTIULSFT aH feta Teg F avs (1)F soavs (H) Fata at fade vat sass(a) & ada afafaaa se atasifsatiiat & aaa araarfeat & oferaecqedfarafafea seq Geacararaa at freer fee me:(1) wat ama F gealFH ATNT Aalt aad el ofefeataat4 50,07,500 at F afrGers aaaad atgaara frat ag F far grea tz,1956 F art ITGU 7 F CHTF saws (1) F agary H yar wer F agiediafarifedt at anrad ost A aftafaafear ara afer?ate (2)aa aa & aeat F grate ge wR raat at ofefeafaat A seaare TAT a Heda Uae, 1956S mTF Fae F fala cess& aateata fratfedt ara fratey ag1956-57% gana 31 fearax,1955 Bl aad Va als Hart ay F ctua Bae arepl BY Te fHarTa Hel TT AHAT Ss ?gag aaa a ga DAY A geal ar gare frat } cet H featsey waraTaa FB ea fasta } fae faaifeat area saa aaaHag atta Hl TE | aT AAT HUI:gy,. afafaatiza—aradit at aod afaa ufaaaa ara at atta FIT% aoftatadHea Hl ger afeaat g ate aiafea far oy Ie Ta BATBY AHL BU T HIT HWA HY ATA Aarareal st Be aet 21dace & ata afar afauar oaoH arr Hl aot FH aaftafaa wzfear wat ar) sat Got qua:. eared Aaa Fata fawat Ft weft atx arqet tacreat 8 gar eral & arent ot se ara fea atTE ft1 ga cart ardfen fae Te Gat aaeT Ft arda & aig 30faaraz, 19548 ca wd B ait wed gu taeereal st arafa gt ag fara aad 9t Fat 1 waatl, 19553 at AAT Ws Har , elt| (48 6) aeeT Ra aT a ae eee St Ha s fH ae ATCT VAaa tae & cart aa ae faah a aaeg at athe & ca aHeT Falt spare1 aeHeT A “gsitea ate faafer fear ae” qavaqagra qseq ate faafea fear sat 2” afita ot aaa Faaer & arg aaa a ag afaa sears fH sae aati ar faa30 fearaz,1954 & ward gar ati afe age aarcarey | aaa,1955 a aT feet wea arte at atra Ta H eaTaT VT TE at HHT Fag aaa fe “fears gas fe Sah oTeH ae 31 Feary,1954 aTanrea ga atet ar vasga fret wafeat aaa feet arate Aofan ae dit” veda at oat 21 afafaaFH ae ofertyy ate sea aaa a aaeT se as (a)ate (7) 1 agfaa aefeat & 1 sa quel¥ que (w) FH aarface rear afaaaa & fataeagay vara wea ® aaa F araré ora arety afar afaatag sh we SIy gat deer % faeare ay fret ot Aft F wa aah wet 1 (FT 7) seq qraray ak araat afaacr at ag wat aro at faeaac ay frat safer at are feat Tat va aaa aH ael ATAT ST aHATwa ae fe Sa sae carta vat fear ara1 (FT 8) M/S. SHRI GOPAL PAPER MILLS CO. LTD. COMMISSIONER OF INCOME TAX, CENTRAL CALCUTI'A April 21, 1970 [J.C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.) Finance Act, 1956 Suh-els. (a) and (h) cl. (l) Second Proriso f'arn-graph D Part JJ-Re.\·o/utio11 hy t·o111pllny capiul/ising unclivided profits in the fonn of fully paid· up bonus s'1ares-JVhe1her the bonus shares <:oulcl he 111clucled in the paid up capital of tile asseJ".\'ee-Share-ho/ders t'ntitled to dh•idends fi·o111 Jcuruary 1., J955-Whetlier honu.'I shares can he .\'aid to lu1'Jle been i.'iJlled on rite .c/ate of re.\·o/u!ion i.e. Dece111ber 30, 1954-./f can he said to Ju1l'e heen is.\·ued ·within the 111ea11ing of Second PrOl'i.vo IP Para D of Parr JJ-'Al/ot' 'distribute', 111eaning. The appellant company-assessee-at a general meeting on December 30, 1954 passed a resolution to the effect that a portion Of the accumulat-ed undivided profits "be capitalised and distributed amongst the- holders of the ordinary shares in the company on the footing that they became entitl-ed thereto as capital and the capital was to be divided into bonus •hares and allotted to the ordinary shareholders on the basis of their sharehold-ings and by clause (b) of the resolution the directors of the company were directed to "issue allot and ·distribute" the new shares, credited as fully paid up amongst the persons whose names- arc registered as ~uch in the books of the company on lst January 1955. The shareholders were entitled to get dividends on those shares only as from !st JaAuary J9S5. For the asse§Sment year 1956-57 the .relevant accounting period ending on December 31, 1955, the Income-tax Officer determined the total income of the company and in computing the Corporation tax due in respect of the income reduced the rebate to which the appellant company was entitled on two counts; first under sub-cl. (a) and secondly under sub<!. lb) of cl. ( J ) to the s~ond proviso to paragraph D of Part II of the Finunce Act 1956. As a result of proceedings before authorities under the Act, the following questions were reFet'J'ed to the High Court : ( i) Whether on the facts and in the circumstances of the case the bo~us shares Of the face value of Its. 50.07,500 should be included in the paid up capital of the assessee within the meaning of that term in ourouance of sub-section (I) of the explanation and oaraaraph D of Part IT of the Finance Act 1956 for the relevant year and; (ii) Whether on the' facts and in the circumstances of the case the honus shares in question can be said to have been issued within the mean-ing of the second proviso to oaragraph D of Part JI of the Finance Act 1956, to the shareholders by the assessee during the accountinR year ended 3 lst December 1955 relevant for the assessment year 1956-57. The High Court answered both the questions in favour of the depart-meot. In appeal to this Court, HELD : (i) The company had· ittlt~wers to convert its 'accumulated undivided profit. into bonus shares and ·it was not "Pen to the ordinarv shareholders to refuse to accept those shares when allotted. Under the resolution a portion of the accumulated undivided profits were .converted Section: CONCLUSION into capital: that capital ·was divided into fully paid up bonus shares ano allotted to the ordinary shareholders on the basis of their share-holdings. The shares so allotted became the property of the shareholders as from the date of the resolution, namely, December 30, 1954 subject to the qualilication that they were entitled to get dividends on those shares only from Isl January 1955. The expression "be capitalised and distributed" in the resolution only means ''is hereby capitalised and distributed". The authori:ies under the Act and the High Court have placed undue emphasis on the<e clauses of the resolution which lay down the procedure to be adopted in the matter of carrying into 'effect the decision of the general meeting. They do not in any manner cut down the nmbit of that resolu-tion. The High Court as well a< the Tribunal were under the erroneous ir11pression that a share cannot be said _to have been issued to a person untii a share certificate is given to him. Merely because in cl. (b) of the resoll1tion the l)irectors of the Company were directed to issue bonu~ shares it cannot be said that the bonus shares had not passed to the share-c holders on December 30, 1954. The meaning of. the words "allot" and '·distribute' should be gathered from the context in which they were used . .. Allotment" means the appropriation out of the previously unappropriated capital of a company of a certain number of share:' to a person. The \Vord "distribute" found in cl. (b) of the resolution in the context means iO record the distribution of the shares in the books of the company. [330 H: 3H A-F: 332 G-H; 333 G] D There \\'as thcr_efore no justification in reducing the rebate firStly under sub-cl. (a) of cl. (I) of the second proviso of paragraph D of Part JI and secondly under •ub-cl. (b) of cl. (I) of the first proviso to paragraph O pf Part II, of the Finance Act. [334 B•CJ .~r/ Gop11I 111/011 t1nd !;,, v. Calcutta Stock E:xclia1111t A.froclt1/i11n Lui.I. f 1964] 3 S.C.R. 698, Bulli's ct1at, L.R. IX Ch. D. 554, Rt : Htaton's Str..t 1i111I lr1111 Comp1111y, [ 1876-77] 4 Ch. 0. l40 D11/w11 Tim• Loe~ Co111pa11.1· v. D11/to11, 66 L.T. 704, Re : F/oru11cr Lant/ 11111/ Public Works Company. ( 1885) L.R. 29, Ch. D. 421 and Mos/ti' v. /('offyfcmtaln Ml11r.1· L11/, ( 191 I) L.R. Ch. 73, referred to.· C1v1t APPELLATE JURISDICTION : Civil Appeal No. 1669 of 1966. . Appeal from the judgment and order dated February S, 1965 of the Calcutta . High Court in Income-tax Reference Nb, 32 of 1961. A. K. $en, T. A. Ramachandran and D. N. Gupta, for the appellant. . B. Sen, Sen, s. K. Aiyar, B. D. Sharma and R. N. Sachthey, for the . B. Sen, Sen, s. K. Aiyar, B. D. Sharma respondent. · The Judgment of the Court was delivered by H~, J. This appeal is by a certificate under s. 66A(2) of the lndmn Income.Tax Act, 1922 (which will hereinafter be called 'the Act') issued by the High Court of Calcutta. It arises out of the judgment and order of that High Court dated February 5, 1965 A III a reference under s. 66 ( 1) of the Act. In the reference men-tioned earlier, two question of law were referred to the High Court for its opinion. They are : · "(l) Whether on the facts and in the circumstances of the case the bonus shares of the faee value of RS. SQ,07,500/- should be included in the paid up capital of the ·assessee Within the meaning of that term in pursuance. of sub-section ( 1) of the explanation to paragraph, (D) of Part II of the Fina;nce Act, 1956 for ihe relevant assessment year? ” aq ea acta Bara aera aad aaa gfe qaafaaaa ® deer ® avs (a) FH aeadt S faaaat at aaa azara ea % fae fate feat wat at, Fara elfae ataa are A ataeafar 30 fearax, 1954 a argelt aacarel Bl AA eh gE aTaaetHave (a) F are vardea” ate “fare” eat @ VT aTAATagaz aa ati saat at set aed a fear watarfeq foraygaat aatt fear mar alt deer} avs (@) Ae(7) BT ATS (F)Bara arisreagt eT ace sar arfer | “araet” ee al arTaTafafan t ofemfat ad fear ware) aa: “aaet HAT aTugnaea” wer eI ad va det a for sat arfec feat sa aeatar wart fear ware“arden” & wrod at Yaar afafratfnd q aitHa sirea de® gaday Pelt oafeeat fatter afar¢ | 1964 SeaaH earatera frog fast =:[1974] 3 BAO fio Qo dar aaet St TTA aH Ta ar tar er afeaca F at ara| oHgat & arden B aed a Tar aferea FamaFi (FT 10) deer as (a) F oe ae “faaem” aes B ree at afeatHard % faacn at afafafar scarafara %1 30 fearaz, 1954al aad F ata afaaaa F ofa aaer By argo wefar agat gat ate ate ad tear fe afaa afraaa ara Bow array Tefer oat & aafeafaa fear ar ati ag fe sat got Aaa aayfanaa at ag ft att sas TIT Gat F areas ox arget ase gatat aidedat wéadty gasareatdferwat gaada a zameat} ata wa gt tawareal at arafa aae fe se sa aaa.Te Fat 1 Tra, 1955 a Aras nay THAT g|AHeT F Gs(a) ae (1) &adievat sacralaaifaa ww F ame F.fatant at afaca fatafeu acaiaa:fae Asawa:BEARTtaz, 1956 F wm WF Gu ah fede ceGe se ave (1) %sqaus (am) F ata ae fedtoa: areata daz, 1956 F aM Imar oh fade vege & aes (1) F saews (a)F seit HatBA HT FTE afar él & (Feafafase 11) facta|. fafaa adie afaariat : 1966 at fata adit deat 1669, 1961 8%aranct fata aeat32 A waHaseq eqarate 5 Heat, 1965 ater fore att oer HF frag st TE aeeT amarag at favig eararfrata Bo Ua. BTS[%][ fear] varatactaeS — ag atta efeeaa gern daa daz, 1922 (fat eat gah ceT‘afafaan’ Her vars) BT are 66 B(2) & seta TATITTT HT FTTET HAHA Toa MaTaT are feat war at1 ag aia afafranaT are 66 (1) ¥ ala free F sana seqaa F artla5Hea, 1965 are feria site ada F reg at veg1 Gaae ofeafierafreerfecav Hfatai easesatset Sea— OATFT saat ua FH faa faeoefre 1966 «© Seam arate favia afaat = [1974] 3 THO Fro Go (1) aa ara B geetF mere TAT OaTAeTHIafefeafaal % 50,07,500/- wat & aferyea s Aaa aadat ganafaater atfaqwrgda tae, 1956% WTFGah eqedtawyF sas(1) F age svat Wea Fwofaiafaaifedt a) aarea TotFo aftafaafeat sarafer ?. (2) ar are Fat F mere ae at aaa stafefeafadt H saara ataaaaet a wretatae,1956 F AMTUe a a F aru rege % aatata faatfedt ara frat ae1956-57 & gana 31 faearaz, 1955 at aaa ay Te earagater gat alentHT ATA fa Ta Her aT AHAT gs?” 2. sa aha at fafafeaa wet F sara F fae qed aa eamart Tea fee oT apa ¢1 waiter efisat artes tae F altarfanfar wa areedt21 ae arie F fafanior sr Beare Heat Z|30 fratax, 1954 al saad sar ATMS FT BU ara afaaaa F THATa farafafad aaea ofa frat at) (a) fis area 30 Ga, 1954 at Teer arefafa Barat Asar araat & afanza TAH AT FSTF 50,07,500 wa(Gia are ara art aise at aaa) aT Ufa at Head Bargeqa F arwal F Ha ga arate a Giga Ate faafer featare feaot wT A sak gwars aT € ak ua fix oraq oft ar tS Argel Tae aT [ HT][ ATT][ A][ HTT][ F][ 10][ VIA][ ae][ sf]% 5,00,750 aryet aad & far qeia: Marr Het H aged fraare att ag fe 10RIa ofa Tae F VA 5,00,750 TT Argel ary,Hl Wid: TATET BIH TAT He fag a z, at saz afaararaangel tae arr aaafs & ear at fear gee fe saearen 31 faaraz, 1954 HY aT sat cae aA Mls are fretararafa a araa feet arate H afeafea adh ght atcag fase eat satel & fare 0S argett satereat HA oes areatfea aot at Csi H araara aT wHH AT afe FeI A AMATSTE, SIAL aTwTaay7 onal c (2) Whether on the facts and in the circumstances of the case the bonus sbares in question can be said to have been issued within the meaning of the second proviso to paragraph (D) of Part Il of the Finance Act, 1956 to the shareholders by the assessee during the account¥ig year ended D 31st December, 1955 relevant for the assessment year 1956-57 n The facts relevant for the purpose of deeiding .this appeal may now be stated : The aJ?PCllant is a company incorporated under the Indian Companies Act. . It carries on business of manufacturi: E of paper. On December 30, 1954, it passed the followmg reso-lution unanimouslf at a General Meeting held on that date : ' ' (a) That a sum of Rs. 50,07,500/-(Rupees fifty lakhs seven thousand and five hundr~ being part of the undivided profits of the Company standing to the credit of General Reserve as on F 30th Jt1ine, 1954, be capitalised and distributed amongst the holders of the ordinary shares in the Company on the footing that they became entitled thereto as capital and that the said capi-tal be applied on behalf of such Ordinary Share-holders in payment in full for 5,0Q,750 Ordi-G nary shares of Rs. 10/- each, in the Company and that such 5,00,750 New Ordinary Shares ol Rll. 10/- each, credited as fully paid up shall rank in all respects pari passu with the existing Ordi-nary Shares, save and except that the holders thereof will not participate in 'any dividend in H · respect of any period ending on or before 31st December 1954 and that the same shaU1be treated for all purposes as an increase. ¥ the I1.9minal .amount of the capital of the Company held ~ L12Su).Cl/70-7 each of such Ordi;nary shareholders and not as A income. (b) That pursuant to the ab\)ve resolution and in satisfaction of the interest of .the said Ordinary Shareholders in the capitalised sum, ~he Direc-. tors be and they are hereby directed to issue'· a!loi and distribute the said 5,00, 750 New Ordi-nary Shares of Rs. 10/ - each, credited as fully paid up amongst the persons whose names are registered as such in the books of the Company as on 1st day of J~nuary 1955, in proportion o{ one such new ordinary share for each ordinary share already held by them on that date, provided that no allotment of slrares issued as aforesaid· shal! be made to non-resident shareholders till approyal of the Reserve Bank of India is obtain, ed for the same. ( c) That the Draft of the Agreement providing for the allotmel)t of said New Ordinary shares irt satisfaction or the said capitai bonus and sub-miUed to this meeting and signed in the margin by 'the Chairman, by way of identification, be . and the same is hereby approved and that the Director be authorised to affix the Comp~ny's seal to duplicate endorsement of such Agreement E as and when the same shall have been signed on behalf of the members holding Ordinary shares • in the company on 1st January, 1955, by some person to . be appointed by the Directors in that behalf, which the. Directors be and are hereby authorised to do." onal (a) fe var deere agen Hsicgvss ft ®wae argetaatereat Heart st afteH fadwal a atxVAST BS VA: TATA® eA qa 10 way oft darkBAT 5,00,750 AT ATART att at te eafsaal & ae, Faasara Hrqat al afgat H 1 Haat, 1955 at ge er FH ceag, oH, Te a GAS ae Tena A afer wate ageTat H fer va ar are acs aqua F atd, mafra atxfaaftaara fau wet ae % aad fou fafacet ae feat stave, arder TER aftard aE fa taza TASTY FT Aqa an aét fear gem saan fe cat fou ford ae araafesar ar agate sree ral St ATA (7) ae fe Fut aTsTeq, frat sar Tet aaa atgfee Agar aT AAS aa F ardea B faq soaea fear wataa Me afsawa as sega fear warat ate fa azqa & ate wt wert get mad F geet fee az a,agnferfeat sie att qagerat gt agalfad fat oatoatag fe freeay a weeat THT TR a AAT HTTal ala ama& fae sfeea fear ae wa dt sa Hat I1 qaatt, 1955 at aradt Fara Ta al MT HM aAaaeat Bl are a Ce antes ata geataz fee are Tt va fafa- facet aru fagad fear war a, fad ae & fac fata“waagrer sifiee fre a al até 0”. 3Baa Har HH faferieaal at araa arg wh faate ad¥ zt aeardfF aT-wqeeel S aqeare afta fear war ats31 fearax,1955 at gare atm are gaara war area fratet ay 1956-57 Ffae saat afrard + aTde 29 faarar, 1958 are ATA mea gewert Bt HT AT 42,73,176 vay fraifea at at) saa ara st araaatared-neqataer fra BT grax TTAT HSat sa TAT ay amare TiaHr afraret ge wa 4 ae fra feat; fede saya: F favwigia Caz,1956 F aT Ws sa a H fede cega F avs (1) Fgrav (%) F agate yay 50,07,500 wR et Tt sah. agarx ariret-aeeat a art ward Ts tafe wet at afse 8 GaaTag} atua wa aaa gard fecac aaa aaa F afsayea aT Tafert weg, 2 aay sf was st ae a Fras a Hx fearfediaa: Sat Ga TATA Tait H, fara ge orate Vaz, 1956 F aA ITeamar daa sft Sad® fade at ace coqe feara& ae& feaz (1) wa} feat stave ora (a) oT, ¥ 6 agar SfaaaaYafin afafeed arate at waar HUH saat se far lara,1955 a Bra aT aaTeT Tot HA sa ara aad at fare fearTAA MINT IT «fe at ag Heidt Go6,25,937/50Ft A ategat ATT TT A Fo 1,48,127/31 43 MtHeat A aTTH aT(ate)at gaat adie at afte ag erat farfe area 4 8 araaiax frat ad 1956-57 % far gene qdat ae a Tet Te aT Aart fac me a, gafac a am We aaa s feta rege t ae(1)} save (m) A dlareda B aeaia vel art1 gaa 4g saltat & fe aaa saz,1 waTd, 1955 at araet st ama Tatsamt & ate gafae sant mae wereVaz, 1956 F aT UWITa & fadta rege % orave (a) F farare F genta aayBaeargad (ait) & aretha cam after araTaqT BT feat fag saattgad acta at Aart at faaTie sak agar AAT Aa VAsafeaat & Aaquia: aaa e wa A aa far ara a, fart va1 waatl, 1955 HY Hrgat HY afeat F sa wa F efaediad 4, safad Fs"ugaraad: wa at 3a eraa ade fear’ F age fe ga ardtacal aat feu AVA ar aaa AaaAafeeg 1 aravat a TEA 1955ay fat ah & ate ag fe & dat aega: 1 saat, 1955 HVAT TTAfeu ae &1 gafau saa ae afufaaiferfear fe araeit aacareasetaea aa FaH eat aes aa:, vat ata Pasyear at orgarr tae,1956 Sars Fa 4h fata cesTFwave (1)& soeos (a) F saa % fou aaray F san feaat aradt at amaa oot & afeafaaae fear wecttate are stam faa dal &dt agianomgaat (ait) F ge ara %fag, wet aH ag waa free oa, atta at) afar a frailal cette a ararat He feat: ate fara BYseller BT TAHT HTfrat 1 aerearg Fraifedt- F ager oe sea earareay H ater BT TS | sea araraa ava fatfaa dal Asal atsat faamsoryfear| 4, pred tae, 1956 F art 1 Fu a FH afeae at ax fateaalae lag WT et THT a— -Ferg, gehen BETH HY TAT A—Ft AT I7 7Be aT ATT|aft era (i) feat tat arate aa Aga at wast wamfr erat at at & faefear sreart— (%) frat art,1957 & gadiadfeat at aaraala area ag H fare gemy cay tar H ae He FH arfacaeiaAT AA Hl FIT AA wWsaaa H arate wa FAwer aaa Bt ToT Hw ate aay Ha H far sar “ast F ag cat THI F— Rate “D. In the case of every company— “fe On the whole of total income Six annas and ninepies in the rupee| Provided that—> .(i)arebate at the rate of five annas per rupee of thetotal income shall be allowed in the case of any companywhich—.ot Rate (a) in respect of its profits liable to tax under theIncome-tax Act, for the year ending on the 31st dayof March, 1957 has made the prescribed arrangementsfor the declaration and payment within the territory ofIndia, of the dividends payable eut of such profits andfor the deduction ofsupef-taxfrom dividends in = [1974] 3 Tao fro qo Baa afirfram at are 18 st sree (3 7) B saa, &ayat arate & afyax st wetdt was fac fafeaeasy Ht far gs,Air (@) at 25,000 to & aaftn Fa ary are Tetarastta wert g fraat are 23 wewae aT alfare AT THA;|oo, (ii) Gat Heat at ar 4H, aT gaadh aos at at (Hm)ga wed St, freg ad (@) gah a eet a, Fa ara ae ae ara fa eaaT ATaw a fede fear area; wit (iii) Cat arat HT ear a, wT qaadl feet WH me F ataAeae at BRAT AS, FTAAsat aTae, fat feet angesareata araat & araia aftafaa al, da wrat se wgat at afate ak ga am 4 aftafaad fedl ara arr oe us arar sf watar ax a fae fear sear: °accordance with the provisions of sub-section (3D) ofsection 18 of that act, and (b) isa public company with total income notexceeding Rs.25,000/-to which the- provisions ofsection 23A cannot be made applicable;° (ii) a rebate at the rate of four annas per rupee of the totalincome shall be allowed in the case of any company which satisfiesconition (a) but not conition (b) of the preceding clause; and (iii) a rebate at the rate of three annas and six pies per rupee onso. much of the total income as consists of dividendsfromasubsidiary Indian company, anda rebate at the rateof one anna per rupee on any otherincomeincludedin thetotal income shall, be allowed in the case of any company notentitled to a rebate under either of the preceding clauses : ee~; , syunoure ay}Joyonui os Ajuo ‘ostaord Sulpsdeid+943 jo ‘aq Aeut 989ay se(f) asnepo Jo(7)asnep> YMgoueps090eUT yepoarse ajeqe1ey} Jo Junowe ay} spaeoxe ostaoid sty}jo(1) asnejojo asneyo-qns ayyYyIoq 40 (q)asnejo-qnsym aduepi0s0eUl je peAtite wns oy} a0yM (1) ‘-gedni rad seuueqeytdeo dn predgaily} JO ayeray} ye = “aY} JO WV zad gy] spasoxe YyoryM spueprarp pres aq} Jo yaed yey} uo ‘gadna sad seuueOM} Jo a3e1 9Y} 1%ee' - syeqideo dn pred oy)jo jueo sed Q] peeoxe jou sa0pynq {ue0. Jed gspeeodxe Yorspuapratp pres ou) Jo Wed wy} UO ayer paxy & ye ajqeded spuoptarp Suteq jou ‘Teyrdeodn pred sy jo que sod xIs Jo sseoxe Ul spuoprArpread snoraoid ay} Surinp srappoyoreys sit 0} penquystpsey yorum ostAoid Surpeooid ay} jo (i) asne[o Ur O}posrajar Aueduioo & jo eseo oY} Ul ‘uorIppe ur (q). Bb 2 whe B RE |b. Ded) Bb [leb) rIphle & (it) Sobik(1) 206 Djbajieh ~ eBodh JPePb Ryd Bir Laleh} bie & [eoBbswir 2 (1)eb & eben Be Ikke (2) Sabb [Ble (1)|ies.ke bh BKCB while B DERIK OT & Leb:IbeBIDBBURB Us 2b klk RPA} Riel BEAa2b debts B BIR}>> de kha "Of Beuy B ebje BPREIK Oe, YehDjs lblie BP-WEIRBUs hike BPA & LiltEB P>Pb} 4B b Riktlb kRP B BIBRA) & 2b kb] Yo ‘eliteehie “B RED‘ Be & inh Belkb jbbie Le lerlbr blkh BDI & be bPbh bbls] ‘b UEP je babs 2abibIb (IT) 2B @ eBob ebb ‘Pepe gps (2) oh ob} ohA € sek blob nlalhis BEAR Fag ag ae fe (i): ae aa toga % aenferfe ae (1) at ave (II)% ata fede at cae HF tet ate, afe ME a, A fengahora marta wet aT ey THA Tuat gt wer aaT a— .(%) aaa catFt afe wa ayafse & aaa ath ahora aT aatareat|ar are fae mg fret ata aad seafr aor at saferwea art wRae at feet ara at HA TT Te aTar AyBis ar faa aH aga aac F dt Hatqt rae Masa FS Va aaa sax ayatra ard fre ae 2; atk There is no dispute as regards the validity of that resoluiio.n. It was passed. in accordance with the Articles of Association of the Company. For the assessment year 1956-67, the relevant accounting period ending on December 31, 1955, the Income-tax Officer had detennined by• his order dM,ted September 29, 1958. the total income of the company at Rs;· 42,73,176/-. In com-• G putirtg the Corporatio.n Tax due in respect of the said income, the Income-tax Officer reduced the rebate to which the appellant-company was entitled on two counts; firstly in accordance with sub-cl. (a) ·of cl. (l) to second proviso to s. D of Pt. II of the Finance Act, 1956, he reduced the rebate at the rate of 2 annas a rupee on 'Rs. 50,07,500 which according to him represented- the face value .Qf the bonus shares issued by the appella,nt. company to its share-holders during the previous year with a view to increaf°ng its paid up capital. Seco11dly he excluded those bonus A shares from the paid up capital·of the company as on 1st January,. 1955 for the purpose of determining the excess diVidends !JVer 6 per cent of the paid up capital on which the rebate was to be reduc-ed at the rate of 2 annas· in a rupee according to sub-cl. (b) of cl. (1) of the secQD.d proviso to s. D of Pt. ll of the Finance Act, 1956. The reduction of the rebate on the first count was B Rs. 6,25,937 /50 P. and on the second count it was Rs. 1,48,127 /31 P. The company appealed to the Appellate Assistant Commissioner and claimed that the bonus shares were in fact issued in the year preceding the previous year relevant to the· assessment year 1956-57, therefore, did not come withln thQ mis-chief of sul>cl. (a) of cl .. ( 1) of the second proviso to ~. D of c Pt. II. It also' contended that 'the bonus shares were part of the paid-up capital of the company as on January 1, 1955 and, there-more, its case came within the $cope of sub-cl. (b) of the second proviso to s. D of Pt. II of the Finance Act, 1956. The Appellate · Assistant Commissioner rejected the first contenti0)1 of the company but accepted the second contention. According to him, as the bonus shares were to be credited· as fully paid up amongst persons D whose names were registered as such in the books of the company as on January ~. 1955, the issue could not possibly take place· before that date. But at the same time he took the view that the· shareholders have ~ put ilito possession of the bonus shares on· January 1, 1955 ·and that the shares were actually .issued on Janu-· ary l, 1955. Hence lie held that from that date the ordinary E shareholders became the owners of the bonus shares. He, there-fore, included the face value of The bonus shares in the paid up capital of the company as on 1st day of the accounting year for the purpose of sub-cl. (b) of ch (1) of the 2nd proviso to s. D of Part Il of the Finance Act, 19 5 6. Both the company as well a.~ tlJ,e department appealed against the order of the Appellate Assis-F tant Commissioner to the extent it went against them. · The Tribu-n'al rejC\:ted the contention of the assessee and accepted that of the · depaqment. Thereafter at the, instance of the assessee, i_t stated a case. to the High Court. . The High Court answered both the ques-tio)18 referred to it in .fayour of die depariment. . The Finance Act, 1956 presyribed the rate of sutier tax in Part G II Paragraph ',D'. That part reads : Rate "D. In the case of every company.-• . On the whole of total income ..... . Siir !lllnas and nihe pies ·in the rupee. . Provided· that-' (i) a rel>ate at the rate· of five annas per rupee of the· total incomt; ~hall be aJ\qwed in the case of any cqpipany which-"·