# [1964] 8 S.C.R. 263

- **Citation:** [1964] 8 S.C.R. 263
- **Court:** Supreme Court of India
- **Decided:** 1964-05-08
- **Bench:** K. SUBBA RAo, J. C. Shah, S. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1964-8-s-c-r-263-3259
- **Pages:** 10

## Headnote

Jnco1ne~tax-Dividend declared and paid· in different yeurs-Rate of
which year applicable-Meaning of 'rebate'-ls there any tUstinction
between rebate under Finance Act and the rebate under other
statutes-Indian lllcome-tax Act, 1922 (11 of 1922), .,,-. 16(5),
60A-Part B States (Taxation Concession) Order, 1950.
"fhe assessee had received in the previous years (1950-51 and 1951-52)
dividends from tv.ro con1panies. These companies had li>een allowed
rebate under the Part R States (Taxation Concession) Order, 1950.
For the assessment years 1951-52 and 1952-53, the assessce claimed
before the Income-tax Officer that the dividend received by him should
be "g'tossed up" under s. 16(2) of the Act, without taking into consideration the rebate allowed tO the said companies under the said
concession order.
On a construction of s. 16(2) the assessee pleaded
that the rate applicable to the total income of the said ·coinpanies was
the rate prescribed by the relevant Indian Finance Act. The Income-tax
Officer grossed up at the State rate and not at the rate prescribed by
the relevant Finance Act. Before the Tribunal and the High Court the
cwessee succeeded.
Held: (i) In interpreting s. 16(2) effect must be given to thes-o words
occurring in the saic! section 'without taking into account any reb3.te196-1
May, S
'.
1964
'-
~-
--~.· ,,......
,..
"
/
_SUPRE?IIE COURT I~EPORTS
[1964J
allow·ed or additional income:-tax charged'. ·If these· words are ignored~
it will be rewriting s. 16(2). Section 16(2) applies the rate of the
C.!~T:.< :
year in ,, .. hich the dividend _is paid, etc., and not of the year when the
Anant Rao B.
profits V.·ere made by the company. On the fact of this case it wa,
Kamat
held that the rates prescribed by the relevant. Finance Act· apply.
Sikrf
J.
'
...
- -
Rajputana .Agencies Ltd. v. _Commissioner of
lncOme~tax, [1959]
Supp. 1 S.C.R. 142, distinguished. -
.-- (ii) The word 'rebate' in s. 16(2) not only relates to rebate granted
under the Indian Finance Act but is wide enough to include any rebate
\\rhich may be granted by other stattitory _ ofders.-
- The form ·Of the certificate prescribed under the _InCoalC-tax R.~ ·
cannot change the meaning of the word 'rebate?. The word •rebate' iB
an apt word to uSe m respect of remission.
A.f/s. J.laganlal Sankalchand v.- Commissioiier of Income·tax~ New
Delhi, c:A. No. 703 of 1963.- -Judgment,· dated May 8, 1964 distinguished.
· (iii) The words "exemption' or 'other modification' in s. 60A are wide
enough to Cnable the Central Government to give rebate_ such as· has
been a.IloWed unc!'!r- the Concc:ssiozi Ordei-."
-
-
CIVIL- APPELLATE JURISDICTION: Civil Appeal Nos: 687688 of 1963.
Appeals from the judgment and order: dated February
3, 1962 of the Rajasthan High Court in D. B. Civil Reference No. 13 of 1958..
·
S. K. Kapur and R. N. Sachthey, for the appellant:
N. S. Palkhivala, S. P. Mehta, I. B. Dadachanji, 0. C.
Mathur and Ravinder _Narai11, for the respondents.
l\foy 8, 1964. ·The Judgment of the Court was delivered by
S1KR1, J.-These are appeuls by the Commissioner of
fncome Tax on certific1tes granted by the Rajasthan High
Court under s. 66A ( 2) of the Indian Income Tax Act, 1922
(II of 1922), hereinafter.referred to as the Act, against the
judgment of the Hi~ Court in a consolidated reference
under s. 66(1) of the Act.
The High Court answered t.'1e
question, reproduced below, in the affirmative. -The reference was made by; the Income Tax Appellate Tribunal in
the following cinmrnstances.
;)
'
·
8 S.C.R.
SUPREME COURT REPORTS
1964
Cl.T.
v.
The respondent, Anant Rao B. Kamat, hereinafter
referred to as the assessee, had received in the previous
years (1950-51 and 195f-52) dividends from two companies, Associated Stone Industries (Kotah) Ltd., and Rajputana Mining Agencies Ltd.
Fo1 the assessment years
1951-52, .and 1952-53, the assessee claimed before the,
Income Tax Officer that the dividends
received by him
should be 'grossed up' under s. 16(2) of the Act, without
taking

## Text

)
8 S.C.R
SUPREME COURT REPORTS
orders that the Court held that the petitioner was entitled
1964
to seek the protection of Art. 19 and invoke the jurisdicSri Jagadguru
tion of this Court under Art. 32. In our opinion, there- c
. v.
•
•
•
•
om1nzss1011er
o
fore, there is no substance 10 the contention that smce m !Iindu
Religim1.
the present case, the scheme has not been completely imple- Charui;::;.~};""0"'
mented till 1952, we mu5t examine its validity in the light
-
of the fundamental rights guaranteed to the appellant under
Ga;en~'"t'"""'
Art. 19 of the Constitution.
The result is, the appeal fails
and is dismissed with
costs.
Appeal dismissed.
COMi\HSSfONER OF INCOME-TAX'; NEW DELHI
v.
ANANT RAO B. KAMAT
(K. SUBBA RAo, J. C. SHAH AND S. M. SIKRI, JJ.)
Jnco1ne~tax-Dividend declared and paid· in different yeurs-Rate of
which year applicable-Meaning of 'rebate'-ls there any tUstinction
between rebate under Finance Act and the rebate under other
statutes-Indian lllcome-tax Act, 1922 (11 of 1922), .,,-. 16(5),
60A-Part B States (Taxation Concession) Order, 1950.
"fhe assessee had received in the previous years (1950-51 and 1951-52)
dividends from tv.ro con1panies. These companies had li>een allowed
rebate under the Part R States (Taxation Concession) Order, 1950.
For the assessment years 1951-52 and 1952-53, the assessce claimed
before the Income-tax Officer that the dividend received by him should
be "g'tossed up" under s. 16(2) of the Act, without taking into consideration the rebate allowed tO the said companies under the said
concession order.
On a construction of s. 16(2) the assessee pleaded
that the rate applicable to the total income of the said ·coinpanies was
the rate prescribed by the relevant Indian Finance Act. The Income-tax
Officer grossed up at the State rate and not at the rate prescribed by
the relevant Finance Act. Before the Tribunal and the High Court the
cwessee succeeded.
Held: (i) In interpreting s. 16(2) effect must be given to thes-o words
occurring in the saic! section 'without taking into account any reb3.te196-1
May, S
'.
1964
'-
~-
--~.· ,,......
,..
"
/
_SUPRE?IIE COURT I~EPORTS
[1964J
allow·ed or additional income:-tax charged'. ·If these· words are ignored~
it will be rewriting s. 16(2). Section 16(2) applies the rate of the
C.!~T:.< :
year in ,, .. hich the dividend _is paid, etc., and not of the year when the
Anant Rao B.
profits V.·ere made by the company. On the fact of this case it wa,
Kamat
held that the rates prescribed by the relevant. Finance Act· apply.
Sikrf
J.
'
...
- -
Rajputana .Agencies Ltd. v. _Commissioner of
lncOme~tax, [1959]
Supp. 1 S.C.R. 142, distinguished. -
.-- (ii) The word 'rebate' in s. 16(2) not only relates to rebate granted
under the Indian Finance Act but is wide enough to include any rebate
\\rhich may be granted by other stattitory _ ofders.-
- The form ·Of the certificate prescribed under the _InCoalC-tax R.~ ·
cannot change the meaning of the word 'rebate?. The word •rebate' iB
an apt word to uSe m respect of remission.
A.f/s. J.laganlal Sankalchand v.- Commissioiier of Income·tax~ New
Delhi, c:A. No. 703 of 1963.- -Judgment,· dated May 8, 1964 distinguished.
· (iii) The words "exemption' or 'other modification' in s. 60A are wide
enough to Cnable the Central Government to give rebate_ such as· has
been a.IloWed unc!'!r- the Concc:ssiozi Ordei-."
-
-
CIVIL- APPELLATE JURISDICTION: Civil Appeal Nos: 687688 of 1963.
Appeals from the judgment and order: dated February
3, 1962 of the Rajasthan High Court in D. B. Civil Reference No. 13 of 1958..
·
S. K. Kapur and R. N. Sachthey, for the appellant:
N. S. Palkhivala, S. P. Mehta, I. B. Dadachanji, 0. C.
Mathur and Ravinder _Narai11, for the respondents.
l\foy 8, 1964. ·The Judgment of the Court was delivered by
S1KR1, J.-These are appeuls by the Commissioner of
fncome Tax on certific1tes granted by the Rajasthan High
Court under s. 66A ( 2) of the Indian Income Tax Act, 1922
(II of 1922), hereinafter.referred to as the Act, against the
judgment of the Hi~ Court in a consolidated reference
under s. 66(1) of the Act.
The High Court answered t.'1e
question, reproduced below, in the affirmative. -The reference was made by; the Income Tax Appellate Tribunal in
the following cinmrnstances.
;)
'
·
8 S.C.R.
SUPREME COURT REPORTS
1964
Cl.T.
v.
The respondent, Anant Rao B. Kamat, hereinafter
referred to as the assessee, had received in the previous
years (1950-51 and 195f-52) dividends from two companies, Associated Stone Industries (Kotah) Ltd., and Rajputana Mining Agencies Ltd.
Fo1 the assessment years
1951-52, .and 1952-53, the assessee claimed before the,
Income Tax Officer that the dividends
received by him
should be 'grossed up' under s. 16(2) of the Act, without
taking into consideration
the rebate allowed
to the said
companies under the Part B States (Taxation Concessions)
Order, 1950, hereinafter called
the Concession Order.
According to the assessee, on a true construction of s. 16(2)
of the Act, the rate applicable to the total income of the
s.aid companies was the rate prescribed by the relevant
Indian Finance Acts.
The Income Tax Officer disallowed
the grossing up at the Indian rate but allowed at the State
rate, defined by paragraph 3 (v) of the Concession Order.
The Appellate Assistant Commissioner upheld the order of
the Income Tax Officer, but the assessee succeeded before
the Income Tax Appellate Tribunal.
On the application
of the Commissioner of Income Tax. the Tribun"J referred
the following question to the High Court:
Anant Rao B.
"Whether the appropriate portion of the dividend
received by the assessee from either of the said
two companies in the financial year 1950-51/
1951-52 is to be increased at the rate applicable to the total income of the respective companies for the financial year 1950-51/195152 and without regard to any benefit conferred
by the T. C. Order 1950 that the companies
would get in the matter of payment of tax by
them on their profits accruing or arising to them
in a part 'B' State and assessable for the assessment year 1950-51/1951-52?"
The High Court, after asking for a supplementary statement of the case, answered, as we have already said in
favour of the assessee.
The learned counsel for the appellant has contended
before us that the rate applicable to the total income of the
Kamal
Sikri
/.
1964
CJ.T.
v.
Anant Rao B.
Kamat
Sikri
J.
266
SUPREME COURT REPORTS
said companies was the rate as finally applied after taking.
into consideration the effect of the Concession Order.
He
has further urged that the word 'rebate' occurring ins. 16(2)
does not include the relief given to the said comp.anies under
the Concession Order for the Concession Order is not concerned with granting rebate but is concerned with the deter-
. mination of the tax payable.
In this counection, he relied
on s. 60A of the Act under which the Concession Order
was made, and said that this section enabled the C.:ntral
Government to make an exemption, reduction in rate or
other modification in respect of income tax but not to grant
a rebate.
The learned counsel for the respondent controverted these arguments and supported the judgment of the
High Court.
Before addressing ourselves to the contentions at the
Bar, it is necessary to reproduce the relevant statutory provisions.
These read thus:
"' S. 16(2)-For the purposes of inclusion in the
total income of an assessee any dividend shaU
be deemed to be income of the previous year
in which it is paid, credited or distributed or
deemed to have been paid, credited or distribued
to him, and shall be increased to such
amount as would, if income tax (but not supertax) at the rate applicable to the total income
of the company (without taking into account
any rebate allowed or additional income-tax
ch3rged)
for the financial year in which the
dividend
is paid, credited or distributed or
deemed to have been paid, credited or distributed. were deducted therefrom, be equal to the
amount of the dividend:
Provided that when the sum out of which the dividend has been paid, credited or distributed or
deemed to have been paid, credited or distri-
. buted includes-
( i) any profits and gains of the company not
included in its total income, or
8 S.C.R.
(ii)
SUPREME COliRT REPORTS
any income of the company on which incometax was not payable, or
1964
CJ.T.
v.
(iii) any amount attributable
to any
made in computing the profits
of the company,
allowance
4.llllfll Rao 11 ..
and gains
Kamal
the increase to be made under this section shall
be calculated only upon such proportion of the
dividend as the said sum after deduction of the
inclusions enumerated above bears to the whole
of that sum.
S. 18(5)-Any deduction made and paid to the
account of the Central Government in accordance with the provisions of this section and any
sum by which a dividend has been increased
under sub-section ( 2) of section 16 shall be
treate<l as ;a--payment of income-tax or supertax on behalf of the person from whose income
the deduction was made, or of the owner of the
security or of the shareholder, as the case may
be, and credit shall be given to him therefor on
the
production
of the
certificate furnished
under sub-section ( 9) or section 20, as the case
may be, in the assessment, if any, made. for the
following year under this Act:
Provided ....... .
S. 6UA. Power to make exemption, etc., in relation
to merged territories or to the territories which
immediately before the 1st November, 1956.
were comprised in any Part B State.
If the Central Government considers it necessary or
expedient so to do for avoiding any hardship or anomaly,
or removing any difficulty, that may arise as a result of the
extension of this Act to the merged territories or to the
territories which immediately
before the 1st November,
1956, were comprised in any Part B State, the Central Gov-
. /
emment may , by general or special order, make an exemption, reduction in rate or other modification in respect of
income-tax in favour of any class of income, or in regarrt
Sikri
J.
1964
C.J.T.
v.
A"'111 Rao B.
~am at
Silcri
J.
268
SUPREME COURT REPORTS
to the whole or any part of the income of any person or
class of persons:
Provided that the power conferred by this section shall
not be exercisable in the case of merged territories and the
territories which immediately before the !st November,
1956, were comprised in Part B States other than the State
of Jammu and Kashmir, after the 31st day of March, 1955,
and, in the case of the State of J ammu and Kashmir after
I.he 31st day of March, 1959, except for the purpose of rescinding an exemption, reduction or modification already
made.
Para 3 (iii) of the Concession Order· - The expression "Indian rate of tax" means the rate determined by dividing the amount of income-tax
and super-tax payable in tl1e taxable territories
on the total income for the year in question in
accordance
with the rates
prescribed by the
relevant Finance Act of the Central
Government, by the amount of such total incom~.
Para 3 (\') of the Concession Order-The expression
"State rate of tax' meaps the rate determined
by dividing the amount of income-tax .1nd supertax and payable on the total income according
to the rates of tax in fnrce in the State immediately before the appointed cay, or for the
year in question, as th~ case mav be, by the
amount of such total income and where under
any State law, the ratl.'s of tax in force in the
State are prescribed with reference to the total
income including agricultural income, the State
rate of tax shall he the rate determined by
dividing the amount of income-tax and supertax on the total income including the agricultural income without taking into account anyreduction of tax allowed on the agricultural
income by the State law by the amount of such
total income;
F.:xp,lanation.-Where there was no State law relating to charge of income-ta,x.and super-tax, the
8 S.C.K
SUPREME COURT REPORTS
rates of income-tax and super-tax in force in
that State immediately before the appointed day
shall, for the purposes of this clause, be deemed to be the rates specified in the Schedule.
Para 6 of the Concession Order-Income of a previous year which does not fall under paragraph
5.
1 ·:. ;ncome, profits and gains of any previous year ending after th~ 311t day of March. 1949. which does not fall
within paragraph 5 of this Order shall be assessed under
the Act for the year ending on th~ 31st day of March, 195L
or on the 31st day of M.arch, 1952, as ::ie case may be, and
the tax payable thereon shall be determined os hereunder:
In respect of so much of the income. profits and gain~
included in the total income as accrue or arise in any State
Gther than the States of Patiala
a!'ld East Punjab States
Union and Travancore-Cochin--
(i) the tax shall be computed (al at the Indian rate
of tax and (b) at the StHte rate of tax in force
immediately before the appointed day;
(ii) where the amount of tax computed under subclause (a) of clause ( i) is less than or is equal
to the amount of tax computed under subclause (b) of clause (i), the amount of the
first-mentioned tax shall be the tax payable;
(iii) where . the amount of tax computed under subclause (a) of clause (i) exceeds the tax computed under sub-clause (b) of clause ( i), the
excess shall be allowed as a rebate from the
first-mentioned tax and the amount of the firstmentioned tax as so reduced shall be the tax.
payable ..... .
Para 6A of the Concession Order-Income. profits
and gains chargeable to tax in the assessment
year 1952-53, 1953-54 and 1954-55-
. Th~ incon_ie, profits and gains
of any previous year
which is a prevmus year for the a~sessment for the year end1964
C.1.T.
v.
Anant Rao B.
Kaniat
Sikri /.
1964
CJ.T.
••
4.nant Rao B.
Kamat
Sikri
J.
270
SUPREME COURT REPORTS
[1g64]
ing on the 31st day of March, 1953, 1954 and 1955, shall
be charged to tax at the Indian rates of tax, provided that
from the tax so computed, there shall be allowed in each
year, rebate at the percentage thereof specified thereunder:
in respect of so much of the income, profits and
gains as accrue or arise-
(a) in the States of Saurashtra, Madhya Bharat or
Rajasthan, to any assessee, at the rate of
40 per cent, 20 per cent and 10 per ce_nt,
respectively, for the assessment for the
year ending on the 31st day of March,
1953, 1954 and 1955 .... ".
'The scheme underlying s. 16(2) and s. 18(5) seems to
be this. Under s. 16 (2) the dividends are grossed up and
under s. 18 ( 5) any sum by which a dividend is increased
under s. 16(2) is treated as payment of income-tax on
behalf of the shareholder.
In this setting, Jet us examine
what is the true construction of s. 16(2) of the Act. It is
common ground that 'grossing up' has to be effected in this
case.
The real point of controversy between the parties is
regarding the rate at which it is to be done. The learned
counsel for the appellant relying on the decision of this
Court in Rajputana Agencies Ltd., v.
Commissioner of
Income Tax(') urged that the same meaning should be
attributed to the expression "rate applicable to the total
income of the company" in s. 16(2), as was attributed by
this Court to the same expression occurring in sub-clause(b)
of clause (ii) to the second explanation to proviso to paragraph B of Part I of the First Schedule to the Indian Finance
Act, 1951.
We are unable to accept this argument. It i~
true that the same expression occurs in s. 16(2) and the
sub-clause above referred to, but as pointed out by the High
Court, the words 'without taking into account any rebate
allowed or additional income-tax charged' occur in s. 16(2)
and not in the said sub-clause, and effect must be given to
these words. If we ignore these words, we would be
Tewriting s. 16(2). It will be noticed thats. 16(2) applies
the rate of the year in which the dividend is paid, etc., and
(1) (1959] Supp. • s.c.:R. r42
8 S.C.R
SUPREME COURT REPORTS
271
not of the year when the profits were made by the compaμY..
The legislature has devised a mechanical test which has to
be applied regardless of the hardship or the benefit which
may accrue to an assessee.
Therefore, we agree with the
High Court that though the rate applicable is the rate which
is actually applied, rebate if any allowed to a company, has
not to be, as directed by s. 16(2), taken into account.
This takes us next to the point that benefit given by the
Concession Order is not a rebate at all.
We cannot accept
this contention. The Concession Order itself uses the word
'rebate' in paras 5, 6, and 6A.
Indeed, though it may be
possible to urge something while dealing with para 6. no
aq?ument is possible q:garding para 6A, for it expressely
says that 'there shall be allowed in each year rebate at the
percentage thereof specified hereunder'. The learned counsel for the appellant laid great stress on the language of
para 6 of the Concession Order.
He said that clause (i J
directed the computation of tax and clause (iii) was equally
directing computation of tax, and that in this context the
word 'rebate' has been loosely used. We are unable to say
that the word 'rebate' has been loosely used. In para 6A
the meaning is clear and the word 'rebate' must have the
same meaning in both paras.
Further. but for the provisions of the Concession Order. the said companies would
have been taxed at the rates prescribed by the relevant
Finance Act.
The Concession Order remits what would
otherwise be the proper tax leviable under the Finance Act.
read with Indian Income Tax Act. The word 'rebate' is an
apt word to use in respect of a remission.
That a rebate as such can be directed to be a'.lowed
under s. 60A of the Act seems clear to us.
The words
'exemption' or other modification are wide enough to enable
the Central Government to give rebate such as has been
allowed under the Concession Order.
During the course of the hearing of the connected Civil
Appeal in M/s. Maganlal
Sankalchand v. The Commissioner of Income Ta:c, New Delhi('), the learned counsel
(1) Civil Appeal No. 703 of 1963-judgment delivered on May&,
1964.
1964
CJ.T.
'·
Anant Rao B.
Kamat
Sikri J.
1964
CJ.T.
v.
Anant Rao B.
Kamat
Sikri J.
272
SUPREME COURT REPORTS
[1964;
for the Commissioner of Income Tax raised two additional
arguments.
First, he urged that the word 'rebate' in
s. 16(2) only related to rebate granted under the Indian
Finance Act, and not any rebate granted under the Concession Order. He further referred us to r. 14 of the Indian
Income Tax Rules, which prescr.ibes the certificate to be
furnished by the principal officer of a company under s. 20
of the Act.
The relevant portion of the certificate is a&
follows:
''I/We cermy :-
(A) (i) that the Company/ estimates that out of
the profits of the said period-
(a) .... per cent., is chargeable at full Indian
rate;
(b) .... per cent., is chargeable at the reduced
rate of ... <Name of Part B State):
and .... ~.
Regarding his first contention, we are unable to limit the
meaning of the word 'rebate' to rebate granted under the.
Indian Finance Act. The word 'rebate' is not qualified and
is wide enough to include any rebate which may be granted
by other statutory orders.
The form of the certificate referred to us which mentions reduction of rate cannot change
the meaning of the word 'rebate'.
In the result, we agree with the High Court that the
answer to the question referred should be in the affirmative.
The .appeals accordingly fail and are dismissed with costs.
One set of hearing fees.
Appeals dismissetl.