# COMMISSIONER OF· INCOME-TAX, BOMBAY v. ROBERT J. SAS

- **Citation:** [1963] Supp. 2 S.C.R. 209
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Bench:** S. K. Das, J. L. Kapur, A. K. Sarkar; M. Hidayatullah, Raohubar Dayal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-bombay-v-robert-j-sas-2766
- **Pages:** 8

## Headnote

Inwme
Tax-Notico of ·as•umaent-Limitalicm forIncome deemed lo be distributed as dfoidtnd-Indian I~z
Act, 1922 (11of1922), 88. 23 A(l), 34,
The asscssccs were the three sharcholden of a private
company. The company made profits in the calendar year
194 7, but did not declare any dividend at the shareholders
mreting· held on December 4, 1948.
The
Income-tax
Officer passed an 01 der under s. 23 A (I) of the Income· tax Act
whereby the income of the company was dccrncd to have been
divided amongst the· three shareholders. He issued notices to
the as'ICSSCCS which were served on them on April 1, 1954. The
asscssecs contended that the notices were served beyond the
period of four }can allowed by s. 34 (1) (b),
Held, that the notices served under s. 34 (1) of the Act
were beyond time . and the Income-tax Officer had no jurisdiction to assess the asses.secs.
Under s. 23A ( 1) the dividend was
to be d~med to, have been. distnbuted not on June 30, 1949,
by which date the company should have distributed
the
dividend, but on the date of the general meeting i.e., December,
4, 1948 within the accounting year 1948 and asscssmeut year
J!ln
SIMI of hl}ob
' 'v.
l•ri"'" SilltA
··-
SW,I.
1961
N-"', 16,
210 SUPREME COURT REPORTS[l963]SUPP.
1949-50. The notice wa• not served within four years from the
end ofthc t•sessment·year. It ~de no· difl'erence that under
s. 23 A (I) an order could- be passed at any time.
CIVU, APPELLATE jURISl>ICTICN : Civil Appeals
NPl!. 136 to 138 of 1962.
·
Appeals hy special leave from the judgment
and order dated March 19, 1958, of the Bombay
High Court in Income·tax Reference No. 74 of 1957.
Gopal Singh and R. N. Sachthey, for the
appellant.
R. J. Kolah, J. B. Dadachanji, 0. O. Mathur
and Ravinder Narain, for the respondents.
R. Gopalakrishnan, for the Intervener.
1962. November 16. The Judgment of the
Court was delivered by
KAPUR, J.-These three appeals by special
leave are brought against the judgment and order of
the High Court of Bombay. The appellant in all
the three appeals is the Commissioner of Income-tax
but in each of the appeals the respondent is different
i. e., one of the three shareholders of a private
limited company A.C.E.C. Private (India) Limited
which was carrying on business in India. and made
profits during the calendar year 194 7. The account'
ing year is the calendar year ending December 31,
l 948, and the relevant asse<!Sment year 1949-50.
Although the company had earned large profits during
the year 194 7 it did not declare any dividend at the
shareholders' meeting held on December 4, 1948. On
March 29, 1954, the Income-tax Officer passed an
order under s. 23A(l) of the Income-tax Act, hereinafter termed the "Act", whereby the income of the
company was in accordance with that provision,
deemed to have been divided amongst the shareholrlP.rs. By that order the following dividends were
2 S.C.R. SUPREME COURT REPORTS
211
deemed to have been distributed amongst the three
shareholders, each a respondent in one of the appeals.
Mr. Paul Rouffart
: Rs. l,09,859/~
Mr. Paul Victor H'.ennans
Mr. Rol:>ert J. Sas
: Rs. 1,00,189/-
: Rs. 1,09,859/-
The Income-tax Officer issued notices under s.. 34 of
the Act and the notices were served on the respective
respondents on April 1, 1954. Thereafter the return
of the income was submitted and the assessment was
completed in regard to the shareholders. Appeals
were taken first to the Appellate Assistant Commissim1er and then to the Income tax Appellate Tribunal.
One of the points taken before the Tribunal was that
the Income-tax Officer had no jurisdiction to take
proceedings as the notices were served on the assessee
respondents beyond the period of four years allowed
under s. 34(1 )(b) of the Act. This plea was accepted 'by the Tribunal and at the iniltance of the Commissioner of Income-tax a case was stated to the High
Court under s. 66(1) of the Act and the following two
questions were referred to it :
(I) Whether on the facts and circumstances of
the Case it w

## Text

2 S.C.R. SUPREME COURT REPORTS
209
Cadre' and the 'Provincialised Cadre' in the matter
of promotion to the higher scale must be regarded as
invalid. The appeal must therefore fail.
BY COURT : In view of the opinion of the
majority, the appeal ,is allowed and the order of the
High Court striking down r. 2(d) and (e) and r. 3
in so far as it relates to promotions is set aside.
There will 'be no order as to costs in this appeal.
COMMISSIONER OF· INCOME-TAX, BOMBAY
v.
ROBERT J. SAS
(S. K. DAS, J. L. KAPUR, A. K. SARKAR;
M. HIDAYATULLAH and RAOHUBAR DAYAL, JJ.)
Inwme
Tax-Notico of ·as•umaent-Limitalicm forIncome deemed lo be distributed as dfoidtnd-Indian I~z
Act, 1922 (11of1922), 88. 23 A(l), 34,
The asscssccs were the three sharcholden of a private
company. The company made profits in the calendar year
194 7, but did not declare any dividend at the shareholders
mreting· held on December 4, 1948.
The
Income-tax
Officer passed an 01 der under s. 23 A (I) of the Income· tax Act
whereby the income of the company was dccrncd to have been
divided amongst the· three shareholders. He issued notices to
the as'ICSSCCS which were served on them on April 1, 1954. The
asscssecs contended that the notices were served beyond the
period of four }can allowed by s. 34 (1) (b),
Held, that the notices served under s. 34 (1) of the Act
were beyond time . and the Income-tax Officer had no jurisdiction to assess the asses.secs.
Under s. 23A ( 1) the dividend was
to be d~med to, have been. distnbuted not on June 30, 1949,
by which date the company should have distributed
the
dividend, but on the date of the general meeting i.e., December,
4, 1948 within the accounting year 1948 and asscssmeut year
J!ln
SIMI of hl}ob
' 'v.
l•ri"'" SilltA
··-
SW,I.
1961
N-"', 16,
210 SUPREME COURT REPORTS[l963]SUPP.
1949-50. The notice wa• not served within four years from the
end ofthc t•sessment·year. It ~de no· difl'erence that under
s. 23 A (I) an order could- be passed at any time.
CIVU, APPELLATE jURISl>ICTICN : Civil Appeals
NPl!. 136 to 138 of 1962.
·
Appeals hy special leave from the judgment
and order dated March 19, 1958, of the Bombay
High Court in Income·tax Reference No. 74 of 1957.
Gopal Singh and R. N. Sachthey, for the
appellant.
R. J. Kolah, J. B. Dadachanji, 0. O. Mathur
and Ravinder Narain, for the respondents.
R. Gopalakrishnan, for the Intervener.
1962. November 16. The Judgment of the
Court was delivered by
KAPUR, J.-These three appeals by special
leave are brought against the judgment and order of
the High Court of Bombay. The appellant in all
the three appeals is the Commissioner of Income-tax
but in each of the appeals the respondent is different
i. e., one of the three shareholders of a private
limited company A.C.E.C. Private (India) Limited
which was carrying on business in India. and made
profits during the calendar year 194 7. The account'
ing year is the calendar year ending December 31,
l 948, and the relevant asse<!Sment year 1949-50.
Although the company had earned large profits during
the year 194 7 it did not declare any dividend at the
shareholders' meeting held on December 4, 1948. On
March 29, 1954, the Income-tax Officer passed an
order under s. 23A(l) of the Income-tax Act, hereinafter termed the "Act", whereby the income of the
company was in accordance with that provision,
deemed to have been divided amongst the shareholrlP.rs. By that order the following dividends were
2 S.C.R. SUPREME COURT REPORTS
211
deemed to have been distributed amongst the three
shareholders, each a respondent in one of the appeals.
Mr. Paul Rouffart
: Rs. l,09,859/~
Mr. Paul Victor H'.ennans
Mr. Rol:>ert J. Sas
: Rs. 1,00,189/-
: Rs. 1,09,859/-
The Income-tax Officer issued notices under s.. 34 of
the Act and the notices were served on the respective
respondents on April 1, 1954. Thereafter the return
of the income was submitted and the assessment was
completed in regard to the shareholders. Appeals
were taken first to the Appellate Assistant Commissim1er and then to the Income tax Appellate Tribunal.
One of the points taken before the Tribunal was that
the Income-tax Officer had no jurisdiction to take
proceedings as the notices were served on the assessee
respondents beyond the period of four years allowed
under s. 34(1 )(b) of the Act. This plea was accepted 'by the Tribunal and at the iniltance of the Commissioner of Income-tax a case was stated to the High
Court under s. 66(1) of the Act and the following two
questions were referred to it :
(I) Whether on the facts and circumstances of
the Case it was necessary for the Incometax Officer to initiate action under section
34 of the indiail Income-tax Act in order
to tax the deemed income distributed by
virtue of the order under section 23A( I} of
the Act made in the case of the A.C.E.C.
Private (India) Ltd. ?
( 2) If the answer to question No. 1 is in the
affirmative whether having regard to the
observations of their lordships in .Navincoondra
Majatlal v. Oomrnisaioner
of
Income-tax, Bombay Oity I (1955) 27
I. T :R. 245 the notice served on April I,
1954 was out of time?
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212 SUPREME COURT REPORTS [1963) SUPP.
The second question was reframed by the High
Court as follows :
If the answer to question No. I is in the affirmative whether the notice served on April I, 1954
was out of time ?
Both the questions were answered in the affirmative
and against the Commissioner of Income-tax. Against
that judgment and order he has come in appeal to
this court by special leave.
In view of the decision of this court in Bardar
Baldev Singh v. Oommissioo.er of Income-tax, Delhi &
Ajmer (1) and Oommissioner of Income-tax v.
Navirwhandra Mof<Jtlal (1) in which it was held that
an assessment cannot be made under s.23A of the Act
because that section ·does not make provision for an
assessment to be made and assessment can only be
made under s. 34 of the Act, the first question no
longer survives for decision and was rightly not argued
before us.
The only question that remains for decision is
the second question i. e., whether the notice
~erved
on April I, 1954, was out of time. Counsel for the
appellant-Commissioner of Income-tax-argued (1)
that there was no limitation prescribed in regard to
the
order to be. made
under s. 23A of the
Act and if the period mentioned in s. 34 (I) ( b)
is
made applicable
to orders under s.
23A
then that section
(s. 23A)
would become unworkable; (2) that as under s. 23A(l) there was a
period of six months up to the end of which dividends
could be distributed the accounting year would, in
the present case, be 1949 and the assessment year
1950-51 and therefore the notice could be served within four years of the end of that year i. e.. up to
March 31, 1955. Finally it was urged that proviso
(1) to sub-s. (3) ofs. 34 applied and as the notice was
issued within four years under s. 34( l )(b) there was
\I) (1961} I S.C.R. 482.
(2) (1961] 421.T.R. 53.
2 S.C.R. SUPREME COURT REPORTS
213
a period of one year from the date of service of the
notice during which the assessment or rea~ment
could be made and the impugned order having been
made within that period it was a proper and a valid
order.
In the . present case the High Court in its
advisory jurisdiction had to give its opinion on the
question submitted to it and it reframed the question
in order to bring out the question which arises from
the order of the Tribunal. We did not allow the
question of the applicability' of proviso (I) to s. 34(3)
to be raised as the question does not take in the
point raised about the proviso to sub-s. (3) of s. 34.
The question as framed'by the High Court is whether
the service of notice under s. 34(l)(b) was out of time.
The proviso to sub-s. (3) of s. 34 relates to completion
of assessment within a particular period when the
notice is issued before the period of limitation
referred to in s. 34(l)(b). The two are different
questions and one does not include the other.
At the relevant date s. 23A which empowered
the Income-tax Officer to assess individual members
of certain companies read as under :
S. 23A. Power to aBIJeBB individual members of
certain companies ( 1 ). Where the Income
tax Officer is satisfied that in respect of
any previous year the profits aud gairu;
distributed as dividends by any company
up to the end of the sixth month after its
accounts for ·that previous year are laid
before the,company in general meeting are
less than sixty per cent of the assessable
income of the company of that previous
year, as reduced by the amount of incometax and super·tax payable by the company
in respect thereof he shall, unless, he is
satisfied that
having regard
to losses
incurred by . the company in earlier years
or to· the smallness of the profit made, the
11161
c...._..,
lr1u.W-1ox, ~
•.
-
-
Robnl J. s..
K<IJW, J,
1962
C...iss,_,, •f
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v;
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KofNr, /,
214 SUPREME COURT REPORTS [1963] SUPP.
payment of a dividend or a larger dividend than that declared would be unreasonable, make with the previous approval of
the Inspecting Assistant Commissioner an
order in writing that the undistributed
portion of the assessable income of the
company of that previous year as computed
for income-tax purposes and reduced by the
amount of income-tax and super-tax payable. by the company in respect thereof
shall be deemed to have been distributed
as dividends amongst the shareholders as
at the date of the general meeting aforesaid and. thereupon the proportionate share
thereof of each shareholder shall be inducted in the total income of such shareholder
for the purpose of assessing his total
income."
The Income-tax
Officer has power to make an
order under this section determining the amount of
undistributed balance out of the profits of a company
where the company has distributed by way of dividends out of the income of the previous year less than
60% of the assessable income; and if it has distributed less than 60% up to the sixth month after the
holding of the general meeting then the undistributed
assessable income shall be deemed to have been
distributed as dividend amongst the shareholders as
at the date of the general meeting. Thereafter the
proportionate share of each shareholder shall be
incfuded in the total of such shareholder for the purpose of assessing his total income. It ·comes to this
that if at the end of the sixth month after the general
meeting of a company to consider its accounts of the
previous year the income of which is being assessed,
the Income-tax Officer finds that the dividends distributed are less than 60 % of the assessable income
then such undistributed income shall be deemed to
have been distributed at the general meeting or in
2 S.C.R. SUPREME COURT REPORTS
215
accordance with tile res'ol!Jtion passed at the general
meeting and proportionate share shall be includec;l .in
the total income of each individual shareholder. Thus
s. 23A(l} creates· a fictional distribution of dividend
which is deemed' to be a receipt of diVidend by the
shareholder although in fact the share-holder .does not
receive it. It is deemed ·to have been distributed on
the date on which accounts of the previous year were
laid before the company at its general meeting.
Thus construed the undistributed assessable income
in the present. case was rightly determined by the
Income-tax Officer because 60% was not distributed
by way of dividends up to the end of the sixth month
after the holding of the meeting which was on
December 4, 1948. Under s. 23A(l) of the Act
dividend distributed by June 30, 1949, should not
have been less than the statutory limit but the effect
of the deeming provision is not that the income
should be: deemed to have been distri:buted on June
30, 1949,. but on·tbe.date of. the general meeting i.e.
December 4, 1948, and therefore within the account·
ing year 1948, the relevant assessment year.being
1949-50. It makes no difference that accohhng to
the wording of s. 23A{l) the order could be passed at
any time, the assessment would still have to be made
under s. 34(l){b) of the Act and if a notice is not
served in accordance with that provision' the Incometax Officer will .have. nojurisdiction to take any
action against . the shareholder;
The notice under
s. 34( I) is to be served within four years . from the
end of the assessment year. It . was held by this
court in First.· ..4.dditionat
Income-tax Officer,
MyllOre v. H. l{. S. Iyengar (1) that the pc;riod of
eight or four years under s. 34(l)(a) or (b) begins
from the end of the assessment year. Besides we
cannot 'see whys. 23A(l) should beoonie unwcirkable
merely because the notice under s. 34(1) which isthe
assessment section prescribes a time limit for takii;ig
action for. escaped incomes nor was any reason
'
'
(l) (1962) Supp. I S.C.R.l.
Qlmmii.riOllH ·Of·
,,,,__, .. ; &itolio)
••
RMml J, s..
r..,.,, J.
1961
C...;,,~ ~
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'
li.bn1J. Sa
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1962
216 SUPREME COURT REPORTS [1963] SUPP.
brought to our attention in support of that sub·
miaion.
In this view of the matter the answer given by
the
High Court to the
second question was
correct and the asses.5ment made under s. 34(l)(b) of
the Act after four years from the end of the relevant
as.5essment year was out of time. This is the only
question which survives for decision and in our
opinion the High Court answered it correctly.
These appeals therefore fail and are dismissed
with costs. One hearing fee.
A ppe,al8 diamissed.
--
BURMAH SHELL OIL STORAGE &
DISTRIBUTING CO. INDIA LTD.
v.
THE BELGAUM BOROUGH MUNICIPALITY
(S. K. DAS, J. L. KAPUR, A. K. SARKAR,
M. HmAY.t.TULLAH and RAGHUBAB DAYAL, lJ.)
Octroi-Levy of Octroi on good& by Belgaum Municipality
-Oo11SUmption, """ or Mlle-Mooning' of-Difference bUwttn
T...,,.inal lax and Octroi-Bombay Municipal Borougha Act,
1925, (Bom. 18 of 1o25), •· 13.
The appellant company
deals in petrol and other
petroleum products which it manufactures in its , refineries
situated outside the octroi limits of Belgaum Municipality. It
brings those products inside the said area either for use or con.
sumption by itself or , for sale generally to its dealers and
licensees who in their turn sell them to others. , The Company
alsO directly sells its products to Government, both civil and
military, and to local bodies and big private concerns. The
goods brought by the company within the octroi limits fall into
four categories, viz. (i) goods consumed by ~he, Company, (ii)
goods sold by the Company through its dealers or by itself and
I
f-
-,