# SUPREME COURT REPORTS [1959] Supp. RA.JPUTANA AGENCIES LTD v. COMMISSIONER OF I. T., BOMBAY

- **Citation:** [1959] Supp. 1 S.C.R. 142
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Civil Reference No. l of 1955
- **Bench:** T.L. Venkataramaaiyar, P. B.Gajendraoadkar, A. K. Sarkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/supreme-court-reports-1959-supp-ra-jputana-agencies-ltd-v-commissioner-of-i-t-1611
- **Pages:** 12

## Headnote

Income-tax-Assessment of company-Declaration of dividend
in excess of stai1.tory limit-Additional income-tax-Computaiion-
" Raie applicable to the total income of the company "',
Meaning of
-Indian Finance Act. r95r, First Schedul• Para. B, proviso (H),
explanation (ii)(b).
The assessee, a private limited company in Saurashtra, v.·as
~ssessed for the assessment year 1952-53 on a total income of Rs.
26,385. It was assessable at the rate of four annas per rupee but
in view of the provisions of the Part B States (Taxation Conces- ·
sion) Order, 1950, it was actually assessed at the rate of sixteen
pies per rupee. The assessee had declared dividend of Rs. 30.000
out of which Rs. 15,159 was found to be excess dividend. On
this excess dividend the assessee was liable to pay additional
income-tax and the dispute was regarding the rate at which tax
was to be computed. Clause (ii) of the proviso to para. B of
Part I of the First Schedule to the Finance Act, 1951, which
applied to the case, provided that the additional income-tax was
to be equal to the sum by which the aggregate amount of incometax actually borne by the excess amount fell short o!:the amount
calculated at the rate of five annas per rupee on· the excess
dividend. Sub-clause (b) of cl. (ii) to the second explanation to
proviso to para. B provided· that the aggregate amount of incometax actually borne by the excess dividend was to be determined
at the rate applicable to the total income of the company.
The
assessee contended that the words 'at the rate applicable to the
total income of the company' meant the rate prescribed by para.
B of the Act, i.e. four annas per rupee, and not the rate as reduced by the Order at which the income-tax had actually and in
fact been levied and that consequently it was liable to pay
additional income-tax on the excess dividend at the rate of one
anna per rupee only.
Held, that the expression 'rate applicable to the total income
of the company' meant the rate actually applied and that the
assessee was rightly charged at the ratt of forty-four pies per
rupee being the.rate by which the rate at which the assessee was
actually assessed fell short of the rate of five annas per rupee.
The clause referred to the specific or definite rate which was
determined to be applicable to the taxable income of the company for that specific year and not to the rate prescribed by the
Act for the relevant year generally in reference to incomes of
companies.
(1) S.C.R.
SUPREME COURT HEPOH.TS
143
Elphinstone Spinning and Weaving Mills Co. Ltd. v. Commissioner of Income-tax, Bombay Citv, [1955] 28 I.T.R. 8u, considered.
·
CIVIL APPELLATE ,JURISDICTION:
Civil Appeal Xo.
91 of 1957.
Appeal from the judgment and order dated l\Iarch
29, 1956, of the Sa.urashtra. High Court at Ra.jkot in
Civil Reference No. l of 1955.
Shankarlal G. Bajaj and P. 0. Aggarwal, for the
appellant.
K. N. Rajagopala Sast-ri, R. H. Dhebar and D. G-upta,
for the respondent.
1958. October 9.
'fhe Judgment of the Court was
delivered by
Rajputana
A genci1s Ltd.
v.
Contmi:;sioner of ,
I. T .. Bombay
GAJENDRAGADkAR, J.-This appeal a.rises from the Gaj•ndragadlt•• 1 ·
assessment proceedings taken against the appellant,
Ra.jputana Agencies Ltd., Lava.npur, for its income for
the assessment year 1952-53, the accounting period
being the corresponding Marwadi Year ending in
October, 1951. The appellant is a private limited
company and it was assessed to income-tax and supertax by the Income-tax Officer, Morvi Circle, Morvi, on
a total income of Rs. 26,385.
The appellant had
declared dividend of Rs. 30,000.
The Income-tax
Officer held that out of the said a.mount of dividend,
Rs. 15,159 was excess dividend. On this basis the
Income-tax Officer determined the additional incometa.x payable by the appellant at the rate of forty-four
pies in a rupee on the said excess dividend. The additional income-tax payable by the appellant in that
behalf was computed at Rs. 3,473-15-0. This order
was passed on November

## Text

Oclobtr 9.
142
SUPREME COURT REPORTS [1959] Supp.
RA.JPUTANA AGENCIES LTD.
v.
COMMISSIONER OF I. T., BOMBAY
(T.L. VENKATARAMAAIYAR,P. B.GAJENDRAOADKAR
and A. K. SARKAR, JJ.)
Income-tax-Assessment of company-Declaration of dividend
in excess of stai1.tory limit-Additional income-tax-Computaiion-
" Raie applicable to the total income of the company "',
Meaning of
-Indian Finance Act. r95r, First Schedul• Para. B, proviso (H),
explanation (ii)(b).
The assessee, a private limited company in Saurashtra, v.·as
~ssessed for the assessment year 1952-53 on a total income of Rs.
26,385. It was assessable at the rate of four annas per rupee but
in view of the provisions of the Part B States (Taxation Conces- ·
sion) Order, 1950, it was actually assessed at the rate of sixteen
pies per rupee. The assessee had declared dividend of Rs. 30.000
out of which Rs. 15,159 was found to be excess dividend. On
this excess dividend the assessee was liable to pay additional
income-tax and the dispute was regarding the rate at which tax
was to be computed. Clause (ii) of the proviso to para. B of
Part I of the First Schedule to the Finance Act, 1951, which
applied to the case, provided that the additional income-tax was
to be equal to the sum by which the aggregate amount of incometax actually borne by the excess amount fell short o!:the amount
calculated at the rate of five annas per rupee on· the excess
dividend. Sub-clause (b) of cl. (ii) to the second explanation to
proviso to para. B provided· that the aggregate amount of incometax actually borne by the excess dividend was to be determined
at the rate applicable to the total income of the company.
The
assessee contended that the words 'at the rate applicable to the
total income of the company' meant the rate prescribed by para.
B of the Act, i.e. four annas per rupee, and not the rate as reduced by the Order at which the income-tax had actually and in
fact been levied and that consequently it was liable to pay
additional income-tax on the excess dividend at the rate of one
anna per rupee only.
Held, that the expression 'rate applicable to the total income
of the company' meant the rate actually applied and that the
assessee was rightly charged at the ratt of forty-four pies per
rupee being the.rate by which the rate at which the assessee was
actually assessed fell short of the rate of five annas per rupee.
The clause referred to the specific or definite rate which was
determined to be applicable to the taxable income of the company for that specific year and not to the rate prescribed by the
Act for the relevant year generally in reference to incomes of
companies.
(1) S.C.R.
SUPREME COURT HEPOH.TS
143
Elphinstone Spinning and Weaving Mills Co. Ltd. v. Commissioner of Income-tax, Bombay Citv, [1955] 28 I.T.R. 8u, considered.
·
CIVIL APPELLATE ,JURISDICTION:
Civil Appeal Xo.
91 of 1957.
Appeal from the judgment and order dated l\Iarch
29, 1956, of the Sa.urashtra. High Court at Ra.jkot in
Civil Reference No. l of 1955.
Shankarlal G. Bajaj and P. 0. Aggarwal, for the
appellant.
K. N. Rajagopala Sast-ri, R. H. Dhebar and D. G-upta,
for the respondent.
1958. October 9.
'fhe Judgment of the Court was
delivered by
Rajputana
A genci1s Ltd.
v.
Contmi:;sioner of ,
I. T .. Bombay
GAJENDRAGADkAR, J.-This appeal a.rises from the Gaj•ndragadlt•• 1 ·
assessment proceedings taken against the appellant,
Ra.jputana Agencies Ltd., Lava.npur, for its income for
the assessment year 1952-53, the accounting period
being the corresponding Marwadi Year ending in
October, 1951. The appellant is a private limited
company and it was assessed to income-tax and supertax by the Income-tax Officer, Morvi Circle, Morvi, on
a total income of Rs. 26,385.
The appellant had
declared dividend of Rs. 30,000.
The Income-tax
Officer held that out of the said a.mount of dividend,
Rs. 15,159 was excess dividend. On this basis the
Income-tax Officer determined the additional incometa.x payable by the appellant at the rate of forty-four
pies in a rupee on the said excess dividend. The additional income-tax payable by the appellant in that
behalf was computed at Rs. 3,473-15-0. This order
was passed on November 25, 1952.
The appellant filed an appeal against this order
before the Appellate Assistant Commissioner of Income-tax at Rajkot. The appellate authority determined the additional income-tax payable by the
appellant at Rs. 2,084-12-0 on August 29, 1953.
An
appeal was preferred by the appellant against the
appellate order before the Income-tax Appellate Tribunal, Bombay, but the appellate tribunal confirmed
the order under appeal on November·27, 1954. The
144
SUPREME COURT REPORTS
[1959) Supp.
r958
appellant then moved the appellate tribunal under
s. 66(1) of the Income-tax Act and the appellate tribnA~;i,/'.;~;~;d.
nal, by its order passed on April 25, 1955, referred two
v.
questions to the High Court at Saurashtra for it8
commission" af opinion. In the present appPal, we are concerned with
I. T., Bombay
the second of the said two questions. This questiou
as framed by the tribunal was: Whether the expresGajend.agadl<a' J. sion "at the rate applicable to thC' total income of the
eompany" as appearing in sub-cl. (b) of cl. (ii) to the
second explanation to proviso to paragraph B of Part I
of the First Schedule to the Indian Finance Act, 1952,
means the rate at which a company's total income is
actually assessed or the rate prescribed by the respective :Finance Act without taking into consideration the
rebate allowed in the respective years in accordance
with the provisions of the Part ' B ' States (Taxation
Concessions) Order, 1950 (hereinafter .called the Order) ..
Section 2 of the Finance Act, 1952, provides that the
provisions of s. 2 of, and tho First Schedule to, the
Finance Act, 1951, shall apply in relation to incometa.x and super-tax for the financial year 1952-53 as
they apply in relation to the income-tax and super-tax
for the financial. year 1951-52 with the modification
that, in the said provisions for the figures 1950, 1951
and 1952 wherever they occur, the figures 1951, 1952
and 1953 shall be respectively substituted; and so in
the present case we are really concerned with the
material provisions of the Finance Act, 1951 (hereinafter called the Act).
By its judgment delivered on March 29, 1956, the
High Court answered t.his question against the appellant and held that the expression "at the rate applicable to the total income of the comp~ny " means the
rate at which the company's total income is actually
assessed. The appellant then applied for and obtained
a certificate from the High Court under Art .. 133(l)(c)
of the Constitution read with s. 66A(2) of the Incometax Act that the case is a fit one for appeal to this
Court. It is with thi& certificate that the present
appeal has been brought to this Court; and the only
point which it raises for our decision relates to the
construction o~ the expression " at the rate applicable
(1) S.C.R. SUPREME COURT REPORTS
145
to the tota.l income of the company " a.ppea.ring in
r9sa
the relevant provision of the Act.
Rajpu1.,.,.
The appellant does not dispute its liability to pay
Agenci11 LtJ.
additional income-tax under cl. (ii) of the proviso to
v.
paragraph B of Part I of the First Schedule to the Co1tu••ission,, of
Act. The dispute between the parties is in regard to
1· T., Bombay
the rate a.t which the additional income-tax has to be Gajmdraiadkor 1.
charged. The appellant has pa.id income-tax on its
total income in the relevant assessment year at the
rate of sixteen pies in a. rupee in accordance with the
computation prescribed by para. 6 of the Order; and
it is urged on its behalf, that the rebate to which it is
entitled under the provisions of the said Order is irrelevant in determining the rate at which the additional
income-tax can be computed against it. On the other
hand, the respondent contends that the additional
income-tax ha.s to be computed at the rate at which
the appellant's income has been actually assessed and
so the rebate granted to the appellant under the said
Order must be taken into account in determining the
said rate of the additional tax.
·
It would be relevant, at this stage, to refer to the
provisions of the Order under which the appellant has
admittedly obtained rebate as a company carrying on
its business in Saurashtra. By the Order, the Central
Government ma.de exemptions, reductions in the rate of
tax and modifications specified in the Order in exercise
of the powers conferred by s. 60A of the Income-tax
Act. This Order applied to Part 'B' states which
included all Part 'B' States other than the State of
Jammu a.nd Kashmir. Paragraph 5 of the Order deals
with income of a previous year chargeable in the Part
'B' States in 1949-50. Sub-clause (3) of para.graph 5
shows tha.t the State assessment yea.r 1949-50 means
the assessment year which commences on a.ny da.te
between April 1, 1949 a.nd December 31, 1949. We
are not concerned with the provisions of this para.-
graph. Paragraph 6(iii) appJies to the present case.
The effect of para. 6(i), (ii) and (iii) is that in respect of
so much of the income, profits and gains included in
the total income as accrue or a.rise in any State other
19
146
SUPREME COURT REPORTS [1959] Supp.
1958
than the States of Pa.tie.la. and East-Punjab States
Union and Travancore-CochinRajpu1ana
.~genciu Ltd.
(i) the tax shall be. computed (a) at the Indian
v.
rate of tax; and (b) at the State rate of tax in force
Commi.<sioner of immediately before the appointed day ;
1• T .• Bombay
(ii) where the amount of tax computed under subGoj1nJ••t•d~., f. clause (a) of clause (i) is less than or is equal to the
amount of tax computed under sub-clause (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 first mentioned tax as so reduced shall
be the tax payable.
Thus under cl. (iii) the a.mount of income-tax levied
against the appellant is not the amount computed at
the Indian rate; it represents the difference between
the amounts ca.lculR.ted at the Indian rate of tax R.nd
that calculated at the State rate of tax. The excess
of the first amount over the second is allowed as a rebate. In other words, the Indian rate of tax prescribed by the relevant provisions of the Act does not by
itself determine the amount of tax payable by the
appellant for the relevant year.
It is well known that when different Pan' B' States
merged with the adjoining States or Provinces and
were made taxable territories under the Income-tax Act,
the operation of the Indian rate of tax was introduced
by phases and rebates on a graduated scale were
allowed to the assessees under the provisions of this
Order. As we have already mentioned, it is common
ground that the appellant was entitled to and has
obtained rebate under sub-cl. (iii) of paragraph 6 of
the Order, with the result that his total income has
been taxed to income-tax at the rate of sixteen pies in
a rupee. The point for determination is whether this
rebate is relevant in determining the rate at which the
additional income-tax has to be levied against the
appellant under the relevant provisions of the Act.
(1) S.C.R. SUPREME COURT REPORTS
147
Let us now consider the relevant provisions of the
r958
Act. Section 3 of the Income-tax Act which is the
Rajp1'i<ma
charging section provides that "where any Central
Agi•cies Ltd.
Act enact.s that income-tax shall be charged for any
v.
year at any rate or rates, tax at that rate or those Commission" of
rates shall be charged for tha.t year in accordance
I. T., Bomb••Y
with, and subject to the provisions of, this Act in res-,.. . -- •
1
f. I
l .
f ti
•
f th u11;rntiragt1d"ar
.
pect o t ie tota mcome o
· ie previous year o
e
·
a.ssessee ". Thus, when levying income-tax against
the total income of the assessee, the rate at which
the t.ax has to be levied is prescribed by the Act for
the relevant year. Section 2 of the Act provides that,
subject to the provisions of sub-ss. (3), (4) and (5), income-tax shall be charged at the rates specified in
Part I of the First Schedule; and sub-s. (7) provides
that " for the purpose of this section, and of the rates
of tax imposed thereby, the expression "total income"
means total income as determined for the purposes of
income-tax or imper-tax, as the case may be, in accordance with the provisions of the Act". So we must turn
to the 1nrst Schedule to the Act to find the rate at which
the appellant can be assessed. Paragraph B of the
said Schedule deals with companies and it provides
that, in the case of every company, on the whole of
total income the tax is leviable at the rate of four annas
in the rupee. There is a proviso to this paragraph
and the clause which calls for our construction in the
present appeal occurs in the explanation to cl. (ii) of
this proviso. This proYiso deals with the case of a
company which in respect of its profits liable to tax
under the Act for the releYa.nt year has made the
prescribed arrangements for the declaration and payment within the territory of India excluding the State
of Jammu a.nd Kashmir of the dividends payable out
of such profits and has deducted the super-tax from
the dividends in accordance with the provisions of
sub-s. (3D) or (3E) of s. 18 of that Act ; and in that
connection, it provides :
(i) where the total income, as reduced by seven
anna.s in the rupee a.nd by the amount, if any, exempt
from income-tax exceeds the a.mount of any dividends
(including dividends pa.ya.hie at a fixed ra.te) declared
148
SUPREME COURT REPORTS [1959) Supp.
1958
in respect of the whole or part of the previous year
for the assessment for the year ending on the 31st day
Rajput,in•
of March, 1951, and no order has been made under
Agencies I .. td.
v.
sub-section (l) of section 23A of the Income-tax Act,
c-mission1r of a rebate shall be allowed, at the rate of one anna
1. T., Bombay
per rupee on the amount of such excess;
G . 4
dk
1
(ii) where the amount of dividends refe~red to in
•J•• ••&• °' ·clause (i) above exceeds the total income as reduced
by seven a.nnas in the rupee and by the amount, if
any, exempt from income-tax, there shall be charged
on the total income an additional income-tax equal
to the sum, if any, by which the aggregate amount of
income-tax actually borne by such excess (hereinafter
referred to as " the excess dividend") falls short of the
amount calculated at the rate of five annas· per rupee
on the excess dividend.
It would thus be seen that the object of the legislature
in enacting this proviso is to encourage companies to
plough back some of their profits into the industry
and not to distribute unduly large portions of their
profits to their shareholders by declaring unreasonably
high or excessive dividends. In order to give effect to
this intention the legislature has offered an inducement
to the companies by giving them a certain rebate. If
a company does not distribute as dividends more than
roughly nine a.nna.s of its profits which is specified as
distributable, then the rebate of one a.nna. is given to
the company to the extent that the dividend pa.id by
it was less than the distributable dividend. If the
company pays more than the distributable amount of
dividend then it was not entitled to claim any rebate ;
but, on the contrary, it becomes liable to pay an additional income-tax as provided in cl. (ii) of the proviso.
In other words, the intention of the legislature appears
to be that companies should no doubt declare reasonable dividend and thereby invite the investment of
capita.I in business; but they should not declare an
excessive dividend and should plough back pa.rt of
their profits into the industry. It is with this object
that the provision for rebate has been made. It would
be noticed that, in addition to the rebate received by
the appellant under the relevant provisions of the
(1) S.C.R. SUPREME COURT REPORTS
149
Order, it would have been entitled to receive the rebate
'958
under cl. (i) of the proviso to paragraph B if the diviRsjputan/J
<lend declared by it had not exceeded the specified disAgencies Ltd.
tributable amount. In fa.ct the dividend declared by
v.
the appellant has exceeded the said amount and the Commissioner of
appellant has thus become liable to pay additional
I. T .• Bombay
income-tax in respect of the excess dividend under G .
r1 -dk 1
cl. (ii) of the proviso to paragraph B. Under this a;en •aga a•
•
Cilause, "the appellant shall be charged on the total
income an additional income-tax equal to the sum, if
any, by which the aggregate amount of income-tax
actually borne by such excess (hereinafter referred to
as " the excess dividend") falls short of the amount
calculated at the rate of five annas per rupee on the
excess dividend ". This provision raises the problem
of determining the aggregate amount of income-tax
actually borne by the. excess dividend ; and it is to
help the solution of this problem that an explanatiQn
has been added which says, inter alia, that "for
the purposes of cl. (ii) of the above proviso the aggregate amount of income-tax actually borne by the
excess dividend shall he determined as follows:
(i) the excess dividend shall be deemed to be
out of the whole or such portion of the undistributed
profits of one or more years immediately preceding
the previous year as would be just sufficient to cover
the a.mount of the excess dividend and as have not
likewise been taken into account to cover an excess
dividend of a preceding year;
(ii) such portion of the excess dividend as is
deemed to be out of the undistributed profits of each
of the said yea.re shall be deemed to have borne ta.x-
(a) if an order has been made under sub-section (1) of section 23A of the Income-tax Act, in respect of the undistributed profits of that year, at the
rate of five anna.s in the rupee, and
(b) in respect of any other year, at the rate applicable to the total income of the company for that
year reduced by the rate at which rebate, if any, was
allow~d on the undistributed profits."
Clause (i) explains what shall be deemed to be the
150
SUPREME COURT REPORTS [1959] Supp.
19.<S
excess dividend and how it should be ascertained.
Clause (ii) lays down how the portion of the excess
T.'ojpuiano
dividend as jg deemed to be out of the undistributed
A ~n1cir$ 1-td.
•.
profits of each of the years mentioned in cl. (ii) of the
co'""''"'""" o/ proviso shall be deemed to have borne tax. Sub-
!. T., llombay
clauso (a) of cl. (ii) is concerned with cases where an
order has been made under s. 23A (1) in respect of the
Gujendoag•d''"' /.undistributed profits of that year at the rate of fivo
annas in a rupee.
We are not concemed with this
clause in the present appeal. It is sub-cl. (b) of cl. (ii)
of the explanation to the p1·oviso to paragraph B
t.hat falls for consideration in the present appeal.
The appellant's case is that the expression "at the
rate applicable to the total income " means the rate
prescribed by paragraph B of the Act and not the rate
at which income-tax has actually and in fact been
levied.
This contention has been rejected by the
High Court and t.he appellant urges that the High
Court was in error in rejecting its case. The argument
is that the words "at the rate applicable to the total
income pf the company " must be strictly and literally
construed and reliance is placed on the principle that
fiscal statutes must be strictly construed. On the
other hand, as observed by Maxwell " the tendency
of modern decisions upon the whole is to narrow
materially the difference between what is called a strict
and beneficial construct.ion (1) ". Now the words" the
rate applicable" may mean either the rate prescribed by paragraph B or the rate actually applied in the
light of the relevant statutory provisions." Applicable",
according to its plain grammatical meaning, means capable of being applied or appropriate; and appropriateness of the rate can be determined only after con.
sidering all the relevant statutory provisions. In this
sense it would mean the rate actually applied. In the
present case, if sub-cl. (b) is read as a whole, and all
the material words used are given their plain gramma.
tical meaning, its construction would present no serious
difficulty. \Vhen the clause refers to the ra.te applicable, it is necessary to remember tha.t it refers to the
rfl.te applicable to the total income of the company for
(1) !\:laxwell on" Interpretation of Statutes", 10th Ed., p. 281.
(1) S.C.R. SUPREME COURT REPORTS
151
that year. In other words, the clause clearly refers to
r95a
the specific or definite rate which is determined to be
Rajputana
applicable to the taxable income of the company for
Agencies L1d.
the specific year; and it is not the rate prescribed by
v.
the Act for the relevant year genera.Uy in reference to CommissioKtr of
incomes of companies. The result is that, for deter1· T., Bombay
mining the aggregate a.mount of income-tax actually G . d --dll . 1
b
b
h
d. 'd
d
h
d
aJ"' raga
ar
;
orne y t e excess
1v1 en , t e
epartment must
take into account the rate at which the income of the
company for the specific year has in fact been applied
br levied.
Besides, in construing the words "the rate applicable" we must bear in mind the context in which they
are used. The context shows that the said words a.re
intended to explain what should be taken to be "the
tax actually borne". If the legislation had intended
that the tax actually borne should in all cases be
determined merely by the application of the rate
prescribed for companies in general, the explanation
given by the material clause would really not have
been .necessary. That is why, in our opinion, the
context justifies the construction which we are inclined
to place on the words " the rate applicable ".
The same position is made clear by t.he fort.her
provision in sub-cl. (b) itself which requires that the
relevant rate has to be reduced by the rate at which
the rebate, if any, has been allowed on the undistributed profits; which means that, for determining the rate
in sub-cl. (b), it is necessary to take into account the
rebate which may have been allowed to the company
under cl. (i) of the proviso to para.graph B, so that in
such a case the rate applicable cannot be the rate
prescribed in paragraph B of the Act; it must be the
rate :so prescribed rednced by the rate at which the
rebate has been granted under cl. (i) of the proviso to
paragraph B. It is thus clear that the words " rate
applicable " in such cases mean the rate determined
after deducting frotn the rate prescribed by para.graph
B the rate of rebate allowed by cl. (i) of the proviso to
the said paragraph. Therefore, at lea.st in these cases
the material words mean the rate actually applied. If
that be the true position, the rate applicable must in
152
SUPREME COURT REPORTS [1959] Supp.
i95&
all cases mean the rate actually applied. The same
words cannot have two different meanings in the same
Rajputana
clause.
Agencie1 Ltd.
v.
Incidentally we may point out that the provision of
Comm;ssioner of the Act in regard to the payment of additional income-
/. T .• Bombay tax appears to be intended to impose a penalty for
G . d -dk
1 distributing dividends beyond the distributable limit
01'" '
0 g•
0
'
·mentioned by the statute. The method prescribed for
determining the amount of this additional income-tax
is this. Calculate the amount at the rate of five annas
per rupee on the excess dividend and deduct from the
amount so determined the aggregate amount of income.
tax actually borne by such excess dividend ; the
balance is the amount of additional income-tax leviable
against the company. In adopting this method, if
rebate admissible under cl. (i) of the proviso to para.-
graph B has to be deducted from the rate prescribed,
it is difficult to understand why a. rebate granted under
paragraph 6(iii) of the Order should not likewise be
deducted. We accordingly hold that the rate applicable in sub-cl. (b) of cl. (ii) of the explanation read with
cl. (ii) of the proviso to paragraph B of Schedule I of
the Act means the rate actually applied in a. given
case. On this construction the rate at which the appellant is liable to pay the additional income-tax would
be the difference between the rate of five annas and
the rate of sixteen pies in a. rupee at which the appellant has in fact paid income-tax in the relevant year.
That is to say, the additional income-tax is leviable at
the rate of forty-four pies in a. rupee.
In its judgment, the High Court of Saurashtra has
referred with approval to the decision of the Bombay
High Court in Elphinstone Spinning and Weaving
Mills Oo., Ltd. v. OommisBioner of Income-tax, Bombay
Oity (1). In this case, Chagla C. J. and Tendolka.r J.
have held that if a. company has no taxable income at
all for the assessment year 1951-52 and in that year it
pays dividends out of the profits earned in the preceding year or yea.rs, additional income-tax cannot be
levied on the company by reason of the fa.ct that it h,as
paid an excess dividend within the meaning of that
(1)[1955] 28 l.T.R. Sn.
(1) S.C.R .. SUPREME COURT REPORTS
153
expression in the proviso to para.graph B of Part I of
r958
the Act. We a.re not concerned with this aspect of the
Rajputana
matter in the present appeal. However, in dealing
Ag•ncias Ltd.
with the question raised before them, the learned
v.
judges have incidentally construed the relevant words Commissioner of
" rate applicable" a.s meaning the rate actually a.ppliI. T .• Bomb·•Y
ed ; and their observations do support the view ta.ken G . d -dk 1
by the Sa.ura.shtra. High Court in the present case.
a;•n •a!{a
ar
·
The result is the appeal fails and is dismissed with
costs.
Appeal dismissed.
THE STATE OF UTTAR PRADESH
v.
BANSRAJ
(and connected appeal)
(.TAFEB IMAM and J. L. KAPUR, JJ.)
Motor Ve'/iicle-Driving in contravention of terms of permitDrioer, .if liable-Motor Vehicles Act (IV of r939), ss. 42(I) and
r23.
The respondents who were drivers, not being owners, were
found driving motor vehicles in contravention of the terms of
the permits granted under s. 42(1) of the Motor Vehicles Act.
They were prosecuted and were convicted under s. r23 of the
Act and sentenced to pay fine. The High Court held that under
s. 42(1) it was the owner alone who was interdicted from using
or permitting the use of the vehicle save in accordance with the
conditions of the permit and that, accordingly, if the vehicle was
used against the conditions of the permit only the owner, and no
one else, including the driver, could be guilty of the contravention under s. r23.
Held, that drivers of the motor vehicles were also liable
under s. 123 of the Act for driving in contravention ·of the terms
of the permits. Section 42(1) contemplates not only prohibition
against the user by the owner of the vehicle or his permitting
its user contrary to the conditions of the permit but it also
contemplates that the vehicle itself shall be used only in the
manner authorised by the permit. Section r23 penalises all
20
Octob•r 9.