Law:

Section:

Section 16(2) of Indian Income-tax Act, 1922, read with First Schedule, Part II(D)(b) of Finance Act, 1956 - Super-tax - Rebate - Assessment year 1956-57 - For assessment years 1949-50 and 1950-51, ITO found that dividend declared by assessee-company was deficient - He called upon assessee to take steps to declare additional shares which was complied by assessee during current year - On basis of such declaration ITO for current year withdraw rebate - Tribunal found that conditions of Finance Act, 1956, were satisfied in this case, namely, that there was a dividend declared during previous year and that it exceeded 6 per cent of paid up capital and that, therefore, the withdrawal of rebate on entire sum of Rs. 3,68,750 was in order - Tribunal was also of view that deeming effect of declaration of dividend had no bearing upon scope and application of Finance Act of 1956, in relation to withdrawal of rebate - Whether for application of clause (b) of section D of Part II of First Schedule to Finance Act, 1956 - It was not necessary that dividend declared must be for a previous year and this clause would be attracted if the dividend was distributed to shareholders during the previous year - Held, yes - Whether merely because declaration of such further dividend was on direction under section 23A would make no difference as declaration in instant case was covered by second proviso to this section which was not deemed dividend but an actual dividend - Held, yes - Whether withdrawal of rebate was proper - Held, yes FACTS For the assessment years 1949-50 and 1950-51, the assessee had returned certain total incomes which were recomputed by the ITO. Finding that the dividends declared out of the profits referable to those assessment years were only 55 per cent of the assessable incomes less the tax payable, he called upon the assessee to take steps to declare the deficiency. In compliance with the direction, the assessee-company resolved to declare a further dividend in order to make up 60 per cent of the assessable income. For the assessment year 1956-57, in assessing the tax, the ITO withdrew rebate on a sum of Rs. 3,68,750, after overruling the assessee's contention…

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