Law:

Section:

Paragraph D of Part II of Schedule I to the Finance Act, 1956 - Rate of super-tax - Assessment year 1956-57 - Assessee was following calendar year as accounting year - A resolution was passed on 30-12-1954, for issue of bonus shares to persons holding ordinary shares as on 1-1-1955 by capitalising general reserve as on 30-6-1954 - Whether distribution of bonus shares became effective as from 30-12-1954, that is, in previous year relevant to assessment year 1955-56 - Held, yes - Whether, therefore, there was no justification to reduce rebate under sub-clause (a) or under sub-clause (b) of clause 1 of second proviso to Paragraph D of Part II of schedule I to Act - Held, yes FACTS On 30-12-1954, the assessee-company passed a resolution at a general meeting (a) that a sum of Rs. 50,07,500 standing to the credit of general reserve as on 30-6-1954, be capitalised and distributed amongst the ordinary share holders in the company on the footing that they became entitled thereto as capital and that the said capital be applied on behalf of such ordinary shareholders in payment in full for 5,00,750 ordinary shares of Rs. 10 each, in the company and that such new ordinary shares credited as fully paid up shall rank in all respects pari passu with the existing ordinary shares, save and except that the holders thereof will not participate in any dividend in respect of any period ending on or before 31-12-1954; (b) that the directors were directed to issue, allot and distribute the said new ordinary shares amongst the persons whose names were registered as such in the books of the company as on 1-1-1955, in proportion of one such new ordinary share for each ordinary share already held by them on that date; (c) that the draft agreement providing for the allotment of said new ordinary shares in satisfaction of the said capital bonus, be approved and that the director be authorised to affix the company's seal to duplicate endorsement of such agreement as and when the same shall have been signed on behalf of the members holding ordinary shares in the company on 1-1-1955, by some person to be appointed by the directors in that behalf. For the assessment year 1956-57, relevant to…

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