China Mall Vs. the State of West Bengal - Court Judgment

Excerpt:
- [j.r. mudholkar,; k. subba rao,; r.s. bachawat,; raghuvar dayal and; v. ramaswa, jj.] the appellant .company reduced its capital and the reduction was confirmed by the high court. on november 4-, 1954, i.e. during the course of the appellant's accounting year ending november 30, 1954, the registrar of companies issued the requisite certificate under s. 61(4) of the indian companies act. the surplus share capital consequent on reduction was, however, not refunded to the shareholders during the said accounting year. it was refunded by actual payment or by credit entries in the next accounting year which ended on november 30, 1955. the income-tax officer held that the said distribution to the extent of accumulated profits was 'dividend' under s. 2(6a)(d) of the indian income-tax act, 1922. he further held that the distribution took place in the accounting year ending november 30, 1955, relevant for the assessment year 1956-57. on these findings he calculated the rebate on super-tax in the terms of cl. (i)(b) of the second proviso to paragraph d of part ii of the first schedule to the finance act, 1956. the findings of the income-tax officer were upheld by the appellate assistant commissioner and the appellate tribunal, and also, in reference, by the high court. the appellant came to the supremen court by certificate. it was contended on behalf of the appellant: (1) in defining 'dividend' to include capital receipts resulting from distribution of capital on reduction, the legislature went beyond the ambit of entry 54 list i, seventh schedule, government of india act, 1935, and s. 2(6a)(d) of the indian income-tax act, 1922 was therefore, ultra vires. (2) the certificate of the registrar under s. 61(4) of the indian companies act was issued on november 4, 1954 and therefore the 'distribution' under s. 2(6a)(d) took place in the previous year relevant to the assessment year 11955-56. held': the expression 'income' in entry 54 list i of the seventh schedule to the government of india act, 1935, and the corresponding entry 82 of list i of the seventh schedule to the constitution of india must be widely and liberally construed so as to enable the legislature to provide by law for the prevention of evasion of income-tax, [5h; 6a] united provinces v. atiqa begum, [1940] f.c.r. 110, sardar baldev singh v. commissioner of income-tax, delhi and ajmer, [1961] 1 s.c.r. 482, balaji v. income-tax officer special investigation circle, [1962] 2 s.c.r. 983 and navnittal c. javeri v. k.k. sen, appellate assistant commissioner of income-tax 'd' range, bombay, [1965] 1 s.c.r. 909, referred to. a company may on the pretext of reducing its capital, utilise its accumulated profits to pay back to the shareholders the whole or part of the paid up amounts on the shares. this is a division of profits under the guise of division of capital. if this were permitted there would be evasion of super-tax. section 2(6a)(d) embodies a law to prevent such evasion and hence it falls within the ken of entry 54 of list i of schedule seven to the government of india act, 1935. [6h; 7a, g] there is no inconsistency between a receipt being a capital one under the company law and by fiction being treated as taxable under the income-tax act. [7f-g] per subba rao. mudholkar and ramaswami, jj. the expression 'distribution' connotes something actual and not notional. like 'paid' or 'credited' in s. 16(2), distribution' signifies 'the discharge of the company's liability and making the dividend available to the members entitled thereto. [8d, f, g] j. dalmia v. commissioner of i.t. delhi, (1964) 53 i.t.r. 83 and mrs. p.r. saraiya v. commissioner of income- tax, bombay city 1, bombay, [1965] 1 s.c.r. 307, relied on. distribution can ke physical, it can be constructive. one may distribute assets between different shareholders either by crediting the amount due to each one of them in their respective accounts, or by actually paying to each one of them the amount due to him. [8d] distribution in the above manner may take place partly in one year and partly in another. but the amount of accumulated profits is fixed by the resolution of the company reducing its capital, and the figure does not change with the date of payment or credit. [9d, e] in the present case the payments and credits were actually given during the accounting year ending november 30, 1955. the dividend under s. 2(6a)(d) must be deemed to have been distributed in the said year. the relevant assessment year therefore was 1956-57.[10f] per raghubar dayal and bachawat, jj. the word distributed', in s. 2(6a)(d) does not mean 'paid' or credited'. cases under s. 16(2) are not relevant to the issue. [14g-h] the 'distribution' contemplated by s. 2(6a)(d) is distribution at the time of reduction of capital, that is to say, when the resolution of the company reducing the capital takes effect. it means allotment or apportionment of the surplus among the shareholders; this allotment takes place and each shareholder gets a vested right to his portion of the surplus as soon as the capital stands reduced. [12f-h] while the distribution as above takes place on a single date i.e. the date of the reduction of capital, the payments to the shareholders either actual or by credit entries in books of account may be made subsequently and on different dates. the successive payments cannot be 'distribution' contemplated by s. 2(6a) (d). [13a-c] in the instant case the resolution for the reduction of the capital of the company and the consequential refund of the surplus capital to the shareholder took effect on november 4, 1954. consequently the distribution of the 'dividend' as defined by s. 2(6a)(d) took place on that date i.e. during the previous year corresponding to the assessment year 1955-56. [15b]   - on 12-10-71 at 04.15 hours you along with abu taleb and others being armed with deadly weapons like kripans and lethals forcefully detained one running truck at alampur on suri road, p.j.m. shelat, j.1. this petition reached hearing before us on october 4, 1972. after hearing the parties we came to the conclusion that the order impugned herein and the petitioner's detention thereunder cannot be sustained. we, therefore, ordered the immediate release of the petitioner and said that we would give our reasons for the order later on. we now set out those reasons.2. by his order, dated november 2, 1971 the district magistrate, burdwan directed the detention of the petitioner under the maintenance of internal security act, 26 of 1971, on the ground that such detention was necessary with a view to preventing him from acting in any manner prejudicial to the maintenance of public order. consequent upon the passing of the order the petitioner was arrested and lodged in jail.3. the ground for detention served on the petitioner was as follows:on 12-10-71 at 04.15 hours you along with abu taleb and others being armed with deadly weapons like kripans and lethals forcefully detained one running truck at alampur on suri road, p. s. burdwan and committed dacoity in respect of valuable belongings of the truck after assaulting shri hardoer sharma of the said truck. this incident in the early morning on the highway of burdwan created panic and the people were terrorised and felt a sense of insecurity and were hesitant to pursue their normal trade and avocation and thereby their even tempo of life was affected adversely.4. after he was lodged in jail the petitioner, through the jail authorities, sent his representation to the government. that representation was received by the government on december 12, 1971, but was not disposed of till february 19, 1972. there was thus a delay of nearly 50 days in considering and disposing of the representation by the government.5. counsel for the petitioner urged that the ground for detention on the basis of which the district magistrate was said to have reached satisfaction about the necessity of detaining the petitioner was extraneous and irrelevant. the impugned order, therefore, was unsustainable and invalid. he also urged that there was undue delay by the government in considering the petitioner's representation which rendered his detention invalid. he contended that on both these grounds the court should order release of the petitioner.6. it is conceded by the respondent-government in the return filed on its behalf that there was delay of about 50 days in consideration, of the petitioner's representation. the only explanation given by it for the delay is that there was a 'sudden and abrupt increase in volume of detention cases during this period under the maintenance of internal security act owing to spate of anti-social activities by political extremists in the state at that time.'7. this explanation is obviously vague and unsatisfactory and cannot for that reason be accepted. no particulars are given in support of the vague assertions made by the deponent. there being thus no proper or acceptable explanation, there is no alternative except to hold that there was undue delay in considering the petitioner's representation which rendered his detention invalid.8. in view of this conclusion, it is not necessary to deal with the other contention raised by the. petitioner's counsel.9. the petition succeeds and is allowed.