LexCOMMISSIONER OF INCOME-TAX, WEST BENGAL versus ALLAHABAD BANK LIMITED
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
722 COMMISSIONER OF INCOME-TAX, WEST BENGAL v. ALLAHABAD BANK LIMITED February 14, 1969 [J.C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] B Finance Acts, 1956 ant( 1951-Explanation to Paragraph D of Part JI-Definition 'of 'share prtmium account'; whether such account liable to be included in the paid-up-capital for computing rebate of super tax- i! to qualify for inclusion it is sufficient if ii is an identifiable separate account within the reserves--Companies Act, 1956, •· 78 (3) r.w.s. 78(1) -Effect of. In proceedings for assessment to tax for each of the assessment years 1956-57 and 1957-58, the Income Tax Officer reduced the rebate in super- tax admissible to the respondent under the Finance Acts of 1956 and 1957 on the view that the respondent bank, which was a public limited company, had distributed dividends exceeding 6% of its paid-up-capital. In reducing the rebate the Income Tax Officer excluded an amount re- presenting share premium received by the company. The Appellate Assistant Commissioner held that the company's share premium was liable to be added to its capital in computing the reduction in the rebate in super-tax and directed modification of the order of assessment The Appellate Tribunal in appeal, as well as the High Court, on a reference, agreed with this view. In the appeal to this Court, it was contended on behalf of the appellant that the amount representing share premium was not to be added to the share caJ)ital because ( 1) the expression "share premium account" in the definition of ''paid-up capital" in the Explanation to Paragraph D of Part II of the Finance Acts of 1956 and 1957 means an account apart from the rP.Sel'ves maintained by the company; and ( 2) in view of the proVi- sions of s. 78 (3) read withs. 78(1) of the Companies Act, 1956, the respondent company was bound to maintain a separate share premium account outside the reserves and to transfer the share premium into that accow1t which the -respondent company had failed to do. HEW : A share premium account is liable to bti included in the pai<1-u1> capital for the purpose of computing rebate if it is maintained as a separate account. But the Explanation to paragraph D of Part II of the Finance Acts of 1956 and 1957 does not contemplate that the account must be kept apart from the reserves. If within the reserves it is an identifiable separate account, the share premium will qualify for inclusion in the paid-up capital. [~28 HJ Although Uhder the Companies Act 1 of 1956 there was an express provision that the share p'remium a¢ount shall be maintained· in a sepa- rate account and by virtue of Sch. VI of the Act the share premium has to be shown in the balance sheet under the head "Liabilities" as part of the share capital and not of reserves, on that account it cannot be assum· ed t.hat if the share premium is maint.ained as a separate account within .the reserves, reduction in the rebate in super-tax is liable to be computed after excluding share premium. [728 CJ In any event with respect to tbe assessment year 1956-57 the .<:ompany was being assessed to tax for the previous year of the company ending on c I D E F G H A B c D E F 0 H C,I.T. v. ALLAHABAD BANI: (Shah. I.) 723 December, 1955, when the Companies Act of 1956 was not in for~. During that period the eompany was governed by Act 7 of 1913 which contained no provision analogous to s. 78. of the 1956 Act. (727 C-DJ C1v1L APPELLATE JURISDICTION: Civil Appeals Nos. 701 and 702 of 1968. Appeals from the · judgments and orders dated December I 7, 1963 and April 6, 1965 of the Calcutta High Court in. Income- tax References Nos. 87 of 1960 and 30 of 1962 respecuvely. S. T. Desai, S. C. Manchanda and B. D. Sharma, for the appellants (in both the appeals). Sachin Chaudhuri, Sukumar Mitra and D. N, Mukherjee, for the respondent (in both the appeals) . The Judgment of the Court was delivered by Shah, J. The Allahabad Bank Ltd. is a public limited com- pany. The paid-up share capital of the Company other than capital entitled to a dividend at .t fixed rate was at the relevant time Rs. 30,50,00U The Company had issued· before January l, 1954, shares at premium and the premium received in cash ag- gregated to Rs. 45,5(\000. In each of the account years 1955 and 1956 the Company distributed Rs. 5,49,000 as dividend. In proceedings for assessment for each of the assessment years 1956-57 and 1957-:i8
Excerpt shown. Read the full judgment & AI analysis in Lexace.