HARI PRASAD JAYANTILAL & CO. LTD. versus INCOME-TAX OFFICER, SPECIAL INVESTIGATION CIRCLE-B

Citation: [1966] 2 S.C.R. 732 · Decided: 25-11-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

Judgment (excerpt)

732 
HARi PRASAD JAYANTILAL & CO. LTD. 
v. 
INCOME-TAX OFFICER, SPECIAL INVESTIGATION 
CIRCLE·B. 
November 25, 1965 
[K. SUBBA RAo, J. C. SHAH ANDS. M. SIKRI, JJ.J 
Income-tax Act (11 of 1922), ss. 2(6A)C and 35(10)-Volun.tary 
/iqui"dation of !company-Distribution of accumulated profits by /1qul-
dator-If declaration of dividends by company. 
The appellant-company was assessed to 
tax in the assessment yea" 
1948-49, to 1953-54, in respect of its profits, and was '.'Howe~ rebate on 
the undistributed profits. It was resolved to 
voluntarily 
wmd up the 
company with effect from October I, 1957. The liquidator, during the 
years 1957 to 1959 distributed, from 
time to time, the accul!'ulated 
profits to the shareholders and also issued income-tax refund certificates. 
The Income-tax Officer, under s. 35(10) of the Income-tax Act, 1922, 
withdrew the rebate granted in respect of each of the assessment years 
194&-49 to 1953-54 
and demanded payment of tax. The company ap-
plied for a writ quashing the order, but the High Court dismissed the 
petition. 
In appeal to this Court, the company contended that : (i) Section 
35(10) did not authorise the Income-tax Officer to bring to tax the 
amount on which rebate tax was granted in assessment years commencing 
prior to !st April 1956. and (ii) the distribution by the liquidator of 
accumulated profits could not be regarded as declaration of dividend by 
the company within the meaning of s. 35(10). 
HELD : (i) The power to withdraw rebate was exercisable within 4 
years from the end of the financial year in which the amount on which 
rebate was allowed was availed of by the company for declaring dividends. 
[735 B-CJ 
Ahmedabad Manufacturing and Calico 
Printing Co. Ltd. v. S.G. 
Mehta, [1963] Supp. 2 S.C.R. 92, followed. 
(ii) Distribution of accumulated profits by the liquidator together with 
the income-tax refund certificates, in the course of voluntary winding up, 
can be regarded as declaration of dividend. so as to attract the applicability 
of provisions enabling the withdrawal of rebate and demand 
for tax. 
[739 CJ 
On the passing of a resolution for voluntary winding up the company 
does not stand dissolved and its property does not vest in the liquidator. 
Ill distributing the assets, including accumulated profits, the liquidator acts 
merely as an agent or administrator for and on behalf of the company. 
Therefore, distribution by the liquidator is distribution by the company. 
[736 B-C, E] 
There is nothing in s. 35(10) which 
suggests that the expression 
dividend was to have a meaning different from the meaning asc;igned to it 
by s. 2(6A) in the 
interpretation clause. 
By the omission of the 
proviso to s. 2(6A) (c) by the Finance Act, 1955, distribution of accu-
mulated profits, whether capitalised or not and without any restriction as 
to time, was brought within the definition Of dividend. 
The provisions 
of ss .. 35(10) and 2(6A) (c) are part of a single scheme to declare di•-
fr1but1on of accumulated profits~ capitalize<;l or not, as 
dividends, 
and 
B 
c 
D 
E 
F 
G 
H 
r • 
T 
•. 
) 
H. P. JAYANTILAL & CO. V. I.T.O. (Shah, /.) 
733 
A 
to bring the undistributed profits on which rebate was granted to tax, if 
availed of by the liquidator of the company for distributing dividends. 
[737 F, H; 738C-D] 
B 
Power under s. 35(10) may be exercised if accumulated profits are 
availed of by the company "for declaring dividends in any year", that is, 
after following the procedure. in Art. 95 of Table A of the Companies Act, 
1913, under which the assessee was registered. But, 
the distribution 
made by the liquidator, was a distribution of interim dividend, and, in 
the matter of distribution of interim dividend, the Companies Act does 
not set up any special machinery nor does it impose any special condition 
before power in that behalf may be exercised. [739 A-C] 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 871 of 
1964. 
c 
Appeal from the judgment and order dated January 16, 17, 
1961 of the Gujarat High Court in Special Civil Application No. 
233 of 1960. 
N. D. Karkhanis, 
T. A. Ramachandran, 
0. C. Mathur, 
Ravinder Narain and J. B. Dadachanji, for the appellant. 
o 
A. V. Viswanatha Sastri, R. Ganapathy Iyer, B. R. G. K. A char 
and R. N. Sachthey, for the respondents. 
The Judgment of the Court was delivered by 
Shah, J, 
The appellant-a Company registered under the 
E Indian Companies Act, 1913-was assessed in the assessment 
years 1948-49 to

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