LexTHE AHMEDABAD MFG. & CALICO PRINTING CO. LTD. versus S. C. MEHTA, INCOME-TAX OFFICER AND ANOTHER
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1962 Bhoju Mantlal v. Dlbnath Bhagat Subba f?a1J J. 1962 92 SUPREME COURT REPORTS [i963] SUPP. crucial circumstances make the two cases entirely dis- similar and therefore the said judgment of this court is not of any help in construing the document in question. On a consideration of the cumulative effect of the terms of the document in the context of the surrounding circumstances we hold that the document in question is not a mortgage but a sale with the condition of repurchase. The conclusion arrived at by the High Court is correct. The appeal fails and as the advocate for the res- pondent is not present in Court it is dismissed with- out costs. Appeal dismissed. THE AHMEDABAD MFG. & CALICO PRINTING CO., LTD. v. S. C. MEHTA, INCOME-TAX OFFICER AND ANOTHER (S. K. DAS, J. L. KAPUR, A. K. SARKAR, M. HIDAYATULLAH and RAGHUBAR DAYAL, lJ.) Income Tax-Rectification-Retrospective operation of atatule-Rebate granted on undistributed profiM-Subaequent declaration of dividend8 on such profits-Recall of rebate and re- computation of aaaeaament-Finance Act, 1966 (18 of 1966), ss. 19, 28-lndian Income-ta:t Act, 1922 (11 of 1922), 8. 36 (10). Sub-section (10) of s. 35 of the Indian Income-tax Act, 1922, which was brought into force on April I, 1956, provided that where in any of the assessment years 1948-49 to 1955-56, a rebate of income-tax was allowed to a company "and sub- - 2 S.C.R. SUPREME COURT REPORTS 93 sequently the amount <;>n which the rebate of income-tax was allowed .......... is availed of by the company, wholly or portly for declaring dividends in any year", the amount shall be deemed to have been made the subject of incorrect relief, and the Income-tax Officer shall recompute the tax payable by the company by reducing the rebate originally allowed. For the assessment year 1952-53, the account year being the calendar year 1951, the appellant company was 1ssessed to income-tax and super·tax on a total income of Rs. 1,02,07,8081- and was allowed a rebate of one anna per rupee on the undistributed profits of Rs. 36,62,776/- under the provisions of the Finance Act, 1952. For the assessment year 1953-54 the appellant was assessed to a Joss of Rs. 5,98,363/- on April 17, 1954. On April 20, 1954, the appellant declared a dividend of Rs. 19,32,000/- out of the undistributed profits of the calendar year 1951 on which a rebate had been allowed. On March 18, 1958, the Income-tax Officer issued a notice caJling upon the appellant company to show cause why action under s. 35 ( 10) of the Indian Income-tax Act, 1922 should not be taken against it by withdrawing the rebate allowed on the sum of Rs. 19,32,000/-. The appellant claimed that sub- section (10) of s. 35 was not applicable as the amount on which the rebate was granted was availed of for declaring dividends before the sub-section had come into force. Held (per Sarkar, Hidayatullah and Raghubar Dayal, JJ., Das and Kapur, JJ., di.•.,eniing), that sub-section (10) of s. 35 of the Indian Income-tax Act, 1922, was intended to have a retrospective operation and was applicable to the present case, Per Das and Kapur, JJ.,-(1) Sub-section (10) ofs. 35 which created a legal fiction was clearly prospective and show- ed that \\·hat was correct at the time when the rebate was granted was rendered incorrect on the happening of the crucial event after the coming into force of the sub-section. (2) The principle in Income-tax Officer v, 8. K. Habibu- llah, [1962] Supp. 2 S. C. R. 716, that a statute which is not declaratory of a pre .. existing law nor a matter relating to procedure but affects vested rights, cannot be given a greater retrospective effect than its language renders necessary, and even in construing a section which is to a certain extent retrospective, the line is reached at which the words of the section cease to be plain, is applir.able to the present case. 1962 Ah .. tdabad Mjg. & C•li(o Printing Co. 1 L". v. S.C. M1/ata, Income· Ta.Op 1962 Jhnudabad Mfg. llf Ca/i,eo Ptinting eo., Ltd. •• S. C. M1hta, lnmn~- Ta.< Ojfim 94 SUPREME COURT REPORTS [1963] SUPP. Per Sarkar;J-The language used in sub-ss. (5) and (IO) is wholly different and I111·mnr-fa1· OjficPr v. S. K. Habihul/ah, (1962] Supp. 2 S. C. R. 71G, is distinguishable. Per, Hidayatullah and Raghubar Dayal, fl.- (1) Under s. 35 (I 0) the only condition was that the declaration of the dividends must be after the gra
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