COMMISSIONER OF INCOME TAX BOMBAY CITY BOMBAY Vs. ELPHINSTONE SPINNING AND WEAVING MILLS COMPANY LIMITED

JUDGEMENT

(1.) THE Judgment of the court was delivered by :

(2.) THE High court of Bombay in a reference under s. 66(1) of the Indian Income-tax Act by the Incometax Appellate tribunal, Bombay, was referred the following two questions for decision: (1) Whether the assessee Company was liable to pay additional income-tax ? and (2) If the answer to question No. 1 is in the affirmative, whether the levy of the additional income-tax is ultra vires THE High court answered the first question in the negative and in the circumstances, left the second question unanswered. This appeal is against the judgment and order of the High court on a certificate granted by it. THE Commissioner of Income-tax is the appellant, and the Elphinstone Spinning and Weaving Mills Co. Ltd., Bombay (the assessee Company) is the respondent.

(3.) THE contention of the assessee Company was that inasmuch as there was no income at all which was taxable, the words 'OD the total income' (lid not apply to it and no additional income-tax could be charged. THE tribunal interpreted the Paragraph to cover evena case where there was a loss holding that even a loss may be a total income', because if total income had to be computed in the manner laid down in the Indian Income-tax Act, the total income might, be a negative figure. THE tribunal also held that inasmuch as excess dividend,,; were to be deemed to have come out of the undistributed profits of the preceding year or years and such undistributed profits ',ere available,, the assessee Company was liable. THE High court did not accept those reasons, and reluctantly held, for reasons which may not be detailed at the present moment, that the assessee Company did not come (If within the letter of the law, however much the intention might have been to impose an additional income-tax under such circumstances. THE Commissioner now contends that, the High court ought to have read the Paragraph B as modified by the intention or to have treated it as an independent charging Section.