COMMISSIONER OF INCOME TAX Vs. SANDOZ LIMITED

JUDGEMENT

(1.) THIS reference pertains to assessment years 1962 -63 and 1963 -64. The controversy relates to the interpretation of s. 101(2) of the I.T. Act, 1961 (hereinafter referred to as 'the said Act'), as it stood at the relevant time. Since the question involved for both the years is the same, it will be sufficient to state the facts with reference to the assessment year 1962 -63.

(2.) IN the assessment year 1962 -63, the assessee's total income was Rs. 8,66,886 which consisted of interest from loans to the tune of Rs. 2,02,886 and dividend of Rs. 6,64,000. The super -tax payable on the dividend at the rate of 5% was Rs. 33,200 and that payable on the interest at the rate of 38% was Rs. 77,097. The total super -tax thus worked out to Rs. 1,10,297, which was 12.72% of the total income of the Rs. 8,66,886. In the total income from dividend, namely, Rs. 6,64,000 a sum of Rs. 3,22,172 was the dividend earned which was entitled to relief under s. 101(2) of the said Act. There is no dispute about this fact.

(3.) BEFORE us Mr. Joshi, the learned counsel appearing for the Revenue, made the same submission as was made on behalf of the revenue before the lower authority, namely, that the deduction or rebate which was permissible under the said s. 101(2) was of an amount equal to super -tax calculated at the average rate of super -tax on the dividend earned by the assessee from the industrial undertaking concerned and not an amount equal to the super -tax calculated at the average rate of super -tax on the total income of the assessee. In order to appreciate the said argument it is necessary to reproduce the provisions of the said s. 101, which are as follows: '101. Newly established industrial undertakings or hotels. - (1) The assessee shall be entitled to the deduction from the amount of super -tax with which he is chargeable on his total income, of an amount equal to the super -tax, calculated at the average rate of super -tax, on profits or gains derived from an industrial undertaking or hotel in cases where and to the extent to which income -tax is not payable on such profits or gains under section 84. (2) Subject to any rules that may be made by the Board in this behalf, a shareholder shall be entitled to a deduction, from the amount of super tax with which he is chargeable on his total income, of an amount equal to the super -tax, calculated at the average rate of super -tax, on so much of any dividend paid or deemed to be paid to him by an industrial undertaking or hotel as is attributable to that part of the profits or gains on which it is entitled to a deduction of super -tax under this section.'