CABLE AND WIRELESS LIMITED Vs. GANGAL V H

JUDGEMENT

(1.) IN this petition under Art. 226 of the Constitution the petitioner-company has challenged the legality and correctness of the order, dated March 30, 1967, whereby the first respondent, ITO, in computing the income-tax liability computed the capital gains made by the petitioner-company for the asst. yr. 1962-63 at Rs. 47,97,735. The relevant facts are as follows :

(2.) THE assessee-company, which is registered in the United Kingdom, held a substantial share capital of an Indian company of the name of Cable and Wireless Ltd. and carried on the business of this company as its subsidiary company. This Indian company was taken over by the Government of India w.e.f. January 1, 1947, and went into voluntary liquidation from May 11, 1949. Between September, 1949, and September, 1961, this Indian company in liquidation paid five different amounts aggregating to Rs. 1,10,26,921 to the assessee-company. Out of these, two payments were made out of accumulated profits and admittedly accounted for as dividend paid over to the assessee-company. Three other payments, being respectively of Rs. 53,85,400, Rs. 25,07,001 and Rs. 2,39,934, aggregating to Rs. 81,32,335 were distributed respectively on September 12, 1949, November 16, 1953, and September 18, 1961, to the assessee-company as these payments were made to the assessee- company because under the Companies Act contributories have a right to participate in the distribution of the assets of a company in liquidation. While submitting its return for the asst. yr. 1962-63, the assessee-company pointed out the fact of the receipt of the above last sum of Rs. 2,39,934 on the footing that in its opinion no capital gains arose on this last distribution.

(3.) ON behalf of the respondent, Mr. Joshi contended that the assessee-company had instituted a Departmental appeal and was accordingly not entitled to file this petition. By relying upon the relevant provisions in the IT Act and the Companies Act he justified the findings made by the first respondent. In his submission the petitioner-company was not entitled to the relief of setting aside or quashing of the impugned order.