COMMISSIONER OF INCOME TAX Vs. AFCO PRIVATE LIMITED

JUDGEMENT

(1.) THIS references raises a very short question. The assessee is a private limited company which was incorporated on the 25th March, 1954, and the assessment year with which we are concerned is the assessment year 1955 -56 and the relevant year of account is the year ending 31st March, 1955. On the 13th July, 1955, the assessee company declared a dividend of Rs. 11,712. The assessee company declared a further dividend of Rs. 5,612 within the time permissible to it under section 23A which brought the dividend declared to the statutory requirement of 60 per cent. of its income. The assessment of the company was made on the 30th January, 1956, and the company claimed a rebate of one anna per rupee on the undistributed balance of the profits as provided in clause (i) of the proviso to item B of Part I of the First Schedule to the Finance Act, 1955. This rebate was disallowed both by the Income -tax Officer and the Appellate Assistant Commissioner, but was allowed by the Tribunal and the question has now come before us on this reference, and what calls for our decision is the interpretation of really one short expression in this provision in the Finance Act. The provision is in the following words :

(2.) NOW , it is not disputed by the Department that all the conditions laid down in this provision have been satisfied and the assessee is entitled to the rebate of one anna, except according to the Department for one condition and that condition is that the company is a company to which the provisions of section 23A of the Income -tax Act cannot be made applicable. It is urged that in fact the provisions of section 23A are applicable and inasmuch as the provisions of section 23A are applicable the assessee company is not entitled to claim rebate. The question that arises is : What is the proper effect to be given to the expression 'cannot be made applicable' used by the Legislature ? Is 'cannot be made applicable' synonymous with 'is not made applicable', or the word 'cannot' had certain connotations which are different from the connotation if the Legislature had used the simple expression was to provide that it is only in those cases where section 23A cannot be made applicable, in other words, it is only in those cases where the conditions, which are required by section 23A itself before an order can be made under it are not present that the necessary relief cannot be granted.

(3.) THEREFORE , out of the category of the companies to which section 23A can apply, companies in which the public are substantially interested are taken out, and the Explanation to that sub -section gives an artificial definition of what a company in which the public are substantially interested is. Now, it is common ground that this is not a company in which the public are interested, and therefore this company cannot be taken out of the categories of companies to which section 23A applies by reason of sub -section (9). It is therefore a company to which section 23A does apply, and Mr. Joshi's contention is that if this is a company to which the provisions of section 23A apply, then the right of claiming the rebate cannot be exercised by the assessee company. The fallacy underlying this argument is to equate the fact of the section applying to the company with the provisions contained in the Finance Act that the section cannot be made applicable to this company. Even though the assessee company is a company to which the section applies, even so by reasons of the fact that the conditions laid down in that section have not been complied with, the section cannot be applied to this company. In other words, no order can be made under section 23A against this company, because the conditions pre -requisite for the making of the order have not been complied with.