COMMISSIONER OF INCOME TAX Vs. ALLAHABAD BANK LTD

JUDGEMENT

(1.) THIS is an application for leave to appeal to the Supreme Court. The assessment year out of which the reference arose was the year 1956-57 and the relevant accounting year was the calendar year ended on the 31st Dec., 1955. The total income of the assessee was computed at Rs. 6,14,525. In computing the tax on the total income in accordance with the Finance Act, 1956, the ITO calculated the reduction in rebate in the following manner : The ITO based his calculation on the paid-up share capital of Rs. 30,50,000. According to the Finance Act, 1956, the expression "paid-up capital" means the paid-up capital of the company as on the 1st day of the previous year relevant to the assessment for the year ending on the 31st of March, 1957, increased by the premium received in cash by the company on the issue of its shares standing to the credit of the share premium account as on the 1st day of the previous year aforesaid.

(2.) THE assessee's accounts as on the 31st Dec., 1954, being equivalent to the balance-sheet as on the 1st Jan., 1955, disclosed no separate amount standing under the name of share premium account. THE receipts on account of share premium said to be for Rs. 45,50,000 were transferred to the "reserve fund and other reserve accounts" disclosing an aggregate figure of Rs. 1,08,00,000. THE ITO did not aggregate the paid-up capital by addition of the said sum of Rs. 45,50,000.

(3.) THE CIT, who is the petitioner herein, wants to urge before the Supreme Court that the definition of "paid-up capital" in the Explanation to Paragraph "D" of the First Schedule to the Finance Act, 1956, refers to addition of an amount "standing to the credit of the share premium account". THE provision, according to learned counsel for the petitioner, postulates that there should be an account labelled as the "share premium account" and unless this account labelled as aforesaid was there on the relevant date, namely, the 1st Jan., 1955, nothing could be said to be standing to its credit. In other words, if on 1st Jan., 1955, there was no share premium account with restrictions imposed upon the company regarding its application, the Explanation to Paragraph D of the First Schedule to the Finance Act, 1956, could not be availed of. Learned counsel submits that s. 78(3) of the Companies Act, 1956, does not satisfy the requirements of the said Explanation. Learned counsel submits further that up till now there is no decision either of the Supreme Court or of any other High Court on this point. THEre is no doubt that on the grounds aforesaid advanced by learned counsel for the petitioner, the certificate prayed for ought to be granted. Mr. E. R. Meyer appearing for the respondent also did not raise any substantial objection to our allowing the application on merits. But there is a technical objection strenuously urged by Mr. Meyer which I shall presently deal with.