JAIPUR UDYOG LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference made by the INcome-tax Appellate Tribunal, Jaipur (hereinafter referred to as "the Tribunal"), relating to the assessment year 1962-63, the following questions have been referred to this court:

(2.) M/s. Jaipur Udyog Ltd. (hereinafter referred to as the "assessee") owns a cement factory at Sawai Madhopur in Rajasthan. Out of the four plants of the said cement factory, the first two plants were set up before March 31, 1957, and the third and fourth plants were installed after March 31, 1957. Under Section 84 of the I.T. Act, 1961 (hereinafter referred to as the "Act"), as it stood at the relevant time, exemption from income tax was granted in respect of profits and gains derived from an industrial undertaking or business referred to in the said section to the extent of 6% per annum on the capital employed in the undertaking. Under Section 85, the said exemption granted under Section 84 was applicable to the dividends paid out of the profits or gains on which income-tax was not payable under Section 84. Under Section 101 of the Act similar exemptions were permissible in respect of super-tax which was chargeable on the total income. Under Section 194 of the Act, the principal officer of the company was required to deduct from the amount of dividend declared to be paid, the income-tax and super-tax payable before making payment of the dividend. Under the proviso to Section 194, it was permissible to pay the dividend without making any deduction in cases where the ITO had given a certificate in writing in the prescribed manner that to the best of his belief, the total income of the shareholder would be less than the minimum liable to income-tax. In Section 197, provision was made for issuance of certificate by the ITO for deduction of income-tax or super-tax at any lower rates or for no deduction of income-tax or super-tax, as the case may be. Sub-section (3) of Section 197 laid down that where the principal officer of a company considered that by reason of the provisions of Sections 84 and 101, no tax would be payable by the recipient on the whole or any portion of the dividend referred to in Section 85 and Sub-section (2) of Section 101, he may, before paying the dividend to the shareholder or issuing any cheque or warrant in respect thereof, make an application to the ITO to determine the appropriate proportion of the dividend on which tax was not payable by the recipient under the provisions of Section 85 and Sub-section (2) of Section 101 and on such determination by the ITO, no tax was to be deducted on such proportionate amount. Section 201 prescribed the consequences of the failure to deduct the tax under Section 194 of the Act and it laid down that if the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under the Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax.

(3.) FEELING aggrieved by the aforesaid decision of the Tribunal, the assessee moved an application before the Tribunal for referring the questions of law arising out the of the Tribunal to this court under Section 256(1) of the Act and thereupon the Tribunal has referred the questions mentioned above.