Commissioner of Income Tax vs K.C.P. Limited

Syed Shah Mohammed Quadri, J.—In compliance with the directions of this court in I.T.C. No. 229 of 1985, dated September 23, 1988, the Income Tax Appellate Tribunal has referred to this court the following questions of law for opinion as arising from the order of the Tribunal in S.T.A. 1 and 2/Hyd. of 1981, dated March 26, 1982 :

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the applications filed by the assessee for rectification u/s 13 of the Surtax Act were maintainable ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in setting aside the Income Tax Officer''s and Commissioner of Income Tax (Appeals) orders and directing the Income Tax Officer to modify the assessments under the Surtax Act ?

Whether or not the Income Tax Officer''s view was proper in view of retrospective amendment effected to section 80M of the Income Tax Act and in view of section 2(9) of the Surtax Act adopting the same meaning for similar terms ?"

The assessee filed an application u/s 13 of the Companies (Profits) Surtax Act, 1964, for short "the Surtax Act", for rectification of the assessment. The Income Tax Officer declined to rectify the assessment. The first appellate authority confirmed that order. On further appeal to the Income Tax Appellate Tribunal, the question was whether for purposes of arriving at the total income, the income by way of dividend has to be excluded and whether the income by way of dividend, means the net income by way of dividend or the gross income by way of dividend. This was the question that was debated by the Tribunal. Following the judgment in Cloth Traders (P) Ltd. Vs. Additional Commissioner of Income Tax , Gujarat-I, , the Tribunal took the view that the gross dividend was deductible and thus allowed the appeal on March 26, 1982. It is from that order of the Tribunal that the above said questions of law are said to arise.

In Commissioner of Income Tax Vs. Andhra Bank Ltd., , the Division Bench of this court took the view that on the face of it the Explanation added in the Surtax Act with effect from April 1, 1981, was declaratory of the law already existing and consequently it would be effective for the assessment year 1975-76 as well and held that only the net dividend should be excluded and not the gross dividend. The same view is taken by another Division Bench of this court of which one of us (Justice Syed Shah Mohammed Quadri) was a member in Commissioner of Income Tax Vs. Vazir Sultan Tobacco Co. Ltd., . Following those judgments, the third question is answered in the affirmative, that is, in favour of the Revenue and against the assessee. So far as questions Nos. 1 and 2 are concerned, in our view, those questions do not really arise from the order of the Tribunal. Therefore, we decline to answer the same.

The reference is accordingly answered.