Case Note & Summary
The case involved the Ahmedabad Manufacturing and Calico Printing Co., Ltd., which challenged the Income-tax Officer's decision to withdraw a rebate on income-tax previously granted. The rebate was allowed on undistributed profits for the assessment year 1952-53, but the company declared dividends from these profits in 1954. The Income-tax Officer issued a notice in 1958 to withdraw the rebate under sub-section (10) of section 35 of the Indian Income-tax Act, 1922, which had come into force on April 1, 1956. The appellant contended that the sub-section did not apply as the dividends were declared before its enactment. The High Court dismissed the writ petition challenging the Income-tax Officer's order. The Supreme Court analyzed the language of sub-section (10) and concluded that it was intended to have retrospective operation, allowing the Income-tax Officer to recompute the tax. The court emphasized that the sub-section affects vested rights and should not be given greater retrospective effect than its language permits. Ultimately, the Supreme Court allowed the appeal, quashing the Income-tax Officer's order and awarding costs to the appellant.
Headnote
A) Income Tax - Rectification of Mistakes - Retrospective Operation of Statute - Sub-section (10) of Section 35 of the Indian Income-tax Act, 1922 - The sub-section allows for the withdrawal of rebates on income-tax if the amount was used for declaring dividends after the rebate was granted. The court held that the sub-section has retrospective effect and applies to cases where dividends were declared before its enactment, thus allowing the Income-tax Officer to recompute tax payable (Paras 1-10).
Issue of Consideration
Whether sub-section (10) of section 35 of the Indian Income-tax Act, 1922 applies to dividends declared before the sub-section came into force.
Final Decision
The Supreme Court allowed the appeal, set aside the order and judgment of the High Court, and quashed the Income-tax Officer's order dated March 27, 1958, awarding costs to the appellant.
Law Points
- Income Tax
- Rectification
- Retrospective Operation
- Vested Rights
