THE COMMISSIONER OF INCOME-TAX,BOMBAY vs THE JALGAON ELECTRICITY SUPPLY CO.,LTD.

The Supreme Court held that the second proviso to para. B of Part 1 of the First Schedule of the Finance Act, 1950, requires the existence of undistributed profits from preceding years to levy additional income-tax on excess dividends. The Court ruled that without such profits, the fiction introduced by the Act fails, rendering the tax assessment unworkable. Consequently, the Court upheld the High Court's decision that the assessee company was not liable for additional income-tax on excess dividends declared in the absence of profits from prior years.