2003 (11) TMI 8 - HC - Income Tax

Leviability of additional tax under section 104 - Undistributed Profits - assessee sought to avoid the levy under section 104, by contending that the Reserve bank had allowed it to declare a dividend of 20 per cent. and, therefore, only that amount which was required for declaring of 20 per cent. was utilised. The Tribunal has found that there was no prohibition in law against the declaration of a higher percentage of dividend and that the figure mentioned in the letter of the Reserve Bank was only the figure which the assessee itself had proposed to the Reserve Bank. The Reserve Bank merely gave the permission that had been sought. - Tribunal, therefore, rightly held that the assessee is liable to be taxed on the undistributed portion of the income

Summary

The High Court of Madras ruled that a banking company was liable to pay additional tax under section 104 for not distributing the required dividend amount despite permission from the Reserve Bank. The Tribunal's decision was upheld, stating that the company must comply with Income-tax Act provisions regarding dividend distribution. The judgment favored the Revenue over the assessee.