1987 (8) TMI 129 - AT - Income Tax

Issues Involved:
1. Conversion of dividend income received in US Dollars to Indian Rupees as per Rule 115 of the Income-tax Rules, 1962.
2. Determination of the assessment year for the second interim dividend of Rs. 68,04,000.

Issue-wise Detailed Analysis:

1. Conversion of Dividend Income:

The appellant, a non-resident company incorporated in Panama, received dividend income from its Indian subsidiary. The appellant argued that Rule 115 of the Income-tax Rules, 1962 should be applied to convert the dividend income received in US Dollars into Indian Rupees. The appellant contended that the rule applies to both income accruing or arising in India and income deemed to accrue or arise in India. The CIT (A) rejected this ground, following the decision of the Special Bench of the Tribunal in the case of Allied Chemical Corpn. v. IAC, which held that Rule 115 did not apply to dividends declared in Indian currency. The Tribunal, adhering to its own prior decision in the appellant's case for the assessment year 1979-80, declined to interfere with the order of CIT (A) and rejected the first ground of appeal.

2. Determination of Assessment Year for Interim Dividend:

The second ground raised a substantial point regarding the assessment year for the second interim dividend of Rs. 68,04,000 declared by Pfizer Ltd., the Indian subsidiary. The appellant contended that the dividend, declared on 14-9-1979 and issued on 24-10-1979, was not unconditionally made available until 18-12-1979, after the previous year ended on 30-11-1979. The CIT (A) held that the dividend was unconditionally made available when the dividend warrant was issued on 24-10-1979, within the previous year, and included it in the income for the assessment year 1980-81. The CIT (A) also noted that the Reserve Bank of India granted permission for remittance on 21-11-1979, further supporting the inclusion of the dividend in the relevant year.

Before the Tribunal, the appellant reiterated that the dividend was unconditionally made available only upon actual remittance on 18-12-1979. The department argued that the dividend was unconditionally available when the dividend warrants were issued on 24-10-1979. The Tribunal considered the provisions of Section 8(b) of the IT Act, which states that interim dividend is deemed to be income of the previous year in which it is unconditionally made available to the member. The Tribunal referred to the Supreme Court's decision in J. Dalmia v. CIT, which interpreted "unconditionally made available" to mean when the dividend warrant is issued.

The Tribunal held that the interim dividend was unconditionally made available when the dividend warrant was issued on 24-10-1979, within the relevant previous year. The Tribunal also considered the Reserve Bank's permission for remittance and concluded that the company's actions indicated that the dividend was unconditionally available within the relevant year. The Tribunal rejected the appellant's argument that actual remittance was required for the dividend to be unconditionally available.

Alternative Argument:

The appellant also argued that if the interim dividend was taxable in the assessment year 1980-81, credit should be given for the tax deducted at source. The Tribunal accepted this argument and directed that credit for the tax deducted at source should be allowed while computing the total income of the appellant company.

Conclusion:

The Tribunal dismissed the appeal, upholding the CIT (A)'s decision to include the dividend income of Rs. 68,04,000 in the assessment year 1980-81 and rejecting the application of Rule 115 for converting the dividend income received in US Dollars. The Tribunal also directed that credit for the tax deducted at source should be allowed.

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