1972 (10) TMI 35 - HC - Income Tax

Questions raised relate to the true construction and effect of the provisions in sections 184 and 199 of the United Kingdom Income Tax Act, 1952, in connection with the claim of the assessee concerned for relief under section 49D of the Indian Income-tax Act, 1922 - When TDS is made on the dividends received or arising outside taxable territories and no provision for relief from double taxation is available whether the provisions of section 49D are applicable - These dividend incomes had accrued in the nontaxable territories and the assessee had paid in those countries income-tax by deduction or otherwise in respect of that dividend income. There was no reciprocal arrangement for relief or avoidance of double taxation in those countries. The assessee was accordingly entitled to relief under section 49D upon calculations made in accordance with the scheme of that section.

Summary

Issues:
- Interpretation of provisions in sections 184 and 199 of the United Kingdom Income Tax Act, 1952 in connection with relief under section 49D of the Indian Income-tax Act, 1922.
- Entitlement of the assessee to relief under section 49D(1) for dividend income received from foreign companies.
- Comparison of provisions in the United Kingdom Income Tax Act with the Indian Income-tax Act regarding taxation of dividend income.

Analysis:
The judgment delivered by the High Court of BOMBAY involved two references, Reference No. 33 of 1964 and Reference No. 35 of 1964, concerning the interpretation of provisions in the United Kingdom Income Tax Act, 1952, in relation to relief under section 49D of the Indian Income-tax Act, 1922. In Reference No. 33 of 1964, the assessee claimed relief for dividend income accrued in the United Kingdom for the assessment years 1955-56 and 1957-58. The Income-tax Tribunal granted the relief, considering tax paid by the assessee in the UK as fulfilling the requirements of section 49D(1). The questions referred pertained to the entitlement of the assessee to relief under section 49D(1) for the respective dividend incomes. Similarly, in Reference No. 35 of 1964, the assessee sought relief for dividend income from English and American companies for the assessment years 1954-55 and 1955-56. The Tribunal ruled in favor of the assessee, leading to questions about the entitlement to relief under section 49D(1) for the mentioned dividend incomes.

In support of the revenue, arguments were made highlighting the provisions of section 184 of the United Kingdom Income Tax Act, emphasizing that dividends paid to the assessees were not taxable in their hands and no statutory provision existed for taxing dividend income. However, a precedent from the High Court of Calcutta was cited to counter these arguments, indicating that deductions from dividend income in the UK constituted payment of income tax by the shareholder. The court in the referenced case held that the assessee was entitled to relief under section 49D due to tax paid at the standard rate.

The High Court of BOMBAY, following established practice, accepted the findings of the Calcutta High Court and ruled in favor of the assessee in both references. It was held that the dividend incomes accrued in non-taxable territories and tax was paid in those countries, making the assessee eligible for relief under section 49D. The court affirmed that the assessee met the conditions for deduction from Indian income-tax as per the provisions of section 49D.

Therefore, the court's findings in both references affirmed the entitlement of the assessee to relief under section 49D for the respective dividend incomes accrued in foreign countries where tax had been paid, aligning with the provisions of the Indian Income-tax Act. The revenue was directed to pay the costs incurred in the proceedings.