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TMI Blog1993 (8) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... x deducted from the dividends declared to be distributed to the shareholders. The view of the Assessing Officer was that under rule 2(i)(b) of the First Schedule, the amount of income-tax if any payable on the distribution of dividends should be reduced from the total income arrived at after making adjustments as provided for in Rule 1. It was the interpretation placed upon this sub-rule (ii)(b) by the Surtax Officer and approved of by the Commissioner of Income-tax (A) that is now the subject matter of appeal before us. 2. For income-tax purposes, the income assessed was Rs. 1.30 crores on which the tax payable was determined at Rs. 79,90,412. This sum was to be deducted from the total income determined in income-tax purposes to arrive at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in the total income ; (b) the amount of income-tax, if any, payable by the company under the provisions of the annual Finance Act, with reference to the relevant amount of distributions of dividends by it. Explanation : In this sub-clause, the expression " the relevant amount of distributions of dividends " has the meaning assigned to it in the Finance Act of the relevant year. " In the First Schedule to the Surtax Act of 1964, the rules for computing the chargeable profits were mentioned. In rule 1, certain items of income and profits and gains and other sums were directed to be excluded from the total income determined for the purpose of income-tax assessment. From the income so arrived at after exclusions, sub-rule 2 says certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned here is the Finance Act, 1984. This Finance Act did not levy any tax on the distribution of dividends. Therefore, the question of any income-tax payable on the distribution of dividends does not arise or did not arise. There was a time when companies were declaring excess dividends and with a view to discourage the declaration of excess dividends, the Government levied some tax on such excess declaration of dividends by an Act called "Excess Dividends Act of 1964". That Act has now been withdrawn and the tax on excess dividends was abolished. Thereafter no tax on distribution of dividends was levied by any Finance Act as far as our knowledge goes and much less by the Finance Act, 1984 which is the relevant Act for our present purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since that is not the case here, the interpretation placed upon this provision by the revenue does not appear to us to be in accord with legislative intent. The tax deducted at source from the dividends paid to the shareholders is confused for the tax payable by the company under the Finance Act with reference to the amount of distribution of dividends. This amount of Rs. 1,88,929 not being the tax payable by the company on its own but paid by it on behalf of the shareholders cannot be excluded from the amount of income-tax payable by the company in respect of its total income. 4. There is a purpose for excluding this amount from the income-tax payable on its income. Let us take clause (a) of (i) first. It says the amount of income-tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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