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TMI Blog2019 (1) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... staying operation of the aforesaid provisions generally and in particular in relation to the Assessment Year 2017-2018. It is submitted that the provisions under challenge are arbitrary, ultra vires and violative of Article 14 of the Constitution of India. 2. Section 10(34) of the Act reads as under:- "10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- XXXX 34. any income by way of dividends referred to in section115-O: Provided that nothing in this clause shall apply to any income by way of dividend chargeable to tax in accordance with the provisions of section 115BBDA." Section 10(34) grants exemption to income by way of dividend referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) of clause (23C) of Section 10; or (iii) a trust or institution registered under Section 12A or Section 12AA." Section 115 BBDA is a non-obstante provision that would apply and prevail over Section 10(34) of the Act. Section 115 BBDA states that notwithstanding anything contained in the Act, where the total income of a specified resident assessee, includes income by way of dividend declared, distributed or paid by domestic companies exceeding Rs. 10 lacs, income tax payable by such assessee shall be the aggregate of clauses (a) and (b). As per clause (a), the specified assessee would be liable to pay tax at the rate of 10% on the amount of income by way of dividend in aggregate of exceeding Rs. 10 lacs. Clause (b) states that the spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcludes from its ambit any domestic company. Prior to 14.09.2018, the provision was not applicable to association of persons. 5. The contention that the provision lacks 'base' is founded on a misrepresentation and misreading of clause (a) of the sub-section (1) of Section 115 BBDA of the Act. The argument proceeds on the premise that clause (a) of sub-section (1) of Section 115 BBDA is ambiguous and vague, as the provision lacks certainty and does not specify whether tax at the rate of 10% would be applicable on the entire dividend income, if it exceeds Rs. 10 lacs or would be applicable only to the dividend over and above i.e. in excess of Rs. 10 lacs. 6. We do not find any merit in the said contention as, according to us, clause (a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m who is resident in India, at the rate of ten per cent The taxation of dividend income shall be on gross basis and no deduction of any expenditure or allowance or set off of loss shall be allowed in computing said income. 14.3 The taxation of dividend income shall be on gross basis and no deduction for any expenditure or allowance or set off of loss shall be allowed in computing the income by way of dividend. 14.4 Applicability: This amendment takes effect from 1st of April, 2017 and will, accordingly, apply in relation to assessment year 2017-18 and subsequent assessment years." 7. In the context of clause (a) to Section 115 BBDA(1), we have no doubt in our mind that the legislation, as framed, stipulates that tax at the rate of 10% wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot not require that every law must have universal application for all persons who are not by nature, attainment or circumstances in the same position, as varying needs of different classes of persons often require separate treatment. It is inexpedient and incorrect to think that all laws are uniformly applicable to all people in one go. Earlier in State of W.B. v. Anwar Ali Sarkar AIR 1952 SC 75, it was observed that if the legislature takes care to reasonably classify persons for legislative purposes and if it deals equally with all persons belonging to a well-defined class, it is not open to the charge of denial of equal protection on the ground that the law does not apply to other persons. 10. Contention of the petitioner that the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U.P. Vs. Deoman Upadhaya, AIR 1960 SC 1125, The State of Jammu and Kashmir Vs. Trilok Nath Khosa & Ors, (1974) 1 SCC 19, R.K. Garg & Ors Vs. Union of India & Ors., (1981) 4 SCC 675, State of M.P Vs. Rakesh Kohli & Ors., (2012) 6 SCC 312 and Namit Sharma Vs. Union of India, (2013) 1 SCC 745). 12. Pertinently, we may note that companies have to pay dividend tax whenever they pay dividend to the shareholders. This would explain and justify the reason why companies have been left out from the purview of Section 115BBDA. If companies were liable to pay tax under this section, it would have led to cascading effect when dividend is finally paid to the shareholders, be it, an individual, HUF or a firm i.e. the 'specified assessee' who are liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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