9911796707
TMI Blog1996 (8) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... ether. In Reference No. 187 of 1992, the assessment year involved is the assessment year 1980-81. For the said assessment year, the assessee claims Rs. 3,87,464 as deduction under section 80K of the Income-tax Act being 100 per cent. of the dividend received from Straw Products Ltd. The claim has been made by the assessee on the basis of the provisional certificate granted by the Assessing Officer under section 197(3) dated July 14, 1978, for the year ending December 31, 1977. Since the assessment in the case of Straw Products Ltd. was completed, the Assessing Officer ignored the provisional certificate granted by the Assessing Officer and proceeded to assess the assessee in the light of the assessment order and worked out the allowable d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... July 14, 1978. On a scrutiny of the assessment records of Straw Products Ltd. it appeared that the company declared dividend of Rs. 60,47,632 on June 29, 1978. The Assessing Officer, therefore, viewed that the said dividend was declared out of the profit of the company earned during the period relevant to the assessment year 1978-79, the assessment for which was completed on September 25, 1981. Therefore, the question of allowing relief under section 80K with reference to the provisional certificate under section 197(3) of the Act did not arise at that stage. The Assessing Officer was of the view that whatever relief allowable under section 80K of the Act was to be determined from the facts and figures of the completed assessment for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate issued under section 197(3) of the Act. But as the certificate suggests it is a provisional certificate subject to rectification, the Assessing Officer is justified in ignoring the provisional certificate if the assessment of the company is completed and the assessee shareholder has to be assessed in terms of the figure arrived at in such assessment of the company. On the other hand, the contention advanced on behalf of the assessee is that since the assessment of the shareholders involves cumbersome and time consuming complicated procedure, such assessment of the shareholders has to be done in accordance with the scheme enshrined in the Income-tax Act and the rules framed thereunder. In fact, the argument is that even if the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before paying the dividend to the shareholders or issuing any cheque or warrant in respect thereof, make an application to the Income-tax Officer to determine the appropriate proportion of the dividend to be deducted under the provisions of section 80K, and on such determination by the Income-tax Officer, no tax shall be deducted on such proportionate amount. Rule 20 framed under the Act provides for the computation of the portion of dividend attributable to profits and gains from new industrial undertakings or ships or hotel business. Rule 20 in fact provides the method and manner of computation of portion of dividend attributable to profits and gains for which deduction is allowable under section 80K of the Act. The provisions extracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the assessment of the shareholders under section 80K of the Act are dependent on each other by methodology provided in rule 20 of the rules framed under the Act. The certificate issued under section 197(3) of the Act is the only valid document on the basis of which the claim for deduction under section 80K is required to be made. So long as the certificate is not rectified, modified or changed, the said certificate holds the field and the Assessing Officer is required to assess the shareholders in terms of the provision of the provisional certificate. The Assessing Officer cannot change the ratio as determined in the certificate merely on the ground that the assessment of the company who happened to fall within his jurisdiction is compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessment order of the shareholders is also required to be modified. So in order to avoid multiplicity of the proceedings, the provisions of rule 20 of the Income-tax Rules have been engrafted so as to allow exemption given to the shareholders at a later date than enjoyed by the company. In the present case, the shareholders of the company happen to be located within the jurisdiction of a particular Assessing Officer. This may be an exception and it may not be a case in general. No doubt if the assessment of the profit of the company has been worked out under section 80J, the shareholders can be assessed in the subsequent year in terms of such assessment order but since there are thousands and lakhs of shareholders falling in the jur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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