9911796707
TMI Blog1986 (6) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian company. The dividend received from the Indian company was grossed up to Rs. 1,35,76,257. On completion of the income-tax assessment of the Indian company, the assessment of the assessee for the said assessment year was reopened under section 34(1)(b) of the Indian Income-tax Act, 1922, and the computation of the dividend income of the assessee was made as follows : From the total income of the Indian company which was assessed at Rs. 5,42,46,753, losses carried forward from the previous year of Rs. 66,33,021 was deducted and the taxable balance was determined to be Rs. 4,76,12,732. Profits exempt under section 15C of the Act were computed at Rs. 1,28,18,538 and the excess depreciation allowed was ascertained at Rs. 2,12,76,702. The total sum out of which dividend was declared was held to be Rs. 8,17,08,972, the percentage of the taxable profits to the total sum out of which dividend was declared was calculated at 58.27% and the grossing up factor was held to be 1.1804. The net dividend in the hands of the assessee was grossed up to Rs. 1,27,41,631. The order under section 34 of the Act of 1922 was passed on September 27, 1962. Being aggrieved, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lculated at 78.78% and the grossing factor was calculated at 1.261. The net dividend was grossed up to Rs. 1,36,14,852. Thereafter, the Income-tax Officer sought to rectify the last assessment order made pursuant to the direction of the Tribunal under section 154 of the Income-tax Act, 1961. He held that in respect of the Indian company, the loss carried forward computed at Rs. 66,33,021 was to be added to the total sum out of which dividend had been declared computed earlier at Rs. 6,04,32,270 under section 16(2) of the Indian Income-tax Act, 1922 and, thereafter, the percentage of taxable profits as determined earlier, namely, Rs. 4,76,13,732, to the total sum out of the dividend was declared had to be calculated. On this basis, the dividend had to be grossed up at 71%. It was found also that exemption under section 15C of the Act should have been granted at a percentage different from that allowed earlier. The Income-tax Officer found that there had been undercharge of tax of Rs. 5,00,532.28 and the order of assessment was rectified by him under section 154 of the Income-tax Act, 1961, on June 28, 1971. Being aggrieved, the assessee preferred an appeal before the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter in respect of the said loss did not stand concluded by the order of the Tribunal. It was contended on behalf of the assessee before the Tribunal that the Tribunal had applied its mind and held that the dividends came out of the current year's profits. The Tribunal only directed the Income-tax Officer to recompute the grossing up factor in the light of its observations. The Income-tax Officer was not entitled to anything more on such directions of the Tribunal. It was contended that the loss carried forward, viz., Rs. 66,33,021, was not relevant to the grossing up factor of dividend within the meaning of section 16(2) of the Indian Income-tax Act, 1922, as the brought forward loss could not be treated either as allowance made in the computation of its profits nor was it an income on which income-tax was not payable. The sum out of which dividends had been declared came entirely out of the current year's profits and there was no question of increasing of such a sum by the loss brought forward. It was contended that the rectification was barred by time and in any event was not permissible in view of the debatable issues involved. The Tribunal held that the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 16 of the Indian Income-tax Act, 1922, it was submitted, were clear and the loss of Rs. 66,33,021 necessarily had to be included in the total sum out of which dividend had been paid by the Indian company inasmuch as the same were either profits and gains of the Indian company not included in its total income or was attributable to an allowance given in computing the profits and gains of the Indian company. The learned advocate for the assessee contended to the contrary. He submitted that the order passed by the Income-tax Officer on June 29, 1967, was limited to the direction of the Tribunal to recompute the dividend income of the assessee in terms of the order of the Tribunal passed on November 3, 1966, where the Tribunal noted specifically that the loss carried forward from earlier years, namely, Rs. 66,33,021, had been deducted from the total income of the Indian company for the year in question, that no part of the dividend declared by the Indian company came out of its earlier years' profits and that the dividend had been declared by the Indian company out of the balance of its profits and after charging further depreciation. The learned advocate for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant accounting year and had paid dividend out of its accumulated profits, the shareholder who received such dividend was not entitled to the benefit of grossing up under section 16(2) and the consequential relief under section 18(5) of the Act of 1922. This decision is also of little relevance to the facts before us. (d) Kooka Sidhwa Co. v. CIT [1964] 54 ITR 54 (Cal). This decision of a Division Bench of this court was cited for the proposition that where a higher appellate authority such as the Appellate Assistant Commissioner or the Tribunal had directed or ordered an Income-tax Officer to do something in respect of an assessment by way of revision or amendment, the Income-tax Officer must be held to be acting under section 23 of the Indian Income-tax Act, 1922, and from such an order, the assessee would have a right of appeal. (e) Gopi Lal v. CIT [1967] 65 ITR 477 (Punj). This decision of the Punjab High Court was cited for the proposition that an appeal lay to the Appellate Assistant Commissioner against an order of the Income-tax Officer, made in pursuance of a direction of the Tribunal under section 33(5) of the Indian Income-tax Act, 1922, reallocating the profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal assessment order. (i) Jeewanlal (1929) Ltd. v. CIT [1977] 106 ITR 33 (Cal). In this case, it was held by a learned judge of this court that there cannot be any merger of the order of the appellate authority with the order of the subordinate authority. It was held in the facts that where the Appellate Assistant Commissioner had directed the Income-tax Officer to consider the claim of the assessee and to grant him permissible rebates and allowances and the Income-tax Officer in carrying out such directions acted erroneously or illegally, it could not be said that such error or illegality formed part of the order of the Appellate Assistant Commissioner. The same would be an independent order subject to the revisional powers of the Commissioner. (j) Mettur Chemical Industrial Corporation Ltd. v. CIT [1977] 110 ITR 832. In this case, it was held by a Division Bench of the Madras High Court that where proceedings for reassessment had been completed under section 147 of the Act of 1961, it could not be held that the entire order of assessment originally passed ceased to exist and that the only order which remained in force was the reassessment order. The limitation for initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax charged) for the financial year in which the dividend is paid, credited or distributed, or deemed to have been paid, credited or distributed, were deducted therefrom, be equal to the amount of the dividend : Provided that when the sum out of which the dividend has been paid, credited or distributed or deemed to have been paid, credited or distributed includes (i) any profits and gains of the company not included in its total income, or (ii) any income of the company on which income-tax was not payable, or (iii) any amount attributable to any allowance made in computing the profits and gains of the company, the increase to be made under this section shall be calculated only upon such proportion of the dividend as the said sum after deduction of the inclusions enumerated above bears to the whole of that sum. " Under the proviso to the said section, for the purpose of computing the total income of the assessee out of which dividends would be deemed to have been paid or distributed any profits or gains not included in the total income of the company, any income of the company on which income-tax was not payable and also any amount attributable to any allowance made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on this point. For the reasons aforesaid, we answer question No. 2 in the affirmative and in favour of the assessee and we decline to answer question No. 1. The learned advocate for the Revenue brought to our notice the earlier judgment of this court in CIT v. Shell Petroleum Co. Ltd. dated May 19, 1986, in the case of the same assessee in a reference under section 256(1) of the Income-tax Act, 1961, marked as Income-tax Reference No. 420 of 1975 in CIT v. Shell Petroleum Co. Ltd. [1987] 164 ITR 346 for the same assessment year. In the said reference this court decided, whether the orders of rectification, which are also before us in this reference, passed at a time when the Income-tax Act, 1961, was in force were appealable orders or not as in the assessment year concerned the Act of 1922 was in force. It was held that the Income-tax Officer had jurisdiction to rectify the order of assessment under section 154 of the Act of 1961, though in the assessment year concerned, the Act of 1922 was in force and that in fact he did so. It was further held that the order under section 154 of the Act of 1961 was admittedly an appealable order from which appeals had been filed. In that r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
