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TMI Blog1979 (2) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... erned in the reference with the assessment year 1965-66. The assessee derived income from business, dividend and capital gains. The question arose of the relief available to the assessee-company under s. 85A. Section 85A reads as follows: "85A. Deduction of tax on inter-corporate dividends.--Where the total income of an assessee being a company includes any income by way of dividends received by it from an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, the assessee shall be entitled to a deduction from the income-tax with which it is chargeable on its total income for any assessment year of so much of the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular to the aims and objects of the bill at the time when s. 85A was introduced in the I.T. Act. The aims and objects were indicated in the following words: " Clause 22 seeks to insert a new section 85A in the Income-tax Act to secure that income from dividends received by one company from another Indian company or a company which had made the prescribed arrangements for the declaration or payment of dividends within India will bear income- tax at the rate of 25%. Further, in the case of a company which has not made the prescribed arrangement for the declaration and payment of dividends within India and which receives dividend from an Indian company in which the public are not substantially interested and which is wholly or mainly engage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n para. 3 of the judgment given by the Judicial Member of the Income-tax Appellate Tribunal. Before the Tribunal once again the aim and intention of the legislature was emphasised. The arguments advanced on behalf of the assessee did not find favour with the Tribunal. In the opinion of the Tribunal, the use of the words " average rate of income-tax " cannot be with reference to dividend income since the entire dividend income was taxed in the hands of the company receiving the same at a uniform rate applicable in the case of that company. Accordingly, the Tribunal dismissed the appeal upholding the calculations made by the ITO which had been earlier confirmed by the AAC. It is from this decision of the Tribunal that the reference has been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the various definitions contained therein are to be applied unless the context otherwise requires. Under. s. 2(10)," average rate of income-tax " means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income. Now, the first question to be considered is whether there is anything special in the context of s. 85A which requires that this definition of average rate of income-tax is not to be applied to the section. According to Mr. Patil, since the words " average rate of income- tax " in s. 85A are followed by the words " on the income so included ", the definition which requires the average rate to be calculated on the basis of the total income will be required to be ignored and averag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given that interpretation which was favourable to the assessee and which would make available to the assessee the full relief on inter-corporate dividends as was available prior to the introduction of s. 85A. This certainly is a proper rule of interpretation. But the difficulty in applying such rule is that, in our opinion, bearing in mind the definition of " average rate of income-tax " to be found in s. 2(10), there is no warrant for holding that the meaning is not clear or that the phraseology is ambiguous or equivocal. In this view we are fortified by the observations to be found in the decision of the Calcutta High Court in ITO v. Raleigh Investment Co. Ltd. [1976] 102 ITR 616. It has been observed by a Division Bench of the Calcutta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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