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TMI Blog1974 (6) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer was of the view that, since in the case of an insurance company, the entire income is assessed as from business regardless of the separate sources from which such income were derived, the sum of Rs. 4,85,802 could not be regarded as dividend income as such in the hands of the assessee. All the same the Income-tax Officer took into consideration the Board's instructions contained in Board's Circular No. 15-D (XXXIII-10) of 1964 dated June 17, 1964, and considered the question of granting relief. It may be mentioned at this stage that this Board's circular interpreted the relevant provisions of the Finance Act, 1963, to the effect that companies like that of the assessee would be entitled to the rebate of Corporation tax in respect of dividends received by them though the total income is considered under one single head of business regardless of the separate sources from which they were received. But it contained also a direction that while giving such rebate the proportionate management expenses incurred by the company should be reduced for the purpose of arriving at the 45% rebate. Purporting to give effect to this Board's circular the Income-tax Officer held that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer granted rebate of the entire Corporation tax at 55%. The assessee filed an appeal to the Appellate Assistant Commissioner contending that it was entitled to a rebate of 55% on the entire dividend income received by it and not merely on the dividend income as reduced by the proportionate expenses incurred by the company. The Appellate Assistant Commissioner did not agree with this contention and took the view that in the case of the general insurance company the income is assessed under the head of business only and the breaking up of such income into income from dividend or from other sources is not permissible under the statute, and that, therefore, the assessee was not entitled to any rebate. But, on the ground that the Income-tax Officer had purported to give effect to the Board's circular referred to above, he considered that there was no case for enhancement and in that view, dismissed the appeal. On a further appeal the Tribunal held that the assessee was entitled to the rebate of Corporation tax under the Finance Act, 1964, on the dividend income, that there was nothing in the Finance Act which permitted the deduction of management or other expenses a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income as consists of dividends from any other Indian company ... shall be allowed ......" It was the contention of the learned counsel for the revenue that in the case of general insurance business in view of the special basis of computation of profits of insurance business under the provisions of the Income-tax Act, 1961, no portion of the total income could be claimed as dividend income from any other Indian company and the entire total income shall be deemed to be the income from business. It is not in dispute that in both the assessment years the assessee in fact received dividend income from other companies and while submitting the returns of income also showed the different sources separately. We do not find anything in the language of the relevant provision in the Finance Act to warrant an interpretation that the said provision will apply only to a company which is entitled to submit a return of its income and to be assessed in respect of such income under separate headings or sources. If we have to accept the argument of the learned counsel for the revenue we would have to read the relevant provision as "in the case of every company other than the general insuran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the dividend income and not to any head of income, and, therefore, the assessee would be entitled to a rebate on the dividend income under the provisions of the Finance Act. In this connection we may also usefully quote the passage from Kanga and Palkhivala on The Law and Practice of Income-tax, VI edition, volume I (page 1116) which reads as follows : " But computation of income, and determination of the rate and quantum of tax, are separate and independent concepts and processes. Section 44 which enjoins the computation of income of an insurance company without reference to the different heads of income, has obviously a direct bearing on the process of computation of income ; but it has no bearing on the determination of the rate of tax which is prescribed by the relevant Finance Act. Consequently, a non-life insurance company is entitled to the benefit of the lower tax rates contained in the various Finace Acts in respect of dividends received from Indian companies. The dividend income does not cease to be dividend income because, for the purpose of computation of income, it is treated as part of the profits of non-life insurance business under this rule." We, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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." It was the contention of the assessee before the Income-tax Officer that under this provision of the Finance Act the entire dividend income should be exempted from the levy of super-tax. Though this interpretation was accepted by the Income-tax Officer, in calculating the rebate the gross dividend income was not taken but the amount as reduced by proportionate expenses alone was taken for purposes of the rebate. This was again on the basis of the interpretation placed by the Board in its circular above referred to. The learned counsel for the revenue attempted to emphasise the words "dividend received by it" and in particular the words "received by it" in clause (iv) of section 99(1) as suggesting that the rebate is only on the net dividend excluding the expenses incurred and not the gross dividend. Even this argument is not available to the learned counsel now in view of the deletion of the words "received by it" by the Finance Act, 1968, with retrospective effect. While deleting the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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