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TMI Blog1984 (9) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------------------------------------------------------------------------------------------------------------- Sl. No. Type of Date of Amount Date of dividend declaration Rs. remittance -------------------------------------------------------------------------------------------------------------------------------------------------- 1. Final 31-7-1975 50,40,000 Rs. 25,40,000 on 3-9-1976 Rs. 25,40,000 on 22-7-1977 2. Interim 6-11-1975 21,00,000 25-3-1976 3. Final 31-5-1976 79,80,000 Rs. 50,40,000 on 21-9-1976 Balance on 22-7-1977 4. Interim 27-10-1976 50,40,000 29-11-1976 5. Interim 7-3-1977 56,70,000 12-4-1977 6. Interim 26-5-1977 56,70,000 5-9-1977 -------------------------------------------------------------------------------------------------------------------------------------------------- We may mention that the tax was deducted from the dividends only at the time of remittance. 4. The assessee filed returns showing the income from the dividends in the respective years they were remitted. The assessing authority, however, included the dividend income in the respective years the dividend was declared. This method was followed both for the interim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent outside India, except where exemption is granted by the RBI. Section 9(1)(e) also places a bar in crediting any sum to a non-resident. Reference is made to section 9(5), which states that securities include dividends also. Section 19(1)(a) of the FERA prevents taking or sending any security to any place outside India. 9. Now, the question is, are these provisions to be so construed that they override the provisions of section 8 of the Income-tax Act. We do not think so. Section 8 is a special provision, dealing with the point of accrual of income from dividend. As per this section, income accrues on the date of declaration of dividend. That date is the annual general meeting of the shareholders. The non-resident is also a shareholder. In the case of a non-resident, permission has to be taken from the RBI under section 29 of the FERA to hold share in Indian companies. This section, in substance, prevents a company not incorporated in India from acquiring or purchasing the shares of an Indian company. It applies to companies having more than 40 per cent of interest in an Indian company. Section 29(4)(a), prevents the continuing of holding of such shares unless the RBI gives spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the Reserve Bank, as the case may be, may permit to be paid; and (c) for the purpose of considering whether or not to grant such permission, the Central Government or the Reserve Bank, as the case may be, may require the person entitled to the benefit of the judgment or order and the debtor under the judgment or order, to produce such documents and to give such information as may be specified in the requisition. (4) Notwithstanding anything contained in the Negotiable Instruments Act, 1881 (26 of 1881), neither the provisions of this Act or of any rule, direction or order made thereunder, nor any condition, whether expressed or to be implied having regard to those provisions, that any payment shall not be made without permission under this Act, shall be deemed to prevent any instrument being a bill of exchange or promissory note. " It will be seen from the above that sub-section (3) is very categorical. It says that neither the provisions of the Act, i.e., FERA, nor terms in the contract will prevent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied with. Therefore, the case can be distinguished on facts. 12. Alternatively, it can also be held that the permission given under section 29(4), allowing the assessee to hold shares by implication, grants the assessee an exemption to enjoy the dividend which arises from the holding of the shares. After all, holding of shares is not an end in itself. It is only a means to have the income by way of dividends, in respect of those shares. So, when the RBI has permitted the assessee to hold shares, it has also by implication permitted the assessee to enjoy the income arising thereof. It means that whenever a dividend has been declared by an Indian company, the RBI is bound to grant permission for remittance of the dividend. Therefore, the provisions in FERA have to be construed as procedural for remitting the dividend under these circumstances. A procedural part for remittance cannot be held to suspend accrual of income. 13. The Commissioner (Appeals) had decided the issue, based on authorities given under the Indian Income-tax Act, 1922 ('the 1922 Act'). The expression used in the 1922 Act is different from the expression found in section 8 of the 1961 Act. In the 1922 Act, the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider it wholly essential that each of the three assessments should be set aside and that on this issue each of the three assessments should go back to the return stage. " Thus, he had set aside the assessments and sent the same back to the assessing authority to proceed from the return stage. We uphold the setting aside of the assessment orders ; however, instead of the principle laid down by the Commissioner (Appeals) that the date of permission granted by the FBI would be the date of accrual, we would direct the ITO to re-do the assessments by applying the principles we have laid down in the above paragraphs. 17. In the above paragraphs, we have given our finding on the issue raised before us. While we hold that our finding, in our considered opinion, is the correct position in law, we feel bound to refer to certain practical aspects. Now, it would be seen that in some years the income would accrue in one year, but the corresponding tax would be deducted in the following year. As section 199 of the Act reads, it may not be possible to get the credit for the tax deducted at source in the year in which the income accrues and is assessable. Consequently, when the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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