1998 (4) TMI 55 - HC - Income Tax

High Court rules against Tribunal on gross dividend treatment & double income-tax relief under Income-tax Act.

Commissioner Of Income-Tax Versus United India Insurance Co. Ltd.

The High Court ruled against the Tribunal's decision, emphasizing the treatment of gross dividend as income and the applicability of double income-tax ... Income, Dividend, Accrual Of Income Issues:1. Inclusion of tax deducted at source by foreign Governments in the total income of the assessee.2. Interpretation of whether the tax deducted at source should be deemed as income of the assessee.3. Applicability of previous court decisions and the Supreme Court's ruling in similar cases.4. Consideration of double income-tax relief provisions under the Income-tax Act.Issue 1: Inclusion of tax deducted at source by foreign GovernmentsThe case involved the United India Insurance Company Limited, where the Inspecting Assistant Commissioner included a sum representing tax deducted at source by foreign Governments in the total income for assessment year 1982-83. The dispute arose as the assessee disclosed net dividend and net interest in its profit and loss account submitted to the Controller of Insurance.Issue 2: Interpretation of tax deducted at source as incomeUpon appeal, the Commissioner held that the tax deducted at source by foreign Governments should not be considered as income of the assessee, favoring the assessee's stance. The Tribunal, relying on previous decisions, upheld the Commissioner's order, stating that only the net dividend and net interest income from foreign countries after deducting tax should be brought to tax.Issue 3: Applicability of previous court decisionsThe Tribunal referred a question of law to the High Court regarding the correctness of its decision on taxing only the net dividend and net interest income after deducting tax. The High Court highlighted the relevance of the Supreme Court's ruling in CIT v. Clive Insurance Co. Ltd. (1978) and a Division Bench decision in A. F. W. Low v. CIT (1995) that emphasized the treatment of gross dividend as income.Issue 4: Double income-tax relief provisionsThe Division Bench decision emphasized the provisions for double income-tax relief under section 91 of the Income-tax Act, stating that gross dividend alone should be regarded as income accrued or received by the assessee. The High Court concluded that the Tribunal erred in law by not considering these provisions, and the question was answered accordingly.In conclusion, the High Court ruled against the Tribunal's decision, emphasizing the treatment of gross dividend as income and the applicability of double income-tax relief provisions. The case was disposed of without costs.