Gross dividend taxation and daily allowance exemption denied where statutory conditions and binding precedent controlled the outcome

Gross dividend declared by Ceylon companies was held taxable on the full amount, the issue having been treated as settled by an earlier binding decision and the reference answered consistently with that precedent. The allowance received by the assessee was treated as a daily allowance, but exemption under section 10(14) was denied because, as an ordinarily resident director working at the Bombay office, the assessee did not satisfy the statutory conditions under the Explanation. Both questions were answered against the assessee and in favour of the Revenue.

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Issues: (i) Whether the gross dividend declared by the companies in Ceylon was chargeable to tax and not the net amount after deduction of tax at source and the cost of foreign exchange entitlement certificate; (ii) Whether the allowance received by the assessee was exempt under section 10(14) of the Income-tax Act, 1961.

Issue (i): Whether the gross dividend declared by the companies in Ceylon was chargeable to tax and not the net amount after deduction of tax at source and the cost of foreign exchange entitlement certificate.

Analysis: The question was treated as concluded by an earlier binding decision on the same controversy, and the reference was answered consistently with that view.

Conclusion: The gross dividend was taxable, and the answer was in favour of the Revenue.

Issue (ii): Whether the allowance received by the assessee was exempt under section 10(14) of the Income-tax Act, 1961.

Analysis: The allowance was construed as a daily allowance. The assessee, being ordinarily resident at Gwalior and performing duties as director at the Bombay office, did not satisfy the requirement for exemption in view of the Explanation to section 10(14) of the Income-tax Act, 1961.

Conclusion: The allowance was not exempt under section 10(14), and the answer was in favour of the Revenue.

Final Conclusion: Both questions were answered against the assessee, and the reference was disposed of accordingly.

Ratio Decidendi: Exemption under section 10(14) is unavailable where the allowance does not fall within the statutory scope as explained by the provision, and taxable dividend income must be assessed in accordance with the governing precedent on the point.

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