Dividend restriction law suspended section 104 additional income-tax during the special statute's operation.

During the currency of the Companies (Temporary Restrictions on Dividends) Act, 1974, additional income-tax under section 104 of the Income-tax Act, 1961 could not be levied for shortfall in dividend distribution. The special dividend-restriction regime, supported by an overriding clause, was inconsistent with the revenue-protective purpose of section 104 and therefore suspended its operation for the relevant period. The later insertion of section 5A did not restore the application of section 104, because it still maintained restrictions on dividend payment during that period. No additional income-tax was consequently leviable on that footing.

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Issues: Whether, during the currency of the Companies (Temporary Restrictions on Dividends) Act, 1974, additional income-tax under section 104 of the Income-tax Act, 1961 could be levied on the assessee for shortfall in dividend distribution.

Analysis: The Companies (Temporary Restrictions on Dividends) Act, 1974 was enacted for temporary restrictions on dividend distribution in aid of capital formation and national economic development. Its scheme, including the prohibition on payment of dividends in excess of distributable profits and the overriding clause, was inconsistent with the revenue-protective object of section 104 of the Income-tax Act, 1961. The subsequent insertion of section 5A merely permitted declaration of a higher dividend but continued to restrict payment during the relevant period, and did not restore the operation of section 104. The two enactments were held to be repugnant to the extent that section 104 could not operate while the 1974 Act remained in force.

Conclusion: Section 104 of the Income-tax Act, 1961 could not be invoked against the assessee for the year under consideration, and no additional income-tax was leviable on that footing.

Ratio Decidendi: Where a later special statute contains an overriding dividend-restriction regime inconsistent with section 104 of the Income-tax Act, 1961, the earlier provision stands suspended for the period of the special statute's operation.

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