Dividend delay with no revenue loss defeats additional income-tax liability under the Income-tax Act

Where dividend was declared and distributed after the prescribed period because the audit was completed later, the Tribunal found that the delay caused no detriment to the Revenue. On that factual basis, section 104(2) of the Income-tax Act, 1961 applied, since payment of dividend within time would not have produced any benefit to the Revenue. The Income-tax Officer therefore could not validly make an order under section 104(1), and the assessee was not liable to additional income-tax.

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Issues: Whether the assessee was liable to additional income-tax under section 104 of the Income-tax Act, 1961, when the dividend was declared and distributed after the period prescribed but the Revenue suffered no benefit-loss.

Analysis: The assessee had distributable income and the required percentage of dividend was not declared within the stipulated period because the audit was completed only later and the dividend was approved and distributed thereafter. The finding of fact accepted by the Tribunal was that the delayed declaration and distribution caused no detriment to the Revenue. Section 104(2) permitted relief where payment of a dividend within the prescribed period would not have resulted in any benefit to the Revenue, and the Tribunal's view that the Income-tax Officer could not have made an order under section 104(1) was supported by that finding.

Conclusion: The assessee was not liable to additional income-tax under section 104 of the Income-tax Act, 1961.

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