Court upholds taxation of Rs. 3,058 as 'dividend' for assessment year 1958-59, denies exemptions and relief.

Walchand And Company Limited Versus Commissioner Of Income-Tax

Walchand And Company Limited Versus Commissioner Of Income-Tax - [1993] 204 ITR 146 Issues Involved:
1. Taxation of Rs. 3,058 as 'dividend' under section 2(6A)(e) of the Indian Income-tax Act, 1922 for the assessment year 1958-59.
2. Exemption of dividend earned from the trust-company under sub-clause (iii) of section 2(6A)(e) of the Indian Income-tax Act, 1922 for the assessment years 1958-59, 1960-61, and 1961-62.
3. Exemption of dividend earned from the trust-company under section 2(22)(e) of the Income-tax Act, 1961 for the assessment years 1962-63 to 1968-69.
4. Claim of exemption from double taxation for the assessment years 1958-59 to 1968-69.

Detailed Analysis:

1. Taxation of Rs. 3,058 as 'dividend' under section 2(6A)(e) of the Indian Income-tax Act, 1922 for the assessment year 1958-59:
The court examined whether the sum of Rs. 3,058 was rightly taxed as 'dividend' under section 2(6A)(e) of the Indian Income-tax Act, 1922. The assessee had received a temporary advance of Rs. 2,49,745 from the trust-company, which was repaid within the same fiscal year. The Income-tax Officer treated this advance as deemed dividend, and the Tribunal upheld this decision, reducing the taxable amount to Rs. 3,058. The court confirmed that the amount was rightly taxed as 'dividend' under the said section.

2. Exemption of dividend earned from the trust-company under sub-clause (iii) of section 2(6A)(e) of the Indian Income-tax Act, 1922 for the assessment years 1958-59, 1960-61, and 1961-62:
The assessee contended that the dividends received from the trust-company should be exempt under sub-clause (iii) of section 2(6A)(e). However, the Tribunal found that the conditions for exemption were not met. The court agreed with the Tribunal, noting that the assessee's case did not fall within the wording of the sub-section. Therefore, the dividends were not exempt under this provision for the assessment years 1958-59, 1960-61, and 1961-62.

3. Exemption of dividend earned from the trust-company under section 2(22)(e) of the Income-tax Act, 1961 for the assessment years 1962-63 to 1968-69:
For the assessment years 1962-63 to 1968-69, the assessee claimed exemption under section 2(22)(e) of the Income-tax Act, 1961. The Tribunal found that the provisions of section 2(22)(e) were almost identical to those of section 2(6A)(e) of the 1922 Act. The court held that the assessee did not qualify for the exemption as the temporary advance had been repaid and the dividends were paid directly to the assessee. Thus, the dividends were not exempt under section 2(22)(e) for these years.

4. Claim of exemption from double taxation for the assessment years 1958-59 to 1968-69:
The assessee argued that the dividends should be exempt from double taxation based on the general principle that the same income cannot be taxed twice. The court referred to the Supreme Court's judgment in Laxmipat Singhania v. CIT, which stated that double taxation is permissible if the legislative intent is clear. The court found that the legislative intent was clear in defining dividends to include advances or loans, and the exclusion clauses did not apply to the assessee's case. Therefore, the assessee was not entitled to relief from double taxation.

Conclusion:
For the assessment year 1958-59:
- Question No. 1: In the affirmative and against the assessee.
- Question No. 2: In the negative and against the assessee.
- Question No. 3: In the negative and against the assessee.

For the assessment years 1960-61 and 1961-62:
- Question No. 1: In the negative and against the assessee.
- Question No. 2: In the negative and against the assessee.

For the assessment years 1962-63 to 1968-69:
- Question No. 1: In the negative and against the assessee.
- Question No. 2: In the negative and against the assessee.

There shall be no order as to costs.