1984 (9) TMI 43 - HC - Income Tax

Court rules against assessee in set-off case for deemed dividends vs. declared dividends.

The court ruled against the assessee, the executor of her late husband's estate, in a case regarding the entitlement to set-off deemed dividends against ... Deemed Dividend, Dividends Issues:Entitlement to set-off of deemed dividends against dividends actually declared.Analysis:The judgment pertains to a reference made by the Income-tax Appellate Tribunal regarding the entitlement of the assessee to set-off deemed dividends against dividends actually declared for the assessment years 1967-68, 1968-69, and 1969-70. The assessee, executor of her late husband's estate, claimed set-off of actual dividends received against dividends treated as deemed under section 2(22)(e)(iii) of the Income Tax Act, 1961. The Income Tax Officer (ITO) rejected the claim, a decision upheld by the Appellate Authority and the Tribunal. The key issue revolved around whether dividends paid by the company could be considered as set-off against previously paid deemed dividends. The Tribunal's detailed judgment for an earlier assessment year revealed that no set-off had occurred as the assessee had repaid the entire debt, converting the account into a credit balance, making any set-off impossible. The statutory provisions necessitated a set-off against amounts receivable by the company, which was not feasible in this case. The Tribunal found that the exclusion of dividends from the assessee's income was neither permissible nor possible due to non-compliance with the requirements. The court emphasized that clear and specific requirements must be met, and in this instance, they were not fulfilled.The court dismissed the assessee's argument of potential double taxation, stating that it did not justify a strained interpretation of the legislative provisions. The judgment highlighted that the exclusion of dividends was not warranted based on the facts presented, leading to a ruling against the assessee and in favor of the Revenue. Reference to previous cases, such as CIT v. Badiani, Tata Iron & Steel Co. Ltd. v. Upadhyaya, and CIT v. Narasimhan, did not sway the court's decision as they were deemed irrelevant or inapplicable to the current matter. The court concluded that the phraseology of the legislation was clear, and based on the facts and legislative provisions, the assessee was not entitled to set off deemed dividends against the dividends actually declared in the three assessment years. The court ordered the assessee to pay the costs of the reference to the Revenue.