Dividend income must be included in advance tax estimates, and omission may trigger penal interest under the 1922 Act.

Dividend income of a resident assessee is includible in the estimate of advance tax under section 18A(2) of the Income-tax Act, 1922, because it is not income on which tax is deducted at source under section 18. Sections 18(5) and 49B merely deem payment and grant credit for grossed-up dividend tax; they do not exclude dividend income from the estimate itself. Section 18A(6) therefore applies where the advance tax paid on the assessee's estimate falls below eighty per cent of the regular assessment tax attributable to income outside section 18, and short inclusion of dividend income can attract penal interest.

---

---

Issues: Whether dividend income of a resident assessee falls within the scope of section 18A(6) of the Income-tax Act, 1922, so as to require its inclusion in the estimate for advance tax and attract penal interest if the estimate is short by more than twenty per cent.

Analysis: Section 18A(1) requires advance payment of tax on income for which no provision is made under section 18 for deduction at the time of payment. Section 18A(2) permits an assessee to furnish his own estimate, and section 18A(6) levies interest where the advance tax paid on that estimate is less than eighty per cent of the tax determined on regular assessment, so far as it relates to income to which section 18 does not apply. Dividend income of a resident is not income in respect of which tax is deducted at source under section 18. The provisions in section 18(5) and section 49B merely create a deemed payment and credit in respect of income-tax on grossed-up dividend; they do not make dividend income a category on which tax is deducted at source under section 18. The expression in section 18A(6) must be read in context, and the exclusion operates only to the extent of tax already deducted or deemed paid under section 18, not to exclude the whole of dividend income from the computation.

Conclusion: Dividend income of a resident assessee is includible in the estimate under section 18A(2), and failure to include it can attract penal interest under section 18A(6). The answer is in the affirmative and in favour of the Revenue.

---