Dividend relief and refund appealability upheld where amalgamated bank traced taxed reserves into distributed dividends.

Dividend relief under section 236 was available where a transferee bank, after amalgamation and name change, distributed dividends from reserves traced to profits already taxed for periods ending before 1 April 1960. The amalgamation did not extinguish the transferee bank, so the earlier taxed profits could be followed into the reserve and treated as the source of the dividend; the word "actually" did not prevent such tracing. An order refusing this relief was also appealable under section 246(n) because the relief was, in substance, a refund of tax already paid. The assessee's entitlement and the maintainability of the appeal were both upheld.

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Issues: (i) Whether dividend relief under section 236 of the Income-tax Act, 1961 was available where the transferee bank, after amalgamation and change of name, distributed dividends out of accumulated reserves representing pre-1 April 1960 taxed profits; (ii) Whether an order refusing relief under section 236 was appealable as a refund order under sections 237 and 246(n) of the Income-tax Act, 1961.

Issue (i): Whether dividend relief under section 236 of the Income-tax Act, 1961 was available where the transferee bank, after amalgamation and change of name, distributed dividends out of accumulated reserves representing pre-1 April 1960 taxed profits.

Analysis: The relief under section 236 depended on the distribution of dividends out of profits and gains actually charged to tax for assessment years ending before 1 April 1960. The amalgamation was effected under section 44A of the Banking Regulation Act, 1949 read with section 394 of the Companies Act, 1956, and the transferee bank did not cease to exist; only its name changed. The taxed profits of the old banks had been carried to reserve and later formed part of the amalgamated reserve from which dividends were declared. The statutory requirement was satisfied by tracing the distributed dividends to those taxed profits, and the expression "actually" did not exclude such tracing.

Conclusion: Relief under section 236 was admissible, and the assessee was entitled to it.

Issue (ii): Whether an order refusing relief under section 236 was appealable as a refund order under sections 237 and 246(n) of the Income-tax Act, 1961.

Analysis: A refund under section 236 was held to be, in substance, a refund of tax already paid and did not differ in kind from a refund under section 237. The statutory regrouping of provisions in the 1961 Act, as compared with section 49BB of the Indian Income-tax Act, 1922, did not alter the essential character of the relief. Since the refusal of such refund affected the assessee's right to repayment, the order fell within the appealable category under section 246(n).

Conclusion: The appeal against the order under section 236 was maintainable.

Final Conclusion: The Tribunal's view was affirmed on both entitlement to dividend relief and maintainability of the appeal, and the reference was answered in favour of the assessee.

Ratio Decidendi: Where a corporate amalgamation results only in a change of name and not in extinction of the transferee company, pre-1960 taxed profits credited to reserve may be traced into the distributed dividends for the purpose of dividend relief, and an order refusing such relief is appealable as a refund order when the relief is, in substance, a statutory refund of tax already paid.

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