Dividend declaration delay and absence of revenue detriment barred an order under section 104

Dividend declared after the expiry of twelve months from the end of the relevant previous year could still be treated as dividend declared for section 104 purposes where no detriment to the revenue was shown. Section 104(2) prevented an order under section 104(1) because the Tribunal found that postponement of distribution would not have conferred any benefit on the revenue even if the dividend had been declared within the prescribed period. The order under section 104(1) was therefore not justified, and the principle operated in favour of the assessee.

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Issues: Whether, on the facts and in the light of section 104(2), dividend declared after the expiry of twelve months from the end of the relevant previous year could be treated as dividend declared for the purposes of section 104, and whether an order under section 104(1) was justified when no detriment to the revenue was shown.

Analysis: The Tribunal found that postponement of dividend declaration caused no detriment to the revenue and that the revenue would not have secured any benefit even if the dividend had been distributed within the period of twelve months referred to in section 104(1). Section 104(2) disables the Income-tax Officer from making an order under section 104(1) where such payment would not have resulted in any benefit to the revenue. The Tribunal was therefore entitled to apply that principle and hold that the order under section 104(1) ought not to have been made.

Conclusion: The dividend declared after the expiry of twelve months was to be treated as dividend declared for the purposes of section 104, and the order under section 104(1) was not justified. The issue was decided in favour of the assessee and against the revenue.

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