Additional tax on dividend distributions applies only where the company has taxable income and the statutory rebate-linked conditions are met.

Additional tax under Paragraph F(1)(B) of Part I of the First Schedule to the Finance Act, 1966 was confined to companies with taxable total income or profits in the relevant year and with dividend distributions falling within the statutory definition linked to rebate reduction under the earlier Finance Acts. Reading the 1964, 1965 and 1966 Finance Acts together, the levy did not apply where the company had suffered a loss and had no taxable income at all in the relevant year, even if dividends had been distributed in earlier years. On that construction, the statutory condition for the additional tax was absent and the levy was not attracted.

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Issues: Whether additional tax under Paragraph F(1)(B) of Part I of the First Schedule to the Finance Act, 1966 was leviable where the company had suffered a loss and had no taxable income in the relevant year, despite distribution of dividends in earlier years.

Analysis: The provision imposed additional tax only on so much of the total income as did not exceed the relevant amount of distributions of dividends. The definition of "relevant amount of distributions of dividends" in Explanation 1 linked the levy to dividends in respect of which rebate had been reduced under the earlier Finance Acts. Reading the scheme of the Finance Acts of 1964, 1965 and 1966 together, the levy was intended to operate only where the company had earned income or profits liable to tax during the relevant accounting year and had made dividend distributions attracting rebate reduction. Where the company had no taxable income at all and suffered a loss, the statutory condition for the additional tax was absent.

Conclusion: Additional tax under Paragraph F(1)(B) of Part I of the First Schedule to the Finance Act, 1966 was not attracted in the assessee's case.

Ratio Decidendi: A levy of additional tax on dividend distributions under the 1966 Finance Act is confined to cases where the company had taxable total income or profits in the relevant year and the dividend distribution falls within the statutory definition tied to rebate reduction under the earlier Finance Acts.

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