Dividend relief computation must follow the statutory deeming fiction and use only the relevant previous year's figures.

Section 49BB was treated as an integrated scheme combining the relief provision, the deeming fiction in Explanation I, and the computation rule in Explanation II. The deeming fiction applied to every claim for relief under the section and was not limited to dividends partly paid out of taxed and current profits. Distributable income for relief had to be computed only by reference to the relevant previous year's allowance and profit-and-loss provision, not by aggregating figures from earlier years since the company's inception. Relief was therefore confined to the balance dividend not absorbed by the deemed distributable income.

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Issues: Whether the assessee was entitled to relief under section 49BB of the Indian Income-tax Act, 1922, and, if so, whether the distributable income for the previous year had to be computed only with reference to that year or by aggregating allowances and provisions from all years since the company's inception.

Analysis: Section 49BB formed an integrated scheme consisting of the charging relief provision, the deeming rule in Explanation I, and the computation mechanism in Explanation II. The deeming fiction was applicable to every claim for relief under the section and could not be confined only to cases where dividends were partly paid out of taxed profits and partly out of current profits. Explanation II required the distributable income of the relevant previous year to be computed by reference to the allowance made in assessment and the provision made in the profit and loss account for that previous year only. The attempt to aggregate figures from all earlier years would make the statutory method of calculation unworkable and was not supported by the language of the section.

Conclusion: The assessee was entitled to relief only to the extent of the balance dividend not absorbed by the deemed distributable income, namely Rs. 706, and not for the full dividend amount.

Ratio Decidendi: Relief under section 49BB must be determined by applying the deeming fiction and computation rules exactly as enacted, and the distributable income under Explanation II is confined to the relevant previous year rather than being computed cumulatively from the company's inception.

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