Special statutory tax exemption protects dividend distributions from additional income-tax where no express override exists.

A special exemption under the Small Industries Development Bank of India Act protects income, profits or gains derived by the Bank, and amounts received by it, from income-tax and other tax. On that construction, the dividend-distribution charge under the Income-tax Act does not override the specific immunity, because the charging provision operates only within its own scope. The note also points out that Parliament used an express override when introducing a similar rule for the Unit Trust of India, indicating that no such override was intended here. Accordingly, amounts distributed as dividend were treated as protected, and the additional tax was not exigible.

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Issues: Whether the petitioner was liable to pay additional income-tax under Section 115-O of the Income-tax Act, 1961 on amounts distributed or paid by way of dividend in view of the exemption contained in Section 50 of the Small Industries Development Bank of India Act, 1989.

Analysis: Section 50 of the Small Industries Development Bank of India Act, 1989 contains a non-obstante clause and grants immunity from income-tax and any other tax in respect of income, profits or gains derived or any amount received by the Bank. The charge under Section 115-O of the Income-tax Act, 1961 is on the domestic company declaring, distributing or paying dividend, but the provision is subject to its own scope and does not override the specific exemption enacted in Section 50. The introduction of Section 115R to deal with a similar exemption under the Unit Trust of India Act, 1963 shows that where Parliament intended to override a special exemption, it did so expressly. On a proper construction, the amounts distributed by the petitioner by way of dividend fell within the protected category of income, profits or gains derived, and the petitioner was outside the reach of Section 115-O.

Conclusion: The petitioner was not liable to pay additional income-tax under Section 115-O, and the tax paid under protest was refundable.

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