Foreign dividend tax deduction counts as income-tax payment for section 49D relief under the Indian Income-tax Act.

Dividend income accruing in the United Kingdom and other non-taxable territories, where tax was deducted under the UK income-tax system, was treated as tax paid by deduction for relief under section 49D of the Indian Income-tax Act, 1922. The Court accepted that such deduction amounted to payment of income-tax for the statutory relief provision, and applied the same construction previously adopted by another High Court on an all-India statute. On that basis, the assessee was entitled to relief in respect of the dividend income, and the referred questions were answered in the affirmative.

---

---

Issues: Whether dividend income accrued outside the taxable territories and subjected to deduction of tax in the United Kingdom qualified the assessee for relief under section 49D of the Indian Income-tax Act, 1922.

Analysis: The dividend receipts were found to have accrued in the United Kingdom and other non-taxable territories, and tax had been paid there under the law in force by deduction or otherwise. The Court accepted the construction that such deduction constituted payment of income-tax for the purpose of section 49D. Following the settled practice of adopting the view taken by another High Court on an all-India statute, the Court applied the same interpretation to the references before it.

Conclusion: The assessee was entitled to relief under section 49D in respect of the dividend income in question, and the answers to the referred questions were in the affirmative.

Ratio Decidendi: Tax deducted from dividend income under the United Kingdom income-tax system constituted payment of income-tax by deduction for the purpose of section 49D of the Indian Income-tax Act, 1922, where the income accrued outside the taxable territories and no reciprocal double-taxation arrangement existed.

---