Section 49B dividend relief is computed by statutory formula, not capped by overall shareholder tax payable.

Section 49B relief for dividends attributable to profits assessed to agricultural income-tax is computed strictly under the statutory formula and is not limited by the shareholder's overall tax payable on total income. For a shareholder company, clause (b)(ii) allows a reduction of twenty per cent of the portion of dividend attributable to such taxed profits, or the amount otherwise permitted by the section, whichever is less. The Kerala HC held that the deduction could be claimed even where it exceeded the tax otherwise payable on the shareholder's total income, and answered the reference in favour of the assessee.

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Issues: Whether a company shareholder receiving dividends from a company assessed to agricultural income-tax was entitled under section 49B to deduct 20% of the portion of dividend attributable to such profits from the tax payable, even though that amount exceeded the tax otherwise payable on the shareholder's total income.

Analysis: Section 49B grants relief by allowing a reduction from the tax payable by the shareholder in respect of dividends out of profits assessed to agricultural income-tax. The quantum of relief is controlled by the formula in the section and does not depend on the amount of tax otherwise payable by the shareholder on his total income. Where the shareholder is a company, clause (b)(ii) applies and the allowable reduction is twenty per cent of the portion of the dividend attributable to the company's agricultural income-taxed profits, whichever is less.

Conclusion: The shareholder-company was entitled to deduct twenty per cent of the attributable dividend portion from its tax payable, and the reference was answered in favour of the assessee.

Ratio Decidendi: Relief under section 49B is to be computed strictly according to the statutory formula on the attributable dividend component, and is not curtailed by the amount of tax otherwise payable by the shareholder on his total income.

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