1980 (9) TMI 49

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.... entire amount of dividend of Rs. 3,50,000 paid by the assessee in each of the two assessment years 1964-65 and 1965-66, which were partly distributed out of the profits earned by the assessee and partly from the subvention amounts paid by the Madhya Pradesh State Government to the assessee in each of the years concerned ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of section 154 of the Income-tax Act, 1961, were rightly applied to the case of the assessee in the assessment year 1964-65 ? (3) Whether the Tribunal was right in holding that the sum of Rs. 9,000, being the profits on the redemption of the loan bonds of the assessee, was liable to be taxed a....

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....4-65, the Tribunal observed that the ITO was justified, in the circumstances of the case, in exercising his powers under s. 154 of the I.T. Act, 1961. The assessee had also invested a sum of Rs. 11,91,000 in the Madhya Pradesh State Development Loans. These bonds were purchased by the assessee at the discount price of Rs. 99.25 per bond. These bonds were encashed at the face value of Rs. 100 on the date of maturity, which fell in the accounting year relevant to the assessment year 1969-70. The Corporation thus received a sum of Rs. 12,00,000 on surrendering the bonds. The excess amount of Rs. 9,000 so realised by the Corporation was taxed by the ITO as business income of the assessee. The AAC, on appeal, held that the sum of Rs. 9,000 wa....

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....t dividend paid by the assessee was chargeable to tax. In our opinion, therefore, the Tribunal was not justified in holding that the dividend tax had rightly been levied, on the amount of dividend paid by the assessee, for the assessment years 1964-65 and 1965-66. In this view of the matter, the question as to whether the amount of subvention by the State Govt. to the assessee in these assessment years for the payment of dividend should or should not have been held chargeable to tax does not arise for consideration. Our answer to the first question referred to us, therefore, is that the Tribunal was not justified in holding that the dividend tax had rightly been levied, on the amount of dividend paid by the assessee, for the assessment year....