TaxTMI 
TaxTMI 
1978 (6) TMI 34
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....ifference between pound 4,585 and pound 4,352 (converted into rupees) which was considered as income by the U.K. income-tax authorities for the U.K. assessment year 1964-65, was not the income of the assessee under the I.T. Act, 1961 ?" The assessee, an individual, having income from salary in India, also received dividends from M/s. Peirce Leslie & Co. Ltd., a company registered in the United Kingdom. The dividends were declared on May 20, 1964, and November 30, 1964, totalling in all to a net dividend of pound 2,808-6-3. As the dividend was declared in the United Kingdom it was assessable there in the financial year 1964-65. The United Kingdom authorities assessed the dividend at pound 4,585 less certain deductions and reliefs. The reliefs were apportioned between the Indian income and the United Kingdom income and the assessee was granted the refund of pound 57-0-6 by order dated September 8, 1965. Then followed the assessment under the I.T. Act for the assessment year 1966-67, which was completed on November 23, 1967. A sum of Rs. 44,695 by way of dividends declared on the two occasions, was included as foreign income from Peirce Leslie & Company Ltd. This represented a tota....
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....d taken a view somewhat inconsistent with, and perhaps even contrary to, the view taken by the Tribunal. One decision has been referred to by the Tribunal itself, viz., CIT v. Clive Insurance Co. Ltd. [1972] 85 ITR 531 (Cal). The said decision exhaustively surveyed the provisions of s. 49D of the Indian I.T. Act, 1922, with reference to the provisions of ss. 18(4) and 18(5) of the said Act. It then examined the provisions of s. 184 of the English I.T. Act, 1952, noticed the absence of a provision like s. 18(5) of the Indian I.T. Act, 1922, in the United Kingdom statute, and referred to the provisions of ss. 169, 184, 185, 186, 199, 350 and 493 of the English Act. Numerous decisions rendered with respect to the provisions of the English Act were also noticed, and their line of reasoning was discussed. For instance, in Blott's case [1921] 8 TC 101 (HL), it was stated that it was not correct to regard a company paying income-tax on its profits as doing so as agent for its shareholders; that it pays as a taxpayer; and that if dividend is declared, the company is entitled to deduct from such dividend, a proportionate part of the amount of the tax previously paid by the company; and that....
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.... ordinarily resident in India within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India." He next referred to ss. 194, 198 and 199 of the Act. s. 194 provides for dividends. It is really unnecessary to refer to that section. ss. 198 and 199 are important and in so far as they are material, they are as follows: "198. Tax deducted is income received.--All sums deducted in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194C (section 194D) and section 195 shall, for the purpose of computing the income of an assessee, be deemed to be income received. 199. Credit for tax deducted.--Any deduction made in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194C (section 194D) and section 195 and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security or of the shareholder, as the case may be, and credit shall be given to him for the amo....
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....and s. 18(5) of the I.T. Act, 1922. The latter section corresponds to s. 198 of the 1961 Act. There is no provision in the 1961 Act corresponding to s. 16(2). After noticing the scheme relating to the grossing up of the dividends, the learned judges observed: " If this scheme is borne in mind, then it is clear that both the AAC and the Tribunal were right in coming to the conclusion that the amount of tax paid in respect of the dividends in the United Kingdom has no hearing whatever as far as ss. 16(2) and 18(5) are concerned. And unless the Commissioner satisfies us that this case falls under some provision of the I.T. Act, no grossing up would be permissible at all. If the only section which permits grossing up is s. 16(2), then, as pointed out, under that section the grossing up call only be in the manner indicated in that sub-section. And that grossing up relates only to the adding to the dividend of a shareholder the tax payable by the company, of which he is a shareholder in India, on the total income of the company. Therefore, there is no provision whatever in the I.T. Act for adding to the dividend of a shareholder the tax paid by the company outside India." (Emphasis su....