COMMISSIONER OF INCOME TAX Vs. TATA SONS PRIVATE LIMITED
LAWS(BOM)-1972-10-2
HIGH COURT OF BOMBAY
Decided on October 18,1972

COMMISSIONER OF INCOME TAX Appellant
VERSUS
TATA SONS PRIVATE LTD. Respondents

JUDGEMENT

K.K.DESAI, J. - (1.) IN Ref. No. 33 of 1964 and also in Reference No. 35 of 1964 the questions raised relate to the true construction and effect of the provisions in ss. 184 and 199 of the United Kingdom IT Act, 1952, in connection with the claim of the assessee concerned for relief under S. 49D of the Indian IT Act, 1922.
(2.) IN Ref. No. 33 of 1964, the claim for relief related to the asst. yrs. 1955 -56 and 1957 -58, the relevant account years being calendar years 1954 and 1956. In these two years the assessee had received the respective sums of Rs. 59,149 and Rs. 56,766 by way of dividend income, accrued without the taxable territories, i.e., income in the United Kingdom. The claim of the assessee under s. 49D(1) was that it was resident in the taxable territories in the year of account. In respect of the above dividend income deduction had been made and the assessee had paid income -tax under the law in force in the United Kingdom. For this reason the assessee was entitled to deduction from the Indian income -tax payable by it in accordance with the scheme of S. 49D(1). The Tribunal decided the claim in favour of the assessee and granted the relief as claimed. The Tribunal construed the above sections of the United Kingdom IT Act to mean that in respect of the dividend income which had accrued to the assessee income -tax was paid by the assessee "by deduction or otherwise" within the meaning of S. 49D(1). This finding is challenged in the present Reference No. 33 of 1964 and the two questions referred are as follows : "(i) Whether the assessee -company is entitled to the benefit of the relief as provided under S. 49D (1) in respect of dividend income of Rs. 59,149 for the asst. year 1955 -56 ? (ii) Whether the assessee -company is entitled to the benefit of the relief as provided under S. 49D (1) in respect of dividend income of Rs. 56,766 for the asst. year 1957 -58 ?" In the IT Ref. No. 35 of 1964, similar contentions were made on behalf of the assessee in respect of the asst. yrs. 1954 -55 and 1955 -56, the relevant account years being the years ended 30th June, 1953 and 1954. The Tribunal made findings in favour of the assessee and the questions raised run as follows : "1. Whether the assessee -company is entitled to the benefit of the relief as provided under S. 49D (1) in respect of the dividend income of Rs. 1,20,523 received from the English companies and/or of Rs. 16,894 received from the American companies, for the asst. year 1954 -55 ? 2. Whether the assessee -company is entitled to the benefit of the relief as provided under S. 49D (1) in respect of the dividend income of Rs. 1,21,636 received from the English companies and/or Rs. 11,536 received from the American companies for the asst. year 1955 -56 ?" In support of these two references, on behalf of the Revenue, Mr. Hajarnavis argued that under s. 184 of the United Kingdom IT Act the company pays tax on profits and gains made by the company. The company is authorised and entitled to make deductions at standard rates from dividends payable to shareholders. The dividends paid to these assessees were never taxable in the hands of the assessee (shareholder) or otherwise. There was no statutory provision for taxing the dividend income nor was any machinery prescribed for assessing to income -tax the dividend income accrued to the shareholders. In fact, income -tax was never charged in respect of dividend income. He accordingly submitted that the findings made by the Tribunal in these two references as regards the true construction and effect of the relevant provisions in the United Kingdom IT Act were all incorrect. He, however, pointed out that these questions also arose before the High Court of Calcutta in the case of CIT vs. Clive Insurance Co. Ltd. (1972) 85 ITR 531 (Cal) and the High Court, after considering the relevant provisions of law including ss. 184 and 199 of the United Kingdom IT Act, 1952, made findings rejecting the contentions made on behalf of the Revenue. These findings are summarised in the head note in the following words : - "In the English statute there is no provision corresponding to S. 18(5) of the Indian INCOME TAX ACT, 1922, which specifically provides that amounts deducted from the dividend income of a member will constitute payment of income -tax by the member. Unlike the position in India the amounts so deducted are not made over to the Revenue authority in U. K. and are retained by the company. Further, the income from dividends in the hands of the shareholders are not liable to any income - tax when such dividends have been declared and paid out of profits which have been taxed in the hands of the company. Notwithstanding these peculiar features, the sums deducted from the dividend amounts payable to a member constitute, under the law and system of taxation in U. K., payment of income -tax by the member and are treated and recognised as such. The provisions of the statute and the judicial decisions make the position quite clear. Sec. 184 of the English IT Act, 1952, empowers the company to deduct tax at the standard rate from the dividend payable to its members. Sec. 199 of the English Act which deals with Explanations of income -tax deductions to be annexed to dividends warrants, etc., refers to such deduction specifically as deduction of income -tax. Again, in S. 493 of the English Act deduction under S. 184 from the dividend income is categorically described as deduction of income -tax. Judicial decisions, particularly Canadian Eagle Oil Co. Ltd. vs. King (1945) 27 TC 205 (HL) and Ritson vs. Phillips (1924) 9 TC 10 (KB), make it clear that whenever tax is deducted by the company from the dividend amount payable to a member under S. 184 the sum so deducted as tax clearly constitutes payment of income -tax by deduction by the member." Having made these findings in connection with the claim for relief made by the assessee in that case under S. 49D of the Indian INCOME TAX ACT, 1922, the Court held : "The assessee -company had paid tax at the standard rate and, therefore, there was no difficulty in applying the provisions of Explanation (iii) to S. 49D and ascertaining the rate of tax of the said country in accordance therewith. Therefore, the assessee was entitled to relief under S. 49D."
(3.) THE attempt of Mr. Hajarnavis was to re -argue all the questions decided in the above decision before us and to persuade us to make findings contrary to, and inconsistent with, the findings made therein. We have informed Mr. Hajarnavis that having regard to "uniform policy laid down in income -tax matters" we did not propose to give him a long hearing as he desired. The practice and the policy established is that in these matters "whatever our own view may be we must accept the view taken by another High Court on the interpretation of the section of a statute which is an all India statute." [see Maneklal Chunilal & Sons vs. CIT (1953) 24 ITR 375 (Bom) and CIT vs. Chimanlal J. Dalal & Co. (1965) 57 ITR 285 (Bom)]. Following the above practice, our findings in the present two references are as follows :;


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