Sankar Prasad Mitra, C.J. - (1.) This is a reference under Section 256(1) of the I.T. Act, 1961. The assessee is a company. The assessment year under consideration is 1966-67. The accounting year ended on March 31, 1966, The assessee had earned during the accounting year gross foreign dividends to the extent of Rs. 11,903. The ITO brought to tax the entire sum of Rs. 11,903.
(2.) Before the AAC, the assessee submitted that only the net dividend should be taxed as the provisions relating to grossing up of dividends applied only to income-tax paid by a company in India and not to tax paid by a company outside India to a foreign Govt, The AAC did not agree with the assessee and upheld the order of the ITO.
(3.) The Tribunal, however, agreed with the assessee that only the net foreign dividend income was taxable. The following question has been referred to us: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that only the net amount of foreign dividend received by the assessee was includible in its total income under the provisions of the Income-tax Act, 1961 ? ";