CLOTH TRADERS PRIVATE LIMITED COMMISSIONER OF INCOME TAX H K INVESTMENT PRIVATE LIMITED C V MEHTA PRIVATE LIMITED DISTRIBUTORS BARODA PRIVATE LIMITED Vs. ADDITIONAL C I T GUJARAT I: H K INVESTMENT P LTD
LAWS(SC)-1979-5-22
SUPREME COURT OF INDIA (FROM: GUJARAT)
Decided on May 04,1979

CLOTH TRADERS PRIVATE LIMITED,COMMISSIONER OF INCOME TAX,H.K.INVESTMENT PRIVATE LIMITED,C.V.MEHTA PRIVATE LIMITED,DISTRIBUTORS BARODA PRIVATE LIMITED Appellant
VERSUS
ADDITIONAL COMMISSIONER OF INCOME TAX,H.K.INVESTMENT PRIVATE LIMITED,COMMISSIONER OF INCOME TAX GUJARAT - III,COMMISSIONER OF INCOME TAX GUJARAT IV Respondents





Cited Judgements :-

COMMISSIONER OF INCOME TAX VS. MCLEOD AND CO LTD [LAWS(CAL)-1981-3-31] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. BISRA STONE LIME CO LTD [LAWS(CAL)-1986-1-36] [REFERRED TO]
VIJAY INDUSTRIES VS. COMMISSIONER OF INCOME TAX [LAWS(SC)-2014-11-78] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. ANAKAPALLI CO OPERATIVE MARKETING SOCIETY [LAWS(APH)-1988-6-25] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. JOSEPH V T [LAWS(KER)-1996-9-57] [REFERRED TO]
STATE BANK OF INDORE VS. COMMISSIONER OF INCOME TAX [LAWS(MPH)-2004-10-20] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. RAMBAL P LIMITED [LAWS(MAD)-1983-10-22] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. KATPADI CO OPERATIVE TIMBER WORKS LIMITED [LAWS(MAD)-1981-9-46] [REFERRED TO]
COMMISSIONER OF INCOME TAX T N V MADRAS VS. KOTAGIRI INDUSTRIAL COOPERATIVE TEA FACTORY LTD [LAWS(SC)-1997-3-130] [HELD]
CLOTH TRADERS P LTD VS. COMMISSIONER OF INCOME TAX [LAWS(GJH)-1983-1-16] [REFERRED TO]
SOUTHERN INDUSTRIAL CORPORATION LIMITED VS. CIT [LAWS(MAD)-2002-8-60] [REFERRED TO]
SIR RAMA VARMA H H VS. COMMISSIONER OF INCOME TAX KERALA [LAWS(SC)-1993-11-52] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. STATE BANK OF INDIA [LAWS(CAL)-1981-9-14] [REFERRED TO]
Commissioner of Income tax VS. Oriental Co Ltd [LAWS(CAL)-1992-1-34] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. MURTHY C S [LAWS(APH)-1987-7-40] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. DUGDH UTPADAK SAHKARI SANGH LTD [LAWS(ALL)-2004-10-36] [REFERRED TO]
THE COMMISSIONER OF INCOME TAX VS. INDUSTRIAL FINANCE CORPORATION OF INDIA LIMITED [LAWS(DLH)-2014-11-64] [REFERRED TO]
MOTILAL PESTICIDES INDIA PRIVATE LIMITED VS. COMMISSIONER OF INCOME TAX [LAWS(DLH)-1993-8-55] [REFERRED TO]
ASSISTANT COMMISSIONER OF INCOME TAXTHE COMMISSIONER OF INCOME TAX VS. ABCON ENGINEERING AND SYSTEMS PVT LTD [LAWS(KAR)-2006-7-48] [REFERRED TO]
JIYAJEERAO COTTON MILLS LTD VS. INCOME TAX OFFICER C WARD [LAWS(CAL)-1979-8-17] [REFERRED TO]
PILANI INVESTMENT CORPORATION LTD VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1986-1-6] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. ORIENT PAPER MILLS LTD [LAWS(CAL)-1981-3-35] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. NORTH KOSHALPUR COLLIERY CO P LTD [LAWS(CAL)-1986-5-18] [REFERRED TO]
Union of India VS. Warren Tea Ltd [LAWS(CAL)-2004-1-2] [REFERRED TO]
HOTEL BALAJI VS. STATE OF ANDHARA PRADESH [LAWS(SC)-1992-10-49] [CITED]
COMMISSIONER OF INCOME TAX VS. DEVIDAYAL ROLLING REFINERIES PVT LTD [LAWS(BOM)-1984-1-12] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. SARABHAI AND SONS [LAWS(GJH)-1994-2-17] [REFERRED TO]
Commissioner of Income Tax and another VS. Wipro Infotech Ltd. [LAWS(KAR)-2008-6-102] [REFERRED TO]
KURAPATI BANGARAIAH VS. GOVERNMENT OF ANDHRA PRADESH [LAWS(APH)-2014-6-192] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. RAJASTHAN RAJYA SAHKARI UPBHOKTA SANGH LIMITED [LAWS(RAJ)-1995-1-60] [REFERRED TO]
INDORE DEVELOPMENT AUTHORITY VS. MANOHAR LAL & ORS [LAWS(SC)-2019-10-82] [REFERRED TO]
COMMISSIONER OF INCOME TAX CENTRAL II VS. SCHRADER SCOVILL DUNCAN LTD [LAWS(CAL)-1980-7-44] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. GRAMOPHONE CO OF INDIA LTD [LAWS(CAL)-1986-2-30] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. NATIONAL INSURANCE CO LTD [LAWS(CAL)-1985-5-24] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. PURE DRINKS NEW DELHI PVT LTD [LAWS(P&H)-1988-12-14] [REFERRED TO]
PRAMILA BAKORE VS. COMMISSIONER OF INCOME-TAX [LAWS(MPH)-2005-2-49] [REFERRED TO]
AGRAWAL WAREHOUSING AND LEASING LIMITED VS. COMMISSIONER OF INCOME TAX [LAWS(MPH)-2002-7-23] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. RANI MEYYAMMAI ACHI LATE [LAWS(MAD)-1982-7-2] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. M K RAJU CONSULTANTS P LIMITED [LAWS(MAD)-1998-2-89] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. ATAM BALLABH FINANCE PRIVATE LIMITED [LAWS(DLH)-2002-8-222] [REFERRED TO]
PLASTIBLENDS INDIA LIMITED VS. ADDITIONAL COMMISSIONER OF INCOME TAX [LAWS(BOM)-2009-10-95] [REFERRED TO]
CONTINENTAL CONSTRUCTION LIMITED VS. COMMISSIONER OF INCOME TAX CENTRAL 1 [LAWS(SC)-1992-1-61] [REFERRED TO]
MOTILAL PESTICIDES I PVT LIMITED VS. COMMISSIONER OF INCOME TAX DELHI [LAWS(SC)-2000-2-37] [REFERRED]
COMMISSIONER OF INCOME TAX-I VS. M/S. RELIANCE ENERGY LIMITED (FORMERLY BSES LIMITED) THROUGH ITS M.D [LAWS(SC)-2021-4-36] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. VISAKHA INDUSTRIES LIMITED [LAWS(APH)-2001-8-86] [REFERRED TO]
VIJAY INDUSTRIES VS. COMMISSIONER OF INCOME TAX [LAWS(RAJ)-2004-5-58] [REFERRED TO]
Abcon Engineering and Systems Pvt. Ltd. rep. by its Managing Director Mr. Ajit K. Bhatacharjya VS. The Commissioner of Income Tax and The Income Tax Officer [LAWS(KAR)-2006-7-95] [REFERRED TO]
Commissioner of Income tax VS. Balmer Lawrie and Co Ltd [LAWS(CAL)-1994-5-11] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. HINDUSTAN GUM AND CHEMICALS LTD [LAWS(CAL)-1989-8-29] [REFERRED TO]
GOURI PRASAD GOENKA VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1989-3-79] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. V VENKATACHALAM [LAWS(SC)-1993-4-56] [EXPLAINED]
DIGVIJAY CEMENT COMPANY LIMITED VS. COMMISSIONER OF INCOME TAX [LAWS(GJH)-1981-7-17] [REFERRED TO]
DISTRIBUTORS BARODA PRIVATE LIMITED VS. UNION OF INDIA [LAWS(SC)-1985-7-14] [OVERRULED]
COMMISSIONER OF INCOME TAX BOMBAY VS. ALBRIGHT MORARJI AND PANDIT LTD [LAWS(BOM)-1998-12-100] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. BENGAL ASSAM STEAMSHIP COMPANY LTD [LAWS(CAL)-1985-3-17] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. INDIAN IRON AND STEEL CO LTD [LAWS(CAL)-1985-4-25] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. C S MURTHY [LAWS(APH)-1987-3-60] [REFERRED TO]
COMMISSIONER OF INCOME TAX BENGAL I CALCUTTA VS. M N DASTUR AND CO P LTD [LAWS(CAL)-2000-1-20] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. BRITANNIA BISCUIT CO LTD [LAWS(CAL)-1989-4-5] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. SUNDARAM INDUSTRIES P LIMITED [LAWS(MAD)-1983-10-33] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. BANQUE NATIONALE DE PARIS [LAWS(BOM)-1990-3-149] [REFERRED]
COMMISSIONER OF INCOME TAX DELHI VS. SWARAN SINGH KANWAR [LAWS(SC)-1997-2-193] [OVERRULED]
COMMISSIONER OF INCOME TAX BOMBAY VS. MAGANLAL CHHAGANLAL P LTD [LAWS(BOM)-1998-11-130] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. STANES TYRE AND RUBBER PRODUCTS LIMITED [LAWS(MAD)-1996-3-170] [REFERRED]
G ATHERTON AND CO VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-1986-5-34] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. EMPIRE JUTE CO LTD [LAWS(CAL)-1986-5-35] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. RANGALAL BAGARIA [LAWS(CAL)-1988-12-16] [REFERRED TO]
CIT VS. DUGDH UTPADAK SANGH LTD [LAWS(ALL)-2004-11-274] [REFERRED TO]
M/S. VIJAY INDUSTRIES VS. COMMISSIONER OF INCOME TAX [LAWS(SC)-2019-3-7] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. GWALIOR RAYON SILK MANUFACTURING WEAVING COMPANY LIMITED [LAWS(MPH)-1983-1-6] [REFERRED TO]
COMMISSIONER OF INCOME TAX DELHI VS. SHRI RAM HONDA POWER EQUIP [LAWS(DLH)-2007-1-170] [REFERRED TO]


JUDGEMENT

- (1.)This group of appeals and Reference raises a short question of construction of Ss. 85A and 80M of the Income-tax Act, 1961 (hereinafter referred to as the present Act). The question is whether on a true interpretation of these sections, rebate of income-tax is admissible on the actual amount of dividend received by an assessee, being a company, from an Indian company, or it is confined only to the dividend income as computed in accordance with the provisions of the Act, that is, after making the deductions specified in Section 57 including deduction of the interest paid on borrowings for making the investments. The Gujarat High Court has taken a view against the assessee while a different view has been taken by the Bombay, Madras and Calcutta High Courts. The appeals are preferred by the assessee, namely, Cloth Traders (P). Ltd., againsst the judgement of the Gujarat High Court and they relate to the assessment years 1965-66 and 1966-67 when S. 85A was in force. The Reference before us have been made directly by the Tribunal under S. 257 of the Act in view of the conflict of opinion amongst the High Courts. Out of these References, three are at instance of the assessees, namely, C. V. Mehta (P.) Ltd., M/s. Distributors (Baroda) Pvt. Ltd., and H. K. (Investment) Co. Pvt. Ltd. and one is at instance of the Commissioner of Income-tax, Gujarat. They relate to different assessment years; assessment year 1969-70 in case of C. V. Mehta (P.) Ltd. and Distributors (Baroda) Pvt. Ltd., and assessment years 1965-66 to 1969-70 in case of H. K. (Investment) Co. Pvt. Ltd. The interpretation of both Ss. 85A and 80M is involved in these References since S. 85A with some minor alterations made in it from time to time was in force during the assessment years 1965-66 to 1967-68 and S. 80M followed upon it with effect from the commencement of the assessment year 1968-69 as part of Chapter VIA. Though the language of Ss. 85A and 80M is almost identical, there are some verbal dissimilarities, but as we shall presently point out, they do not make any difference in interpretation so far as the present question is concerned.
(2.)We are concerned in these appeals and References only with the interpretation of Ss. 85A and 80M, but in order to arrive at the true interpretation of these sections, it is necessary to refer briefly to the history of the legislation enacted in these sections, since these sections were not written by the Legislature on a clean slate, nor were they the outcome of any new or innovative exercise of legislative judgement, but they were preceded by similar provisions granting rebate of super tax or income-tax on inter-corporate dividends and these provisions as interpreted by the courts throw light on the true meaning and content of Sections 85A and 80M.
(3.)The earliest provision granting exemption of super tax in respect of inter-corporate dividends was made as far back as 9th December, 1933 in a Notification issued by the Governor General in Council and it provided as follows:
"The Governor General in Council is pleased to exempt from super tax-

(i) so much of the income of any investment trust company as is derived from dividend paid by any other company which has paid or will pay super tax in respect of the profits out of which such dividends are paid."

This provision came up for consideration before a Division Bench of the High Court of Bombay in Commr. of Income-tax v. Industrial Investment Trust Co. Ltd., (1968) 67 ITR 436 and the question was whether the dividend income exempted from super tax was the entire income by way of dividend received by an investment trust company or the dividend income as computed in accordance with the provisions of the Act, that is, after deducting the expenses incurred in earning it. The High Court of Bombay held that the "dividend income which was exempted under the notification would be the dividend income received by the assessee and not the said income less any further amounts" because "the notification must be regarded as a self-contained one and not controlled by any other provisions of the Act" and there was "no warrant to construe the word 'income' in the notification as total income, not to qualify the dividend income specified in the said notification as the dividend income computed under Section 12 of the Act". It was thus held that the entire amount of dividend received by an investment trust company would be exempt from super tax and not the amount of dividend minus the expenses incurred in earning it. This Notification was followed by a provision of a similar kind granting exemption from super tax in respect of certain specified categories of inter-corporate dividends introduced as Section 56A in the Indian Income-tax Act, 1922 (hereinafter referred to as the old Act) by Finance Act, 1953. It is not necessary to make any detailed reference to this provision since there is no decided case which has considered this provision or expressed any opinion upon it.



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