TMI Blog1982 (11) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 ('the Act'), which was disposed of by the Commissioner (Appeals) by his order dated 20-3-1980. The assessee has, thus, filed two appeals against the aforesaid two orders of the Commissioner (Appeals). However the grounds are common and hence the appeals are disposed of together. 3. It was noticed that conflicting views were taken on the issue by different Benches of the Tribunal in this case for different assessment years as well as in other cases. A Special Bench was, therefore, constituted to dispose of these appeals. 4. It may be desirable to mention at the outset that Shri S.E. Dastur, the counsel for the assessee, stated that for the assessment year 1974-75 the Tribunal had decided the issue in favour of the assessee, that the reference application filed by the department arising out of the said order was rejected by the Tribunal and that the department's application under section 256(2) of the Act was also rejected by the High Court. The department's special leave petition to the Supreme Court against the order of the High Court under section 256(2), though admitted, it was further stated, has not been finally disposed of. The assessee was not aware of what happen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence relied upon in this regard is in the shape of the special leave petition of the department before the Supreme Court and the copy of the notice issued by the Court after admitting the special leave petition. On carefully going through the petition and the notice above, we find that the facts found by the Tribunal in that case have been that the assessee, being a non-resident company having no branches or agents or a bank account in India, necessarily received the net dividend income in US currency after deduction of the consolidated charges made by the bank. Such an expenditure or loss claimed was, thus, held allowable under section 57(1) of the Act, on the footing that it was a sum paid by way of commission or remuneration to a banker for the purposes of realising the dividend income by the assessee. The question of law raised by the revenue was-- "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amount of Rs. 34,575, representing a loss that arose to the assessee at the time of remittance of money to it was an allowable deduction under section 57(1) of the Income-tax Act ?" Naturally, both the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eteness, it may be mentioned that right from the assessment year 1970-71 to the assessment year 1976-77, the assessee has claimed the expenditure or loss in this regard including the notional loss of the above nature as an expenditure under section 57 and the claim has been allowed by the Tribunal on that footing. Applications for reference filed by the department, if any, have also been rejected by the Tribunal. The only exception is in the case of the assessment year 1975-76, where the Tribunal decided the issue against the assessee. The facts pertaining to the assessment year 1974-75 have already been referred to in some detail in the earlier paragraphs. What happened in other cases is not really material and is not, therefore, referred to. 10. The submission on merits on behalf of the assessee is that as laid down by the Bombay High Court in the case of H.M. Kashiparekh Co. Ltd. v. CIT [1960] 39 ITR 706, it is the 'real income' which is to be assessed unless there is something contrary in the statute. This view, it is stated, has been confirmed by the Supreme Court in the case of CIT v. Birla Gwalior (P.) Ltd. [1973] 89 ITR 266. According to Shri Dastur, 'real income' means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend and the tax deducted at source. He placed particular reliance on the comments of the learned commentators, Kanga and Palkhivala, in their latest treatise The Law Practice of Income-tax, Vol. 1 at page 1154. 13. We have carefully gone through the provisions of sections 194, 198, 5(2) and 9(1)(iv) of the Act, and rule 115. We have also gone through the decision of the Bombay High Court in the case of Kashiparekh and the decision of the Supreme Court in the case of Birla Gwalior relied upon by the assessee's Counsel and the decision of the Madras High Court in the case of Standard Triumph and the decision of the Supreme Court in the case of Poona Electric relied upon by the learned standing counsel. 14. Section 207 of the Companies Act, on which reliance was placed by Shri Dastur, the counsel for the assessee, does not support the assessee's contentions. The section only provides that failure to distribute dividend within 42 days after its declaration by a company will be liable to penalty except in five cases specifically referred to under its proviso. Exceptions (a) and (e) clearly contemplate a situation like the one before us in this case, viz., where the dividend c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the Indian company has deducted and could deduct tax at source as provided for in section 194 of the Act. Indirect support for the proposition is available from the decision of the Madras High Court in the case of Standard Triumph. A non-resident assessee in that case was entitled to payment of royalty under a collaboration agreement from a resident-assessee. The non-resident assessee claimed that the royalty amount was not taxable in its hands until it was received as the non-resident assessee was maintaining accounts on cash basis. The High Court held that because of the specific provisions of section 5(2)(b), a non-resident assessee is liable to be taxed on accrual basis and that section 5(2)(a) applied to only resident-assessee in India. The High Court further held that to apply section 145(1) of the Act, to the case of a non-resident assessee would be to defeat the charge under section 4, obliterate section 5(2)(b) and let the income which is taxable escape tax and this cannot be the intention of the statute. Moreover, section 9(1)(iv) provides that a dividend paid by an Indian company outside India shall be deemed to accrue or arise in India. Therefore, even on this s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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