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2019 (1) TMI 1144 - HC - Income TaxAssessment of dividend income - Proviso to Section 10(34) read and along-with with the provisions of Section 115BBDA - hostile discrimination between a resident assessee and a non-resident assessee - Held that:- Government has the right to identify the persons who have to be taxed. Legislature and executive enjoy greater latitude in the field of tax and economic legislation because of the complexities involved as compared to laws touching civil rights such as freedom of speech, religion etc. Taxation invariably is a matter of policy and the court is not to examine and comment on the wisdom of such decisions. Further, there is a presumption in favour of constitutional validity of law made by the Parliament or State Legislature. Taxation statutes are normally not struck down on the ground of under-classification Companies have to pay dividend tax whenever they pay dividend to the shareholders. This would explain and justify the reason why companies have been left out from the purview of Section 115BBDA. If companies were liable to pay tax under this section, it would have led to cascading effect when dividend is finally paid to the shareholders, be it, an individual, HUF or a firm i.e. the ‘specified assessee’ who are liable to pay tax under Clause (a) to Section 115BBDA of the Act. Similarly, the argument that non-residents have been left-out is an argument of under-classification. Non-residents who invest in India contribute and help in growth of industrialization, job creation and economic progress. Non-residents have options to invest in different countries. Consequently, the Legislature/Executive as a matter of policy decide how and in what manner non-residents should be taxed. Non-residents can be treated differently for the reason that they are residents of foreign states and not residents of India. Taxation at source principle may not be applied to non-residents. Non-residents are liable to pay tax in the country of their residence. Taxation regime applicable to non-residents need not identical to that applicable to residents.
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