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2021 (12) TMI 463 - HC - Income TaxExemption from tax under Section 115-O - Tax on distributed profit / Dividend Tax - additional income-tax payable on profits of a domestic company under Section 115-O - Scope of Section 50 of the Small Industries Developments Bank of India Act, 1989 (hereinafter referred to as the SIDBI Act), which exempts Petitioner from payment of income tax on any income, profits or gains derived or any amount received by Petitioner - Whether amount declared, distributed or paid by Petitioner by way of dividend does not fall under the category of income, profits or gains derived or any amount received by Petitioner? - HELD THAT:- In the case of Petitioner, no total income is computed at all under the said Act, in view of the overall overriding effect of Section 50 of the SIDBI Act. The use of the expression no income- tax is payable in Section 115-O(1A) of the said Act also presupposes that the subject company is indeed chargeable to income-tax on its total under Section 4 of the said Act. Section 115-O(1A) of the said Act applies only to a case where the subject company is chargeable to income-tax u/s.4 of the said Act. Section 115-O(1A) of the said Act does not apply to a case where the subject company is not chargeable to income-tax due to an overriding non-obstante provision contained in Section 50 of the SIDBI Act. Dividend is defined in Section 2(22) of the IT Act to, inter alia, include any distribution by a company of accumulated profits, which entails releasing any assets by the company to its shareholders. In terms of Explanation 2 to Section 2(22) of the said Act, the expression accumulated profits includes all company profits up to the date of distribution or payment thereof. It appears that the transfer of profits of Petitioner to IDBI in terms of Section 29(2) of SIDBI Act entails payment by Petitioner to IDBI. This payment or distribution of Petitioner's liquid assets constitutes dividend distributed by Petitioner out of its accumulated profits as envisaged under Section 2(22)(a) of the IT Act. It needs to be noted that the charge under sub-section (1) of Section 115-O of the said Act is on the company's profits, more specifically on that part of the profits which is declared, distributed or paid by way of dividend. The charge under sub-section (1) of Section 115-O of the said Act is not on income by way of dividend in the shareholder's hands. Therefore, the additional income-tax payable on profits of a domestic company under Section 115-O of the said Act is not a tax on dividend. In our considered opinion, the amount distributed or paid by way of dividend falls in the category of income, profit or gains derived. Once it is held that the amount distributed or paid by Petitioner by way of dividend falls in the category of profits under Section 50 of the SIDBI Act, on any income, profits, gains derived or any amount received, Petitioner shall not be liable to pay income tax or any other tax in the relevant years. Therefore Petitioner was not liable to pay additional income tax under Section 115-O of the said Act. In the circumstances, Petitioner's payments under protest need to be refunded to the Petitioner
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