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2017 (9) TMI 1300 - SC - Income TaxConstitutionality of validity Section 115O - the additional tax as levied by Section 115O on the dividend declared, distributed or paid - Calcutta High Court has upheld the constitutionality of Section 115O, but a rider has been put that additional income tax to be charged under Section 115O can only be on 40 per cent of income which is taxable under Income Tax Act. - Held that:- This Court in Mrs. Bacha F Guzdar (1954 (10) TMI 2 - SUPREME Court) was considering the nature of dividend income in the hands of shareholders. Under the Income tax Act, 1961 earlier the dividend was taxable at the hands of shareholder. By Finance Act, 1997 it was made taxable in the hand of company when additional tax was imposed. This Court while considering the nature of dividend in the above case held that although when the initial source which has produced the revenue is land used for agricultural purposes but to give to the words 'revenue derived from land', apart from its direct association or relation with the land, an unrestricted meaning shall be unwarranted. Again as noted above Nalin Behari Lal Singha (1969 (7) TMI 2 - SUPREME Court) observation was made that shares of its profits declared as distributable among the shareholders is not impressed with the character of the profit from which it reaches the hands of the shareholder. We, thus, find substances in the submission of the learned counsel for the Union of India that when the dividend is declared to be distributed and paid to company's shareholder it is not impressed with character of source of its income. The provisions of Section 115O are well within the competence of Parliament. To put any limitation in the said provision as held by the Calcutta High Court that additional tax can be levied only on the 40% of the dividend income shall be altering the provision of Section 115O for which there is no warrant. The Calcutta High Court having upheld the vires of Section 115O no further order was necessary in that writ petition. - Decided in favor of revenue.
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