TMI Blog1965 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... dividends were included by the Income-tax Officer in the assessments of the shareholders notwithstanding their claim that they were entitled to exemption from tax under section 15C in their hands. They preferred appeals and the first series of them relating to the assessment year 1955-56 were allowed by the Appellate Assistant Commissioner on the view that set-off of earlier losses was not part of the computation of the income under section 10 and should not affect the applicability of section 15C. He, therefore, directed rectification of the assessments after the Income-tax Officer satisfying himself that the company was an industrial undertaking entitled to the benefit of exemption under section 15C and that the computation of the company's income under section 10 for the relevant assessment year resulted in a positive figure. Another set of appeals relating to the next assessment year were disposed of by a different Appellate Assistant Commissioner who, however, did not agree with that conclusion of his predecessor but held that section 15C(4) would be attracted only if there was income of the industrial undertaking on which tax was not payable. He considered that, in the compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to computation of income under section 10." In the circumstances, at the instance of the assessees, the Tribunal has referred to us the following question: "Whether, on the facts and in the circumstances of the case, the assessees are entitled to the benefit of section 15C(4) in respect of the dividend income received from Sri Ganapathy Mills Company Limited, Tirunelveli ?" For the assessment years 1954-55 and 1955-56, the company was held, the assessment proceedings, not to be entitled to the benefit of section 15C, as its applicability did not arise because the net result in the assessment was a loss after carry forward of previous years' losses. For the first year it was found that the company made a profit of Rs. 88,184, after allowing depreciation admissible under section 10. But this was reduced to " nil " amount in view of allowances of depreciation losses of previous years and the net result was that a sum of Rs. 1,96,159 was carried forward on account of the depreciation losses. For the second assessment year too, the company made a profit and after giving depreciation allowances, it came to Rs. 1,95,012. Setting off the unabsorbed depreciation, a sum of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imits, apparently with a view to encourage and sustain them. The exemption contemplated by the section is of tax on so much of the profits or gains derived from any industrial undertaking to which the section applies as did not exceed six per cent. per annum on the capital employed in the undertaking, the capital being computed in accordance with such rules as may be made for the purpose by the Central Board of Revenue. What sort of industrial undertaking would be entitled to the benefit of section 15C is defined by sub-section (2) and the proviso to this sub-section empowers the Central Government to direct by notification that the exemption conferred by the section shall not apply to any particular industrial undertaking. Sub-section (3) says that profits or gains of an industrial undertaking, to which the section applies, shall be computed in accordance with section 10. Then comes sub-section (4): " The tax shall not be payable by a shareholder in respect of so much of any dividend paid or deemed to be paid to him by an industrial undertaking as is attributable to that part of the profits or gains on which the tax is not payable under this section." It may be seen that secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occasion for the application of section 15C(1). It must follow from this that there would be equally no occasion to the application of sub-section (4) of that section in that event. Learned counsel for the revenue argues that it is only where dividends have been paid out of profits or gains of an industrial undertaking which are exempt from tax subject to the limit, that exemption under sub-section (4) of section 15C would come into play. We are unable to accept these contentions. Neither sub-section (1) nor sub-section (4) is a charging provision. Both of them relate to exemption from tax within limits. The words " tax is not payable under this section " in sub-section (4) are merely indicative of the scope of the exemption under sub-section (4) which is no different or no less or more than that under sub-section (1). On our view of the effect of sub-section (3), it would follow that profits or gains of an industrial undertaking, for purposes of section 15C(1) and (4), have to be computed only in accordance with section 10, and this is confining the allowances to section 10(2)(vi) and (via) and without taking into account either the unabsorbed depreciation for the previous years u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 15C and its bearing on the computation of profits and gains of an industrial undertaking; for the purpose of that section, did not arise and has not been considered in that case. It does not appear from the facts in that case that there was any question of carry-forward of losses or even unabsorbed depreciation under section 10(2)(via) entering into the computation of profits or gains of the industrial undertaking there. In that case, the assessee held certain ordinary and preference shares in India Cements Limited, from which it received certain dividends for the current years 1951 and 1952. They were assessed by the Income-tax Officer as income from " other sources " for the assessment years 1952-53 and 1953-54. On appeal, the Appellate Assistant Commissioner held that since the dividends were declared out of commercial profits of the company, and as the company did not suffer any tax as all its profits had been wiped off by depreciation, and there was no assessment on the company, the question of granting exemption to the dividends did not arise. It is not clear from the report whether this wiping off by depreciation related to unabsorbed depreciation or current depreciation. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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