TMI Blog1979 (3) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture and sale of beer, Indian made foreign liquors, malt, breakfast food and soft drinks, etc. The assessee-company besides doing their business is also earning dividends from investments made in other Indian companies. For the assessment years 1968-69 and 1969-70, the gross income of the assessee from dividends from such Indian companies amounted to Rs. 34,212 and Rs. 29,441, respectively. The assessee's claim was that the gross amount of dividends was to be excluded from the total income for the purpose of computation of the chargeable profits. But the ITO deducted the reduced amounts of Rs. 13,685 and Rs. 11,576 for these assessment years. According to the ITO, the amount of dividend liable to be reduced under s. 80M of the I.T. Act, 1961, would give the reduced figure, which only could be the income of the assessee from dividends and as such only the reduced amount could be adjusted while computing the chargeable profits under r. 1(viii) of the First Schedule to the C. (P.) S. T. Act, 1964. Being aggrieved by the decision of the ITO, the assessee filed an appeal before the AAC, who too agreed with the ITO and dismissed the appeal. Thereafter, the assessee came in further ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of dividends within India ;..." The expression " income by way of dividends " to be excluded from the total income computed for the purpose of the I.T. Act created a difficulty in the present case. The assessee contended that income by way of dividends would mean the gross income, because in respect of the dividend only that income was received. It was a different question that certain deductions were made for the purpose of income-tax payment with reference to ss. 57 and 80M of the I.T. Act, 1961. Notwithstanding such deductions, it could not but be stated that the company received the gross dividend and only that gross dividend is contemplated in r. 1(viii) for exclusion from payment of surtax and the total income computed for the purpose of I.T. Act is to be reduced to the extent of the gross dividend for payment of surtax under the Surtax Act, 1964. The revenue, however, pleaded that income by way of dividend only meant the reduced income which they preferred to call net dividend after making necessary deductions under ss. 57 and 80M of the I.T. Act, 1961. The other relevant statutory provisions may also be referred to as these will be availed of during the discussion m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends of an amount equal to--... (b) In respect of such income by way of dividends other than the dividends referred to in clause (a) sixty per cent. of such income." This section uses the words " gross total income of an assessee " and further says that if a company includes any income by way of dividends, then from such income by way of dividends, 60% is to be excluded. The question would be whether the gross dividend is to be construed as received by the company as income by way of dividends. As we proceed, in the course of this judgment, we have to clarify, that certain principles have been enunciated in judicial decisions which we have to follow while interpreting the relevant rules. This court noted these principles governing interpretation in taxing statutes in CIT v. Mohan Meakin Breweries Ltd. [1974] 95 ITR 586 (HP). The Division Bench of which one of us was a member observed : " The rules of interpretation applicable to a taxing statute are well founded. The cardinal rule of interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The expressed intention must guide the court. " According to these observations, if the case is of a reasonable doubt the construction most beneficial to the subject is to be adopted. There is a further rule of interpretation with which we are faced, and we refer to CIT v. Tata Sons Private Ltd. [1974] 97 ITR 128 (Bom). The said rule is what we call a rule of stare decisis. In this case, their Lordships observed : " The attempt of Mr. Hajarnavis was to reargue all the questions decided in the above decision before us and to persuade us to make findings contrary to, and inconsistent with, the findings made therein. We have informed Mr. Hajarnavis that having regard to 'uniform policy laid down in income-tax matters ' we did not propose to give him a long hearing as he desired. the practice and the policy established is that in these matters whatever our own view may be we must accept the view taken by another High Court on the interpretation of the section of a statute which is an all India statute '." The principle of stare decisis has its own value and, in our opinion, must be observed unless a departure from that principle is permissible for any valid reason. The view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observe that s. 99 uses the expressions " amounts included in its total income " and " dividend received by it ". The latter expression was, of course, subsequently deleted. It was held in these cases that dividend received would be the gross dividend and as such the same would be excluded for the purpose of super-tax. Shri Indar Singh, the learned counsel representing the revenue, contended that the language used in s. 99 is different from the language used in s. 85A or s. 80M or r. 1(viii) of the First Schedule of the Surtax Act, 1964. According to the learned counsel, the expression used is " income by way of dividend ", and that would indicate only the net income from dividend. The two decisions, CIT v. Darbhanga Marketing Co. Ltd. [1971] 80 ITR 72 (Cal) and CIT v. New Great Insurance Co. Ltd. [1973] 90 ITR 348 (Bom) referred to the plain language used in s. 99. It was observed in [1973] 90 ITR 348 (Bom) that the receipt of dividend was being taxed and not the income. It was further observed that ss. 85A and 99 used the same language and the decision made was that gross dividend was liable to be excluded. These two decisions, in our opinion, refer to s. 99 which no doubt uses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depended upon the proper construction of r. 1 (viii) of the First Schedule. The Bench referred to the expression " income by way of dividend " and observed that the expression referred to gross dividend received by the assessee and not the net dividend arrived at after excluding the proportionate management expenses. This was again a decision on the plain language used in r. 1(viii). In CIT v. Emcete Sons (P.) Ltd. [1977] 109 ITR 491 (Mad) their Lordships were considering s. 80M of the I.T. Act. The language of s. 80M is in pari materia similar to the language used in r. 1(viii) of the First Schedule. The expression " income by way of dividend " is very much there. In s. 80M, if gross income includes an income by way of dividends, the argument was that deduction of only such income is liable to be made. Shri Indar Singh emphasised on the expression " income by way of dividend " and contended that the income which is to be excluded cannot but be the net income. But, in our opinion, on a plain reading of the language used in r. 1(viii), income by way of dividend is the gross income by way of dividend and that alone is to be reduced for adjusting the chargeable profits. If the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1964. We have observed that the language used in s. 85A or s. 80M and the language used in r. 1(viii) of the Surtax Act, 1964, are in pari materia similar, and therefore, the decisions arrived at with reference to s. 85A and s. 80M would certainly be more pertinent for our interpretation. We have referred to these decisions and it is our considered view that upon the plain language used in r. 1(viii) of the First Schedule, the chargeable profit computed for purpose of the I.T. Act, after necessary deductions and adjustments, would nevertheless be amenable for reduction of gross dividend which is income by way of dividend of the assessee. The question does not appear to be still free from difficulty because Shri Indar Singh confronts us with the decision of the Gujarat High Court in Addl. CIT v. Cloth Traders (P.) Ltd. [1974] 97 ITR 140 (Guj). My Lord the Chief Justice was then the judge of the Gujarat High Court and delivered the judgment in that case. With due deference to the opinion expressed by their Lordships, we are constrained to take a different view in consonance with the decisions of the Madras, Bombay and Kerala High Courts. Firstly, we approve of the reasoning th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form the base of the deduction contemplated by s. 85A only if it has become a component of ' total income ' and not otherwise. The discussion which follows shows that it is the net dividend income and not the gross one which can become a component of ' total income '. " As is evident, their Lordships emphasised on the expression " on income so included " and, since in the total income only the reduced amount of dividend was included, concluded that the said reduced amount or the net dividend is to be excluded. This principle of inclusion and exclusion of dividend income was ascertained from the specific language used in s. 85A. In r. 1(viii) of the First Schedule such a language cannot be found. There is nothing to indicate that only so much of the dividends is to be excluded which has been included in the total income. Therefore, the very crux of the argument that prevailed before their Lordships in Addl. CIT v. Cloth Traders (P.) Ltd. [1974] 97 ITR 140 (Guj), failed before us. We ourselves may have been inclined to take that view had we been called upon to interpret s. 85A, but we are concerned with r. 1(viii) of the First Schedule and there the language is clear. The First Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
