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RAGHUBAR DAYAL, A.K.SARKAR, M.HIDAYATULLAH, S.R.DASS, J.L.KAPUR
Purshottamdas Thakurdas – Appellant
Versus
Commissioner Of Income-tax, Bombay City I, Bombay – Respondent
Key Points: - Dividend income is treated as income for which deduction of income-tax at the time of payment is provided via Section 18(5) read with Sections 16(2) and 49B; therefore Section 18A does not apply to such income. (!) (!) (!) - The mechanism of credit under Section 18(5) and the deeming provision of Section 49B cause tax deducted by the company on dividend to be treated as if paid by the shareholder, affecting inclusion in total income and eligibility for refunds. (!) (!) (!) - For advance tax under Section 18A, the tax base to be considered in calculating liability under sub-section (2) excludes dividend income if Section 18A is not applicable to it; otherwise, dividends are to be included in computing the " eighty percent" threshold for interest under Section 18A(6). (!) (!) (!) - Sub-section (6) of Section 18A contemplates interest on shortfall where the advance tax paid is less than eighty percent of the final tax on income to which Section 18 does not apply; the scope depends on the applicability to dividend income. (!) (!) (!) - The understanding that grossed-up dividend income (including tax paid by the company) is included in the shareholder’s total income, supporting the view that dividend income is within the deduction-at-source framework and not subject to penal interest under Section 18A(6). (!) (!)
Judgment
S. K. Das, J. (majority judgment : Das, Kapur and Hidayatullah JJ.) This is an appeal on a certificate of fitness granted by the High Court of Bombay under S. 66-A (2) of the Indian Income-tax Act, 1922.
2. The short facts giving rise to the appeal are these. The original assessee was Purshottamdas Thakurdas, a well-known businessman of Bombay. He died sometime after the proceedings in the High Court had terminated and the appellants herein are his legal representatives. As nothing turns upon the distinction between the assessee and his legal representatives in this case, we shall ignore it for the purpose of this judgment. By a notice issued under S. 18-A(1) of the Act the Income-tax Officer concerned required the assessee to make advance payment of tax in respect of the assessment year 1947-48. On September 15, 1946 the assessee submitted an estimate of his income under sub-s (2) of S. 18-A/. In this estimate the assessee showed his total income at Rs.4,64,000/-. He deducted the sum of Rs.3,64,000/- stated to be his dividend income, on the ground that S.18 of the Act applied to such income. After claiming credit for Rs.10,000/- on the ground of double taxation relief, the
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