Law:

Section:

Section 235, read with section 80M of the Income-tax Act, 1961 - Relief respecting tax on dividend in certain cases - Assessment year 1968-69 - Whether deduction granted in respect of dividends under section 80M can not be considered in determining amount of relief under section 235 - Held, yes FACTS These assessees were companies holding shares in other domestic companies as well. These latter companies had distributed dividends to the shareholders during the accounting years relevant to the above mentioned assessment years of the assessees. These dividends had been reckoned under the head 'Income from other sources' in computing the total income of the assessee-companies. Under section 80M, a sum equal to 60 per cent of such income by way of dividends paid to the assessees by the other companies was to be deducted in computing the total income for the purpose of assessment of these assessees. The ITO computed the total income of these assessees for the relevant years and determined the tax payable. Thereafter, he proceeded to calculate the rebate which these assessees were entitled to under section 235. To grant relief under this section, the ITO proposed a rebate only of tax on 40 per cent of the dividend reckoned by him in computing the total income of the assessees. The assessees contended that they were entitled to a rebate of tax calculated on the total dividend paid to them and attributable to the profits of the company assessed to agricultural income-tax and not 40 per cent of it reckoned under section 80M. The ITO rejected this contention and completed the assessment granting relief only on 40 per cent of these dividends. The AAC also came to the same conclusion as that arrived at by the ITO and dismissed the appeals. On further appeal, the Tribunal, however, directed relief by way of rebate to be given on the basis of the total dividend for each year attributable to the profits of the company assessed to agricultural Income-tax. On reference : HELD As per the language of section 235, from the tax payable by the shareholder under the Income-tax Act the lesser of the two sums calculated under that section has to be reduced and that calculation is to be…

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