Law:

Section:

Section 44, read with section 99, of the Income-tax Act, 1961 - Insurance business - Assessment years 1963-64 and 1964-65 - Whether assessee company carrying on business in motor and general insurance was entitled to claim rebate in respect of dividend received from other Indian Companies - Held, yes - Whether proportionate management expenses was not liable to be deducted and rebate as per Finance Act, 1963 for assessment year 1963-64 should be given on gross amount of dividend - Held, yes - Whether for assessment year 1964-65 assessee was entitled to rebate under section 99(1)(iv) as amended by Finance Act, 1964, on entire gross amount of dividend - Held, yes Circulars and Notifications : Circular No. 15-D (XXXIII-10) of 1964, dated 17-6-1964 issued by CBDT FACTS The assessee, a public limited company carrying on business in motor and general insurance, filed the returns of income showing income from different sources separately. The total of such income for the assessment year 1963-64 came to Rs. 22,15,583. This income included a sum of Rs. 4,85,802 being the income from dividends from other companies. The assessee claimed that it was entitled to a rebate of corporation tax at 45 per cent on this dividend income as per the Finance Act, 1963. The ITO held that, since in the case of an insurance company the entire income was assessed as from business regardless of the separate sources from which such income were derived, the sum of Rs. 4,85,802 could not be regarded as dividend income as such in the hands of the assessee. All the same the ITO took into consideration the Board's instructions contained in Board's Circular No.l5-D (XXXIII-10) of 1964, dated 17-6-1964, and considered thequestion of granting relief. Purporting to give effect to this Board's circular the ITO held that the assessee would be entitled to a rebate only on a sum of Rs. 4,34,941 and accordingly granted the rebate of Rs. 1,95,723. The AAC held that the assessee was not entitled to any rebate on the dividend income at all under the provisions of the Finance Act, but since the ITO had given a rebate on the dividend income as duly reduced by proportionate expenses incurred by the company, he…

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