Law:

Section:

Section 197(3) of the income-tax act, 1961-Deduction of tax at source-Certificate for deduction at lower rate-Petitioner-company, which was entitled to benefit of section 80j, declared dividend which was less than its claim under section 80j-IT applied to ito for certificate under section 197(3) that no tax was deductible while paying dividends-Similar application for earlier years, though rejected by ito, was ultimately upheld by high court-Whether ito can refuse to make requisite determination under section 197(3) on the ground that quantum of petitioner's entitlement to benefit under section 80j was not final as revenue's appeal against high court's declaring rules 19a(2) and 19 as ultra vires was pending in supreme court-Held, no (ito directed to issue requisite certificate after ascertaining relevant facts). Facts The petitioner-company was entitled to the benefit of section 80J with effect from the assessment year 1969-70. It started declaring dividends from the year 1972 and applied to the ITO under section 197(3) for a certificate to the effect that the said dividend was not chargeable to tax in the hands of the shareholders by virtue of section 80K and that, therefore, no tax was deductible at source. The ITO initially refused to issue the certificate for the years 1972 and 1973, but eventually issued it after the High Court had rendered a in favour of the petitioner in writ proceedings and the Supreme Court had upheld the High Court's . For the subsequent three years, viz., 1974, 1975 and 1976, the petitioner again applied for a similar certificate, claiming that the amount of dividend declared for all the three years was much less than its entitlement under section 80J. The ITO refused to issue the certificate for these years on the ground that these figures could not be accepted or acted upon as the of the High Court declaring rules 19A(2) and 19A(3) ultra vires was the subject-matter of appeal in the Supreme Court, so that the order of the AAC or the Tribunal on the basis of which the deduction under section 80J had been worked out could not be the basis for allowing the benefit of section 80K and for a determination raider section 197(3). On writ,…

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