Law:

Section:

Section 80K of the income-tax act, 1961 read with rule 20 of the income-tax rules, 1962 - Deductions-Dividends attributable to profits from new industrial undertakings, etc.-Petitioner-company's claim for section 80J relief in accounting years 1969, 1970 and 1971, was negatived by ITO but allowed by tribunal by its order passed in 1976-Consequently, benefit of section 80K could not be given to shareholders qua dividends for accounting years 1969 to 1971 which had been paid prior to tribunal's decision-Whether said benefit of deduction under section 80K, which could not be given to shareholders earlier, could be allowed qua dividends for accounting year 1977-Held, yes Facts The petitioner-company had set up a new industrial undertaking and claimed relief under section 80J for the assessment years corresponding to the accounting years 1969, 1970 and 1971 qua the profits of this unit, but the claim was negatived by the ITO. The relief was finally allowed by the Tribunal by its order passed in 1976 and effect was given to appellate orders by rectifying the assessments for accounting years 1969 to 1971. Prior to the Tribunal's decision, however, the company had paid dividends in respect of these accounting years the aggregate of which exceeded the aggregate relief under section 80J but the shareholders could not get the benefit under section 80K qua the dividends for those years as the company was disabled from getting the certificate under section 197(3) because of the ITO's decision as to deduction under section 80J. Another unit was set up by the company in 1974 and based on the computation of section 80J relief for this unit, benefit under section 80K had been allowed on dividends in respect of the accounting year 1976. For the accounting year 1977, the company declared dividends and applied to the ITO for a certificate under section 197(3) claiming that, taking into account the section 80J relief both for the earlier unit benefit of which could not be availed of by shareholders under section 80K, and for the later unit set up in 1974 the entire dividend was exempt from tax in the hands of the shareholders. The ITO, however, confined the certificate only to the…

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