Law:

Section:

SECTION 197(3), READ WITH SECTION 201, OF THE INCOME-TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - CERTIFICATE FOR DEDUCTION AT LOWER RATE - ON ASSESSEE'S APPLICATION, ITO GRANTED CERTIFICATE OF DETERMINATION OF CERTAIN AMOUNT OF DIVIDEND TO BE PAID BY ASSESSEE ON WHICH NO TAX WAS PAYABLE AND THEREAFTER ASSESSEE DECLARED AND PAID SUCH DIVIDEND WITHOUT DEDUCTION OF TAX - SUBSEQUENTLY, ON COMPLETING ASSESSEE'S ASSESSMENT FOR RELEVANT ASSESSMENT YEAR, ITO FOUND THAT AMOUNT OF TAX-FREE DIVIDEND HAD TO BE DETERMINED AT MUCH LOWER FIGURE - WHETHER CERTIFICATE GRANTED UNDER SECTION 197(3) EARLIER WAS INVALID MERELY BECAUSE CERTAIN MATERIAL NECESSARY FOR ENABLING ITO TO GRANT SUCH CERTIFICATE WAS NEITHER PRODUCED BY ASSESSEE BEFORE ITO NOR WAS DEMANDED BY ITO TO BE SO PRODUCED AND REVENUE WOULD BE JUSTIFIED IN TAKING PROCEEDINGS UNDER SECTION 201 FOR RECOVERY OF TAX SHORT DEDUCTED BY ASSESSEE WHILE PAYING DIVIDEND - HELD, ON FACTS, NO Facts The assessee-company addressed a letter to the ITO on 17-7-1962 stating that two of the plants in its factory were installed after 31-3-1957 and under sections 84 and 101 (as they stood then), the profits from these plants were exempted from income-tax and super tax for a period of five years and that since it intended to pay dividend to its shareholders for the accounting year ending 31-3-1962, the ITO was requested under section 197(3) to determine the appropriate portion of the dividend on which tax was not payable by the recipients under the provisions of sections 85 and 101. The ITO made the requisite determination and by his letter dated 28-7-1962 intimated to the assessee the amount which would be exempt from tax. Thereafter, the assessee declared and paid the dividend to its shareholders. Subsequently, when the assessee's assessment for the assessment year 1962-63 was completed, the ITO found that the amount of dividend exempt from tax was much less than that determined and intimated to the assessee earlier. Consequently, the ITO passed an order under section 201(1) holding that the communication dated 28-7-1962 issued by the ITO could not be interpreted as a certificate issued under section 197(3) and that in the absence of…

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