Law:

Section:

Section 199 of the Income-tax Act, 1961 - Deduction of tax at source - Credit for tax deducted - Assessee-company was formed by amalgamation of three companies, viz., M, .A and J - Certain dividend income arose to J and A on shares held by them in M - On that dividend income certain tax was deducted at source - Whether Tribunal justified in holding that since dividend income was not to be assessed in assessee's hands, credit for tax deducted at source could not be given to assessee - Held, yes Section 256 of the Income-tax Act, 1961 - Reference - Question of fact - Whether in view of facts captioned 'Deduction of tax at source - Credit for tax deducted' no question of law arose from Tribunal's finding that the assessee could not be given credit for tax deducted at source - Held, yes Facts The assessee-company was formed by the amalgamation of three companies, vis., company M, company A and company J. For the relevant assessment year, a certain dividend income arose to company J and company A, on the shares held by them in company M. On that dividend income, a certain sum had been deducted at source. The assessee contended that so far as the dividend income was concerned, it should be assessed in the hands of the companies who were the shareholders of company M, but so far as the tax deducted at source was concerned, the assessee must be given credit for the tax deducted at source. The ITO held that the gross dividend income including the tax deducted at source out of the dividend income was the income of the assessee and gave credit to the assessee for the tax deducted at source. The Tribunal found that it was at the instance of the assessee the entire dividend income had been treated as not the assessee's income and held that credit for the tax deducted at source on the dividend could not be given to the assessee in whose hands the dividend income had not been taxed. The Tribunal rejected the application seeking reference under section 256(1). On application under section 256(2) : Held The dividend income of which the tax deducted at source was a part could not be treated differently from the gross dividend, which should be taxed in the hands of the companies…

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