Law: Income Tax Act, 1922

Section: 104

Income tax-- Income undistributed profits Undistributed profits suffering tax at hands of company Profits distributed to shareholders after taxation Character of Income does not get changed Such income cannot be taxed again at hands of shareholders. When the undistributed profits had suffered tax at the hands of the company the same could not be taxed again at the hands of the share holders after distribution in favour of them, because the character of the income does not get changed. Further, such levy of tax would amount to double taxation. Broadly stated, the principle of the Income tax Act is to charge all income with tax, but in the hands of the same person only once. There could, be double taxation if the Legislature distinctly enacted it, but upon general words of taxation, and when we have to interpret a taxing Act we cannot so interpret it as to tax the subject twice over to the same tax. Thus if an association or unregistered firm is taxed in respect of its income, the same income cannot be charged again in the hands of the members, individually and vice versa. Commissioner Income tax (Central), Madras v. Express Newspapers Ltd. (1980) 124 I T R 117 Mad.; Jain Brothers v, Union of India (1970) 77 I T R 107; T.N.K. Govindarajan Chetti and Co. v. Commissioner of Income tax, Madras (1964) 51 ITR 731 and Commissioner I. T. v. Afco Ltd. (1963) 48 I T R 76 ref. ORDER All these revisions can be dealt with under a common order. It is enough if I note the facts in C . R . P. No. 129 of 1980. The revision petitioner is an assessee on the file of the I. T.O. Companies Circle IV, Coimbatore. He objected to the inclusion of a sum of Rs.34375 representing gross dividends from Messrs B.N.S. (P) Ltd., for assessment year 1972 73. His case was that by virtue of section 104 of the I. T. Act, hereinafter be referred to as the Act, this amount had suffered tax because it was undistributed profits at the hands of the company. Where, therefore, after such suffering of tax it is distributed to the qua share holders of the company, the further tax sought to be levied, will amount to double taxation his claim was rejected by the Revenue as seen from the proceedings of the…

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