Law:

Section:

Section 80K of the Income-tax Act, 1961 (Corresponding to section 15C of the Indian Income-tax Act, 1922) - Deductions - In respect of dividends attributable to profits and gains from new industrial undertakings - Assessment years 1955-56 and 1956-57 - Whether exemption under section 15C(1) from payment of income-tax on part of profits of a new industrial undertaking was not related to business profits but was related to taxable profits computed in accordance with section 10 - Held, yes - Whether right of shareholders to obtain benefit of exemption under section 15C(4) of 1922 Act depends upon company obtaining benefit of exemption under section 15C(1) of 1922 Act, exemption from payment of tax on dividend received by shareholders is admissible only on that part of profits or gains on which tax is not payable by company under section 15C(1) of 1922 Act - Held, yes - Whether where company had no taxable profits in relevant years, dividend received by shareholders could not be said to be attributable to that part of profits or gains on which tax was not payable under section 15C(1) of 1922 Act and, therefore, they were not entitled to benefit of section 15C(4) of 1922 Act in respect of such dividend income - Held, yes FACTS G. Ltd. was an industrial undertaking to which section 15C applied. It distributed dividends to its shareholders out of the business profits earned by it in the years ending 31-12-1953 and 31-12-1954. The company, however, carried in its accounts a large balance of unabsorbed depreciation admissible under sections 10(2)(vi) and 10(2)(via) of the 1922 Act, and after adjusting that it had no taxable income in the relevant assessment years 1954-55 and 1955-56 and no tax was levied from the company. In assessing the income of the shareholders for the said assessment years, the ITO rejected their claim for exemption from tax under section 15C(4) of 1922 Act, and brought the dividend income to tax. This order was confirmed by the Tribunal. On reference, the High Court, held that the assessee were entitled to the benefit of section 15C(4) of the 1922 Act in respect of the said dividend income. On appeal to the Supreme Court : HELD Exemption under…

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