Case: Union Of India &amp; Others Vs. Coromandel Fertilizers Limited &amp; Anr

the previous year relevant to the next following assessment year and, if there are no such profits and gains for that assessment year, or where the deficiency exceeds such profits and gains, the whole or balance of the deficiency as the case may be, shall be set off against such profits and gains for the next following assessment year and if and so far as such deficiency cannot be wholly so set off, it shall be set off against such profits and gains assessable for the next following assessment year and so on:Provided that-(i) in no case shall the deficiency or any part thereof be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year;(ii) where there is more than one deficiency and each such deficiency r elates to a different assessment year, the deficiency which relates to an earlier assessment year shall be set off under this sub-section before setting off the deficiency in relation to a later assessment year:Provided further that in the case of an assessee being a co-operative society, the provisions of this sub-section shall have effect as if for the words "fourth assessment year", the words sixth assessment year had been substituted"."80K. Where the gross total income of an assessee, being the owner of any share or shares in a company, includes any income by way of dividends paid or deemed to have been paid by the company in respect of such share or shares, there shall subject to any rules that may be made by the Board in this behalf. be allowed, in computing his total income, a deduction from such income by way of dividends of an amount equal to such part thereof as is attributable to the profits and gains derived by the company from an industrial undertaking or ship or the business of a hotel on which no tax is payable by the company under this Act for any assessment year commencing prior to the 1st day of April, 1968, or in respect of which the company is entitled to a deduction under section 80J".11. A perusal of sections 80J(3) and 15C would clearly show the difference in the scheme of the two provisions. Broadly speaking, there was no question of "carry forward" from one accounting year to the succeeding year or years the sums allowable under section 15C. That feature is now prominent in section 80J in clearly providing that "where there are no such profits and gains, an amount equal to the relevant amount or capital employed during the previous year (viz., the six per cent of the capital employed).. shall be carried for war d and set off against profits and gains referred to in sub-section, (1) ........".There is another vital distinction. While section 15C(4) refers to relief in case of only taxable profits, section 80K provides that in computing the total income of an assessee whose gross total income includes any income by way of dividends, there shall be allowed in computing his total income a deduction from such income by way of dividends an amount equal to such part thereof as is attributable to profits and gains derived by the company from an industrial under taking on which no tax is payable by the company under the Act or in respect of which the company is entitled to deduction under section 80J (emphasis supplied). T he expression "or in respect of which the company is entitled to a deduction under section 80J" introduces a new concept. There is no legal requirement of a de facto deduction of the amount in question in the particular assessment y ear. As against actual deduction the companys entitlement to deduction in the relevant year is enough to answer the requirement of section 80J. Necessarily, therefore, the dividend-earner will also be entitled to invoke section 80K and obtain pari passu the benefit of the provision.12. It is submitted on behalf of the appellants that unless there is actual deduction under section 80J, the shareholder is not entitled to claim benefit under section 80K. The appellants further con tend that section 80A(2) of the Act is a complete answer to the claim of the respondents. By sub- section (2) of section 80A the entire amount of deduction under Chapter VI-A shall not in any case exceed the gross total income of the assessee. It was, therefore, submitted that as there were not assessable incomes of the company in the particular years, the question of deduction of the monetary benefit by the shareholder would not arise. We are unable to accept this submission. Under old section 15C, the shareholder was entitled to relief only when the company was able to get actual deduction. Both were at par. The parity has been sought to be maintained under the amended provisions of sections 80J and 80K between the company and the shareholder. The company, when becomes entitled to deductions under section 80J(1), gets it either in that year or by a set off in subsequent years. If the interpretations which we have put to the new sections were not to hold good, the result will be that the shareholder will be debarred from getting any relief when dividend is declared in a year in which the company, because of section 80A(2), is not able to get actual deduction. The company will reap the advantage of set off under section 80J(3) in subsequent years, while the shareholder for the dividend declared in the past, will get no relief, under section 80K. This anomaly is avoided, and the legislature intended to avoid it, by use of the expression "the company is entitled to a deduction" in section 80K and on the interpretation we have put above.We are, therefore, clearly of opinion that the company was not required under the law to deduct at source tax from the dividends which they were declaring to the shareholder. The company was entitled to an appropriate certificate from the Income-tax Officer under section 197(3).

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]A perusal of sections 80J(3) and 15C would clearly show the difference in the scheme of the two provisions. Broadly speaking, there was no question of "carry forward" from one accounting year to the succeeding year or years the sums allowable under sectionis another vital distinction. While section 15C(4) refers to relief in case of only taxable profits, section 80K provides that in computing the total income of an assessee whose gross total income includes any income by way of dividends, there shall be allowed in computing his total income a deduction from such income by way of dividends an amount equal to such part thereof as is attributable to profits and gains derived by the company from an industrial under taking on which no tax is payable by the company under the Act or in respect of which the company is entitled to deduction under section 80J (emphasis supplied). T he expression "or in respect of which the company is entitled to a deduction under section 80J" introduces a new concept. There is no legal requirement of a de facto deduction of the amount in question in the particular assessment y ear. As against actual deduction the companys entitlement to deduction in the relevant year is enough to answer the requirement of section 80J. Necessarily, therefore, the dividend-earner will also be entitled to invoke section 80K and obtain pari passu the benefit of theare unable to accept this submission. Under old section 15C, the shareholder was entitled to relief only when the company was able to get actual deduction. Both were at par. The parity has been sought to be maintained under the amended provisions of sections 80J and 80K between the company and the shareholder. The company, when becomes entitled to deductions under section 80J(1), gets it either in that year or by a set off in subsequent years. If the interpretations which we have put to the new sections were not to hold good, the result will be that the shareholder will be debarred from getting any relief when dividend is declared in a year in which the company, because of section 80A(2), is not able to get actual deduction. The company will reap the advantage of set off under section 80J(3) in subsequent years, while the shareholder for the dividend declared in the past, will get no relief, under section 80K. This anomaly is avoided, and the legislature intended to avoid it, by use of the expression "the company is entitled to a deduction" in section 80K and on the interpretation we have put above.We are, therefore, clearly of opinion that the company was not required under the law to deduct at source tax from the dividends which they were declaring to the shareholder. The company was entitled to an appropriate certificate from the Income-tax Officer under section