DISTRIBUTORS (BARODA) PVT. LTD. versus UNION OF INDIA AND TWO ORS.

Citation: [1985] SUPP. 1 S.C.R. 778 · Decided: 01-07-1985 · Supreme Court of India · Bench: Y.V. CHANDRACHUD · Disposal: Dismissed

Judgment (excerpt)

A 
B 
c 
D 
E 
778 
[Y.V. 
DISTRIBUTORS (BARODA) PVT. LTD. 
v. 
UNION OF INDIA AND TWO ORS. 
July 1, 1985 
CHANDRACHUD, C.J., BHAGWATI, AllAR8NDRA NATH 
SEN, D.P. MADON AND M.P. THAKKAR, JJ] 
Income Tax Act 1961 Sections 80M(J) and 80A.,4 : 
income by way of inturcorporate dividends-Deduction-Whether to be 
1nade with reference to full an1ounl of dividend received or dividend computed i11 
accordance with the prvvisions of the Act -Section SOAA- ~Vhether retrospect iv~ 
in operation. 
Constitution of India 1950, Artice 141: 
Supreme Court-Declaration of/aw-To be certain, definite and correct-
Jndicial decisions-Continuity anJ consistency-Essentiality-Pointed out-Earlier 
ruling of Co,,,rt-Manifest!y wrong, proreeds upon mistaken assumption with 
regard to exi3tence or continuance of statutory provision, contrary to another 
decision of Court-Doctrine of stare decisis-No bar to 
over~ruling such 
decision-Decision of Court in fiscal n1atters-Jnterference in exceptionaf cases-
Necessity of. 
Interpretation of Statutes : 
F 
Statutory prol'ision-Meaning 
of-Interpretation on 
earlier statutory 
G 
H 
provision In different language arid structurally different-Reference lo and reliance 
on-Whether permissible. 
Words and Phrases-Meaning of: 
'Such income by way of di'lidendJ'-Meaning of-Section SOM lnroff1e Tax 
Act 1961. 
The earliest provision granting exemption from super tax in respect of 
inter-corporate dividend was made as far back as 9th December, 1933 in a 
Notification issued by the Governor General in Council and it provided as 
follows:-
''The Governor General in Council is pleased to exempt from super 
tax: 
DJStRIBUTORS (BARODA) LTD. V. UNION 
779 
(i) So much of the income of any investment trust company as is 
derived from dividends paid by any other company which has paid or will 
pay super-tax in respect of the profits out of which such dividends are paid". 
This provision came up for consideration before a Division Bench of 
the High Court of Bombay in CITv. Industrial, investment Trust Co. Ltd. 
(1968) 671.T.R. 437. The High Court guided by a decision of this Court in 
CITv. South India Bank (1966) 59 !TR 763 held that the "dividend income 
which was exempted under the notification would be the dividend income 
received by the assessee and not the said income less any further amounts" 
because the notification must be regarded a self-contained one and not 
controlled by any other provisions of the Act and there was no warrant to 
construe the word 'income' in the notification as total income nor to qualify 
the dividend computed under Section 12 of the Act. 
A provision of a similar kind granting exemption from super tax in 
respect of certuin specified categories of inter-corporate dividend was intro-
duced as Section 56A of the Income Tax Act 1922 by the Finance Act, 
1953. 
When the Indian Income Tax Act. 1922 was 1epealed and the Income 
Tax Act, 1961 was enacted with effect from 1st April, 1902, Section 99, sub-
section (i) was introduced in the new Act exempting certain categories of 
income from super tax and one such category was that set out in clause (iv) of 
Section 99 sub-section (1) which read as follows : 
'·99. (I) Super-tax shall not be payable by an assessee in respect 
of the following amounts which are included in his total income-
(iv) if the assessee is a company, any dividend received by it from 
an Indian company, subject to the provisions contained in the 
fifth Schedule." 
This provision continued in force upto Ist March, 1965 subject to a 
minor inconsequential amendment made by the Finance Act, .1964. 
This provision did not come up for interpretation before this Court only 
in Cloth Traders Case, but it came to be considered by some of the High 
Courts. 
A 
B 
c 
D 
E 
F 
G 
The three High Courts of Bombay, Calcutta and Madras C./.Tv. New 
Great Insurance Company Ltd. (1963) 90 !TR 348, C.l.T. v. Darbhangha Market-
ing Company Ltd. 1971 80 !TR 72 and Madras Auto Service v. I.T.0. (1975) 
101 I. T.R .. 589] on a const~uct1on of clause (1v) of sub~section (I) of section 99, 
took th~ view that the entJCe amount of dividend received by the assessee from 
R 
l
~n .1ndd1and~?dmpda~y was exempt from super tax and the exemption was not 
1m1te to 1v1 en income computed in accordance wi'th the p 
· · 
f h 
. 
rov1s1ons o 
t e 
Act and formmg part of the total income. 
A 
B 
c 
D 
E 
F 
G 
H 
780 
SUI'REME COURT REPoRTS 
[ J 98S) SUPPL. S.C.8.. 
Section 99 sub-section (i) remained in

Excerpt shown. Read the full judgment & AI analysis in Lexace.