THE COMMISSIONER OF INCOME TAX versus M/S. EXPRESS NEWS PAPERS LTD.

Citation: [1998] 1 S.C.R. 288 · Decided: 21-01-1998 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
THE COMMISSIONER OF INCOME TAX 
v. 
M/S. EXPRESS NEWS PAPERS LTD. 
JANUARY 21, 1998 
B 
[B.N. KIRPAL AND S.P. KURDUKAR, JJ.] 
Income Tax Act, 1961/Finance Act, 1964 . 
Interim dividend-Nature of-Declaration of interim dividend by Board 
C of Directors on 6.12. I 962 to be payable on I 6. I. I 963-Accounting year of 
Company being calendar year-Income Tax Officer reduced the rebate for the 
assessment year 1964-65 to the extent of interim dividend-Held, provisions 
of clause (c) of proviso 2(1) attracted-Income tax authorities were right in 
reducing the rebate for the assessment,year 1964-65-lnterim dividend cannot 
D be construed as meaning declaration of dividend by Company-Nature of the 
interim dividend is such that it gives ntJ right to shareholders to receive it 
merely on passing of resolution by Board of Directors whereas on a dividend 
being declared by the Company in General meeting, a vested right accrues 
to shareholders. 
E 
J. Dalmia v. Commissioner of Income Tax, Delhi, 53 I.T.R. 83, relied on. 
Companies Act, 1956 
S. 205, Table A, Clauses 85 and 86-Declaration of interim dividend 
by Board of Directors on 6. I 2.1962 payable on I 6. I .1963-Accounting year 
F of Company being Calender year-Held, where the Board of Director, and, 
not the company in general meeting, decides to pay interim dividend, the 
rebate will be withdrawn in the year of distribution of the interim dividend, 
there being no declaration by the company for payment thereof 
G 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2941-42 of 1985. 
From the Judgment and Order dated 30.10.79 of the Madras High Court 
in T.C. Nos. 22-23 of 1976. 
S. Rajappa and B.K. Prasad for the Appellants.· 
H 
Manoj Arora, N.B. Joshi, P.H. Parekh and S. Bharhari for the 
288 
.. 
C.I.T v. EXPRESS NEWS PAPERS LTD. 
289 
Respondents. 
The following Order of the Court was delivered : 
The respondent is a Public Limited Company which is running a well 
known newspaper. The Indian Express and we are concerned in this case with 
A 
Income Tax for assessment year 1964-65. 
B 
On 6th December, 1962 the Board of Directors of the respondent-company 
passed a resolution whereby it decided that interim dividend should be 
distributed amongst the shareholders. The resolution further provided that 
this dividend would be payable on 16th January, 1963. It may here be noticed 
that the accounting year of the respondent-Company is the calendar year. The C 
resolution which was passed on 6th December, 1962, therefore, was in the 
previous year relevant to the assessment year 1963-64 whereby the payment 
was made to the shareholders in the following year relevant to the assessment 
year 1964-65. 
In determining the amount of tax which was payable by the Company D 
for the assessment year 1964-65 the Income Tax Officer came to the conclusion 
that the rebate which was available to the Company under the Finance Act, 
1964 had to be reduced to the extent of the interim dividend paid to its 
shareholders in January, 1963. The claim of the respondent, in the appeal filed 
by it, was that the Board of Directors had declared the dividend on 6.12.1962, E 
i.e. before the start of the relevant previous year and the payment was made 
in the subsequent previous year and, therefore, by virtue of Explanation 3 to 
the first proviso of the Finance Act, 1964 the rebate could not be reduced. 
Having failed to get any relief from the appellate authorities, a question of law 
with regard to this aspect was referred to the High Court by the Tribunal. Two 
others questions were also referred but we are not concerned with those in F 
the present case and answer to them stand concluded by the judgment of the 
High Court. 
The High Court reframed the relevant question of law as follows:-
"Whether on the facts and the in the circumstance of the case the sum G 
of Rs. 3,39,000 declared as dividends on 6th December, 1962, by the 
Board of Directors, but payable only on 16th January, 1963, could.be 
taken into account in withdrawing the rebate admissible under the 
first proviso to the Finance Act of 1964 by reference to sub-clause ( c) 
of Clause (i) of the second proviso to the same Act read with H 
290 
SUPREME COURT REPORTS 
(1998) l S.C.R. 
A 
Explanation 3 to the same Act." 
The High Court came to the conclusion that the company, acting through 
its Directors, had declared the interim dividend on behalf of the Company and 
when the payment was made not in the same previous year but was mad

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