UNION OF INDIA & OTHERS versus COROMANDEL FERTILIZERS LIMITED & ANR.

Citation: [1976] 2 S.C.R. 894 · Decided: 09-12-1975 · Supreme Court of India · Bench: P.K. GOSWAMI · Disposal: Dismissed

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
894 
UNION OF INDIA & OTHERS 
v. 
COROMANDEL FERTILIZERS LIMITED & ANR. 
December 9, 1975 
[P. K. GOSWAMI AND N. L. UNTWALIA, JJ.] 
Income Tax A.ct ( 43 of 1961), ss. 80J and SOK-Scope of-No deductio11 
from Compan;y's income under s. SOJ because Company had 110 taxable income 
-If Company entitled not to deduct tax at source from the dividend income of 
~ 
share-holder. 
Section 80A(2), Income Tax Act, 1961, provides that the aggi;egate amount 
?--
of deductions under Chapter VIA shall not exceed the gross total mcome of t_he 
assessee. 
Under s. SOJ(l), which is in Chapter VIA, where the gross total m-
' 
come of an assessee includes any profits and gains derived from an industrial 
undertaking, there shall be allowed, in computing the total income of the 
assessee, a deduction of so much of the profits and gai113 a~ does not eXCeed 
the amount calculated at 6 per cent per annum of the capital employed in the 
industrial undertaking, calculated in the prescribed manner, and referred to as 
the 'relevant amount'; and, under s. SOJ (3), where the amount of profits 
and 
gains derived from the industrial undertaking falls short of the 'relevant amount' 
the amount of shortfall, or, where there are no profits and gains, the whole of 
the 'relevant amount' shall be carried forward and set off against the profits and 
gains of the next assessment year and so on up to the 7th ass~ment year 
from the end of the initial assessment year. Section SOK provides that in com-
puting the total income of an assessee, whose gross total income includes any 
income by way of dividends, there shall be allowed, a deduction from the divi-
dend-income an amount ectual to such part thereof as is attributable to profits 
'} 
and gains derived by the company from an industrial undertaking on which no 
tax is payable by the company or in respect of which a company is entitled to 
a deduction under s. SOJ. 
Under 5. 197 (3) if by reason of s. SOK. the whole 
or any portion of dividend payable to a share-holder will be deductible in com· 
puling the assessee's total income, application may be made to the Income Tax 
Officer to determine the amount to be deducted, and, on such determination, no 
t,ax shall be deducted at source on such amount. 
The 2nd respondent is a share-holder of tl:Je 1st respondent-company which 
is an industrial undertaking. 
The Company' commencect production i~ 1967 
and was assessed to income tax for the first time for the ass~ment year 1969-
70. The assessment order disclosed unabsorbed losses and depreciation. 
The 
Income Tax Officer determined also the amount under s. SOJ for the assessment 
years 1969-70 and 1970-71, but as there were no profits in those assessment 
years, the amounts were directed to be carried forward to be set off against pro-
fits and gains in the succeeding years under s. SOJ(3). For the assessment vear 
1973-74, the Company made a profit, but as the total of the unabsorbed ·less 
and depreciation exceeded th!! C~mpany's income, the total income for 
that '•.1 
year of. the Company was nil with some unabsorbed loss and depreciation to 
b~ earned forwar~ to the next assessm~nt year 1974-75, that is, the Company 
did not have any mcome assessable. to mcome tax in the assessment year 1973-
7 4 and, hence, there was no deduct10n under s. 80J (1) for that year also. 
Out of the profits for that ¥~r, the Company declared a dividend. 
The 
Company thereafter sought perm1S'31on of the Income Tax Officer not to dedoct 
tax . at source out of the divi~e!!d payable to shareholders, and also sought a 
cerh~cate under s., 19~ (3) pointing out that the dividend payable by it would 
qualify for deducl!on m the hands of the 
shareholders 
under s SOK 
The 
J!1come Tax Officer rejected the request of the Company, and the wrii peti-
!Ion of the Company was allowed by the High Cou.rt. 
In appeal to this Court, it was contended by the Revenue 
relyin 
u on 
Commissione,r of ln#Jme Tax, Madras v. S. S. Pi/lay (1970) '77 I.Tl. :f54, 
.. 
I'· 
UNION v. COROMANDEL FERTILIZE!tS (Qo~~mi, J.) 
895 
that unless there is an actual deduction under s. 80J, the shareholder was not 
.entitled to claim the benefit under s. 80K. 
Dismissing the appeal, 
.i.r 
HELD : As against actual deduction the Company's entitlement to deduction 
·under s. SOJ in the relevant year is enough to give a right to ~e shareholder to 
invoke s. SOK and obtain, p.ari pas~u, the benefit of the section. The. _Com· 
pany is, th

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