Tamil Nadu Mercantile Bank Ltd. vs Commissioner of Income Tax

R. Jayasimha Babu, J.—The assessment year is 1985-86. The question referred for our consideration is :

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that additional tax u/s 104 is leviable ?

The assessee is a banking company. It had a distributable income of Rs. 50,44,772 for the relevant previous year, which was required to be

distributed as dividend. However, only a sum of Rs. 3,79,282 was distributed. The assessee sought to avoid the levy u/s 104, by contending that

the Reserve bank had allowed it to declare a dividend of 20 per cent. and, therefore, only that amount which was required for declaring of 20 per

cent. was utilised. The Tribunal has found that there was no prohibition in law against the declaration of a higher percentage of dividend and that

the figure mentioned in the letter of the Reserve Bank was only the figure which the assessee itself had proposed to the Reserve Bank. The

Reserve Bank merely gave the permission that had been sought. The permission so given also was without prejudice to the assessee''s obligation to

comply with the requirements of all other laws. The Tribunal, therefore, held that the assessee is liable to be taxed on the undistributed portion of

the income.

3.We do not find any error in that approach of the Tribunal. The obligation imposed on the assessee under the provisions of the Income Tax Act

have to be given full effect while considering the assessee''s liabilities under the Act.

The question is answered in favour of the Revenue and against the assessee.