Income-tax on undistributed income of certain companies
Income-tax on undistributed income of certain companies.
104. (1) Subject to the provisions of 21[this section and of sections 105, 106, 107 and 107A], where the Income-tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that previous year are less than the statutory percentage of the distributable income of the company of that previous year, the Income-tax Officer shall make an order in writing that the company shall, apart from the sum determined as payable by it on the basis of the assessment under section 143 or section 144, be liable to pay 20[income-tax] at the rate of—
(a) fifty per cent, in the case of an investment company, 22[* * *],
23[(b) thirty-seven per cent, in the case of a trading company, and
(c) twenty-five per cent, in the case of any other company,]
24[on the distributable income as reduced by the amount of dividends actually distributed, if any,] 25[within the said period of twelve months].
22[* * *l
(2) The Income-tax Officer shall not make an order under sub-section (1) if he . is satisfied—
(i) that, having regard to the losses incurred by the company in earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared 25[within the period of twelve months referred to in sub-section (1)] would be unreasonable ; or
(ii) that the payment of a dividend or a larger dividend than that declared 25[within the period of twelve months referred to in sub-section (1)] would not have resulted in a benefit to the revenue ; or
(iii) that at least seventy-five per cent of the share capital of the company is throughout the previous year beneficially held by an institution or fund established in India for a charitable purpose the income from dividend whereof is exempt under section 11.
1[(3) If the Central Government is of opinion that it is necessary or expedient in the public interest so to do, it may, by notification2 in the Official Gazette and subject to such conditions as may be specified therein, exempt any class of companies to which the provisions of this section apply from the operation of this section.].
3[(4) Without prejudice to the provisions of section 108, nothing contained in this section shall apply to—
(a) an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power ;
(b) a company which is neither an Indian company nor a company which has made the prescribed arrangements for the declaration and payment of dividends within India.
Explanation : For the purposes of clause (a) of this sub-section, the business of a company shall be deemed to consist mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, if the income attributable to any of the aforesaid activities included in its gross total income for the relevant previous year is not less than fifty-one per cent of such total income.]
21. Substituted for "sub-section (2) and of sections 105, 106 and 107" by the Finance Act 1964, w.e.f. 1-4-1964.
20. Substituted for "Super-tax" by the Finance Act, 1965, w.e.f. 1-4-1965.
22. "and" omitted by the Finance Act, 1965, w.e.f. 1-4-1965.
23. Substituted for "(b) thirty-seven per cent in the case of any other company" by the Finance Act, 1965, w.e.f. 1-4-1965.
24. Substituted for "on the distributable income as reduced by—(i) the amount of dividends actually distributed, and" and cl. (ii) omitted by the Finance Act, 1966, w.e.f. 1-4-1966.
25. Inserted by the Finance Act, 1973, w.e.f. 1-4-1974.
1. Inserted by the Finance Act, 1964, w.e.f. 1-4-1964.
2. For complete list of exempted class of companies, see Taxmann's Direct Taxes Circulars, Vol. 1, 1980 edn., pp. 535-37.
3. Substituted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. Original sub-sec. (4) was inserted by the Finance Act. 1964. w.e.f. 1-4-1964 and later substituted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. In between sub-sec. (4) was amended by the Finance Act, 1966, w.e.f. 1-4-1966 and by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[As amended by the Finance Act, 1983]