Income-tax] on undistributed income of certain companies
3[Income-tax] on undistributed income of certain companies.
104. (1) Subject to the provisions of 4[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 5[income-tax] at the rate of—
(a) fifty per cent, in the case of an investment company, 6[***]
7[(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], 8[on the distributable income as reduced by the amount of dividends actually distributed, if any.]
9[(ii) ***]
(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 would be unreasonable; or
(ii) that the payment of a dividend or a larger dividend than that declared 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 notification 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.
(4) Without prejudice to the provisions of section 108, nothing contained in this section shall apply to—
(a) an Indian company whose business consists 2[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) an Indian company, the value of whose capital assets, being machinery or plant (other than office appliances or road transport vehicles) as shown in its books on the last date of the relevant previous year is fifty lakhs of rupees or more;
3[(c) 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 4[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 5[included in its gross total income for the relevant previous year] is not less than fifty-one per cent of total income.]
3 Sub. for super-tax by s. 26(i) of the Finance Act, 1965 w.e.f. 1-4-1965.
4 Subs. by s. 23(i) of the Finance Act, 1964 (Act 5 of 1964) w.e.f. 1-4-64.
5 Subs. for the words "super-tax" by s. 30(i) of the Finance Act, 1965 w.e.f. 1-4-65.
6 The word "and" was omitted by s. 30(ii), by s. 30(i) of the Finance Act.
7 Subs. for the brackets, letter and words "(b) thirty-seven per cent in the case of any other company", by s. 30(iii), by s. 30(i) of the Finance Act.
8 Subs. by s. 20(a)(i) of the Finance Act, 1966 w.e.f. 1-4-64.
9 Clause (ii) has been omitted by s. 20(a)(ii) of Finance Act, 1966 w.e.f. 1-4-66.
1 Ins. by s. 23(ii) of the Finance Act, 1964 (Act 5 of 1964) w.e.f. 1-4-64.
2 Subs. for the words "wholly or mainly" by Finance Act, 1966 w.e.f. 1-4-66.
3 Ins. by s. (2)(b)(ii) of the Finance Act, 1966 w.e.f. 1-4-66.
4 Ins. by s. 20(b)(iii) of the Finance Act, 1966 w.e.f. 1-4-66.
5 Subs. by Finance (No. 2) Act, 1967 w.e.f. 1-4-1968.
[As amended by Finance Act, 1968]