17-01-2019, RAJAN BHATIA, Section 10(34), 115BBDA, HIGH COURT OF DELHI

Section - 10(34), 115BBDA, 115-O, 10, 2

Order Date - 17-01-2019

Favouring - Revenue

Court - HIGH COURT OF DELHI

Appellant - RAJAN BHATIA

Respondent - CBDT

Justice - SANJIV KHANNA & ANUP JAIRAM BHAMBHANI

Citation - 119Taxpundit322

Appeal No. - WRIT PETITION CIVIL) No. 4089/2017

Asstt. Year - 2017-2018

PER : SANJIV KHANNA, J.:

Rajan Bhatia, who appears in person, has filed the present writ petition for issue of writ or any appropriate order or direction for quashing the proviso to Section 10(34) of the Income Tax Act, 1961 ('Act' for short) read and along-with with the provisions of Section 115BBDA of the Act. Another prayer made in the writ petition is for staying operation of the aforesaid provisions generally and in particular in relation to the Assessment Year 2017-2018. It is submitted that the provisions under challenge are arbitrary, ultra vires and violative of Article 14 of the Constitution of India.

2. Section 10(34) of the Act reads as under:-

“10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be includedXXXX 34. any income by way of dividends referred to in section115-O:

Provided that nothing in this clause shall apply to any income by way of dividend chargeable to tax in accordance with the provisions of section 115BBDA.”

Section 10(34) grants exemption to income by way of dividend referred to in Section 115-O of the Act. The proviso to sub-section (34) of Section 10 states that nothing contained in the main clause shall apply to income by way of dividend chargeable to tax in accordance with the provisions of Section 115BBDA of the Act. The proviso gives primacy to Section 115BBDA over Section 10(34) of the Act.

3. Section 115BBDA of the Act reads as under:-

“(1) Notwithstanding anything contained in this Act, where the total income of a specified assessee, resident in India, includes any income in aggregate exceeding ten lakh rupees, by way of dividends declared, distributed or paid by a domestic company or companies, the incometax payable shall to be aggregate of -

(a) The amount of income-tax calculated on the income by way of such dividends in aggregate exceeding ten lakh rupees, at the rate of ten percent; and

(b) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income by way of dividends.”

Explanation.— For the purposes of this section—

(a) “dividend” shall have the meaning assigned to it in clause (22) of Section 2 but shall not include sub-clause

(e) thereof;

(b) “specified assessee” means a person other than,—

(i) a domestic company; or

(ii) a fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of Section 10; or

(iii) a trust or institution registered under Section 12A or Section 12AA.” Section 115 BBDA is a non-obstante provision that would apply and prevail over Section 10(34) of the Act. Section 115 BBDA states that notwithstanding anything contained in the Act, where the total income of a specified resident assessee, includes income by way of dividend declared, distributed or paid by domestic companies exceeding Rs. 10 lacs, income tax payable by such assessee shall be the aggregate of clauses (a) and (b). As per clause (a), the specified assessee would be liable to pay tax at the rate of 10% on the amount of income by way of dividend in aggregate of exceeding Rs. 10 lacs. Clause (b) states that the specified assessee would be liable to pay income tax chargeable on his/her total income reduced by the amount of

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