Section 80K l Dividends Attributable to Profits and Gains from NEW Industrial Undertakings
Circular No. 79 was issued by the Central Board of Direct Taxes on 25 February 1972. Its subject is Section 80K l Dividends Attributable to Profits and Gains from NEW Industrial Undertakings.
This is an order under section 119 of the 1961 Act — section 239 of the 2025 Act. Section 119 lets the Board give directions to its own officers and, in defined cases, relax a requirement. It is an administrative power, not a power to rewrite the charge.
Uses the Board's power under section 119(2)(b) to let a shareholder claim relief under section 80K late. A company enjoying relief under section 80J, formerly section 84, may declare dividend out of those profits, and its shareholders are then entitled to relief under section 80K; but rule 31(4) requires a certificate from the company stating the percentage of tax-free profits, and this often could not be given because the dividend was declared before the Income-tax Officer assessing the company had determined what percentage of its profits was exempt. By the time the shareholder obtained the certificate the time limit in section 154(7) for rectification had usually run out and the relief was lost. The Board directs that where an assessee applies under section 154 for relief under section 80K supported by the company's certificate specifying the percentage of dividend free of tax, the Income-tax Officer shall admit the application and dispose of it on merits and according to law even though it is filed after the section 154(7) limit. Where such an application was already rejected and a fresh one is filed, it is to be treated on the same footing as one pending or received after the circular. Pending appeals or references on the point are to be withdrawn.
The Board noticed cases where shareholders were denied section 80K relief only because they could not produce the company's certificate in time, and acted to remove that hardship.
SECTION 80K l DIVIDENDS ATTRIBUTABLE TO PROFITS AND GAINS FROM NEW INDUSTRIAL UNDERTAKINGS
581. Dividend paid or deemed to have been paid by company out of its "tax holiday" profits - Relief denied to shareholders in the absence of proper certificate re. percentage of tax-free profits - Whether relief under the section should be allowed on production of necessary certificate after expiry of time limit specified under section 154(7) - Order under section 119(2)(b)
1. Assessees, deriving profits and gains from newly established industrial undertakings or ships or hotel business, are entitled to tax relief provided under section 80J [section 84 up to the assessment year 1967-68]. When such assessees happen to be companies which declare dividend out of such profits, the shareholders too become entitled to tax relief under section 80K.
2. The Board have noticed certain cases where assessees deriving dividend income attributable to the profits and gains from new industrial undertakings or ships or hotel business were denied relief under section 80K for the failure of such persons to produce proper certificates from the concerned companies indicating the percentage of the tax-free profits as required under rule 31(4) of the Income-tax Rules. This mostly happened when the companies declared dividend even before the Income-tax Officer assessing them had determined what percentage of their profits and gains were exempt from tax under section 80J.
3. When in the type of cases mentioned in paragraph 2, the shareholders are able to produce the necessary certificates, the time limit for taking action under section 154 for rectifying the mistake as one apparent from records is often over and they cannot be allowed the relief due to them. For removing this hardship, the Board have, in exercise of their powers under clause (b) of sub-section (2) of section 119, decided that where assessees claim relief under section 80K due to them by filing applications under section 154 duly supported by the relevant certificates issued by the companies specifying the percentage of dividends which are free of tax, the concerned Income-tax Officers shall admit such applications and dispose these of on merits and in accordance with law, even if such applications are filed after the expiry of time limit specified under sub-section (7) of section 154. Where any such applications have already been rejected and the assessees file fresh applications the same may also be treated on par with the applications which may either be pending or received after the issue of this circular.
4. The Board desire that any appeals or references pending on the point at issue may be withdrawn.
Circular : No. 79 [F. No. 245/7/72 A & PAC], dated 25-2-1972.
A section 154 application for section 80K relief refused as time barred, in an old shareholder's assessment.
Rules it names. Rule 31 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.