PURSHOTTAMDAS THAKURDAS vs COMMISSIONER OF INCOME-TAX, BOMBAY

The Supreme Court held that under Section 18(5) of the Indian Income-tax Act, 1922, dividend income is subject to 'deduction of income-tax at the time of payment', thus exempting it from the provisions of Section 18-A regarding advance tax estimates. The court ruled that since the shareholder is deemed to have paid the tax at the time of dividend payment, penal interest under Section 18-A(6) was improperly levied. The dissenting opinion argued that dividend income should be included in the income estimate, affirming the levy of penal interest.