TMI Blog1958 (3) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... territories and also in Pakistan. During S. Y. 2007 (November 10, 1950, to October 30, 1951) profits accrued to it in both the countries. At the seventh ordinary general meeting of the shareholders held on October 14, 1952, the company declared dividend for S. Y. 2007 on several kinds of shares. The total dividend in respect of shares held by the assessee amounted to ₹ 1,71,992 net. It is partly on account of profits that accrued to the company in the taxable territories and partly out of profits that accrued to it in Pakistan. At the said ordinary general meeting of the company, a resolution was passed, a copy of which is marked annexure ' A ' and forms part of the case. The relevant portion of the said resolution is as follows : A moiety of the amount of the dividend be paid to the shareholders on and after 16th October, 1952, whose names appear on the register of the company as on 6th October, 1952, and the other moiety be postponed for payment within two months from the date on which remittances from Pakistan become free and the monies are actually received. As required by section 20 of the Indian Income-tax Act, the company issued a cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inafter referred to as P. portion of the dividend income ) could not be included in the total income of the assessee to be computed under the Indian Income-tax Act for the assessment year 1953-54 ; and (v) lastly, that the assessee was entitled to relief on the said P. portion of the dividend income in accordance with the Agreement for Avoidance of Double Taxation between India and Pakistan (hereinafter referred to as the Indo-Pakistan Agreement ). It is true that the assessee's method of accounting dividend income is cash ; but the Tribunal rejected all these contentions. The first three were rejected for the reasons given in paragraphs 4 and 5 of its order and in doing this, it followed the Bombay High Court decision in Commissioner of Income-tax v. Laxmidas Mulraj Khatau ([1954] 16 I. T. R. 248) and also relied upon the Calcutta High Court decision in Hindustan Investment Corporation v. Commissioner of Income-tax ([1955] 27 I. T. R. 202). The remaining two contentions were common in this appeal and another appeal I. T. A. No. 4856 of 1955-56 relating to the assessment year 1952-53, and the Tribunal rejected these contentions for reasons recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter 16th October, 1952, whose names appear on the register of the company as on 6th October, 1952, and the other moiety be postponed for payment within two months from the date on which remittances from Pakistan become free and the monies are actually received. Now, the dispute arises with regard to the moiety of dividends which were to be paid two months after remittances from Pakistan became free and the moneys were actually received. The contention of the Department was that these dividends were liable to tax for the assessment year 1953-54, and the assessee contended that inasmuch as these dividends had never been paid to him, he was not liable to tax. The question as to the year in which dividends should be considered as part of the total income of an assessee is dealt with by the Legislature in section 16(2) and that section provides that for the purpose of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been paid, credited or distributed to him. Therefore, a special provision is made by the Legislature with regard to a special type of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that income. Now, turning to the judgment in Khatau Mills' case ([1948] 16 I. T. R. 248), that was a simple case where the dividend was declared on the 18th of October, 1941, and it was made payable on and after the 3rd of November, 1941. The accounting year of the assessee commenced on the 21st of October, 1941, and ended on the 8th of November, 1942, and what we held was that as soon as the dividend was declared on the 18th of October, 1941, the dividend income became an income of the assessee, and, therefore, the dividend income was received by the assessee and, therefore, the dividend income which was received by the assessee on the 3rd of November, 1941, was the dividend income of the assessment year 1942-43 and not of the assessment year 1943-44. Now, certain significant features of this case must be borne in mind before we turn to the actual decision. Although the dividend was declared on the 18th of October, 1941, it was made payable without any condition, without any contingency on the 3rd of November, 1941. Therefore, instead of the dividend being made immediately payable, in respect of which the company was liable in praesenti, the company deferred payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espective of these differences between the case here and the case in the Khatau Mills' case (1), the simple answer to the assessee's difficulties is the section itself. Mr. Joshi says that if the Legislature chose to make the declaration of a dividend the only test of taxability, then it is not for us to say that because of hardships or other difficulties of an assessee, some other test should be laid down. We entirely agree with Mr. Joshi. But Mr. Joshi's difficulty, for which he can have no answer, is that a declaration of dividend is not made the test of taxability by the Legislature. It is difficult to understand why, if the intention of the Legislature was that no other circumstance should be considered except the declaration of dividend, the Legislature should have indulged in circumlocution and instead of using the simple expression to be the income of the previous year in which it was declared should have used the words in which it is paid, credited or distributed . Therefore, one thing is clear from the language used by the Legislature that it did not intend to equate paid with declared in every case. Therefore, it is open to us to consider, notw ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
