TMI Blog1948 (3) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... however, urges that another question law should also be referred to the High Court, viz., whether the dividends can be held to be the assessee's income at all. We cannot refer that question for the reasons stated hereafter. 2. In the course of the assessment proceedings relating to the 1945-46 assessment it was found that sundry amounts totalling ₹ 3,628 were received by the assessee during the relevant account year, representing dividends on shares purchased by the assessee which had till then not been transferred in the name of the assessee. The dividends in question were, therefore, received by the vendor shareholders and handed over by them to the assessee-company, the latter having purchased such shares before the dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not a shareholder and Section 18(5) referred to a shareholder. No argument was adduced before the Tribunal to the effect that if the claim under Section 18(5) was not entertained the amount of ₹ 3,628 should not be included in the assessee's income. The third ground of appeal was in these terms: The question as to taxation of dividend is not purely a rebate question. It definitely involves the question of double taxation to income-tax once in the hands of the paying companies and again in the hands of the appellant company, which received the amounts. Owing to factors beyond its control the company could not could not produce the certificates of the respective companies but the fact remains that the amounts were received as di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the assessee the rights and concessions permissible under Section 18(5) and Section 16(2) of the Act. The question submitted to us is, whether in the absence of a certificate under Section 20 the assessee's claim in respect of ₹ 3,628 under Sections 18(5) and 16(2) can be validly entertained. Before we consider the question of the certificate under Section 20, a more fundamental question arises as to the right of the assessee to claim any relief under Section 18 (5), OR 16 (2) of the Act. Turning to these two Section 16 (2) and 18 (5), the principle is fairly clear. Dividends received are not dividends and they are paid after the company has paid the tax on its profits. In order to avoid double taxation, the law permits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was either the shareholder of the company or did it ever receive any dividend from the company, It only received an amount representing the dividend from registered holder of the shares. Therefore, in my opinion, it is only the shareholder of a company to whom dividends are paid who is entitled to the procedure of processing permissible under Section 16(2) and Section 18(5). A person who buys shares or who comes in possession of shares without getting himself transferred in the books of the company and without becoming a shareholder and without being entitled to dividends cannot avail himself of the procedure laid down under these two sections. In this view it is unnecessary to decide whether the law lays down only one mode of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of the respective companies. The assessees claimed that in respect of this dividends the provisions of Section 16(2) should have been applied and these dividends increased in the manner therein provided should have been included in their income and that the provisions of Section 18(5) should also have been applied and the incometax deducted by the companies from these dividends should have been treated as income-tax paid on their behalf. The question for determination, therefore, in the first instance is whether the assessees are entitled to the benefits of Section 16(2). The position of the assessees in law, at the date of the assessment, was that they were purchasers of their respective shares, and the shareholders who had sold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of this reference is : any sum by which a dividend has been increased under sub-section (2) of Section 16 shall be treated as a payment of income-tax on behalf of the shareholder. Those words make it perfectly plain that the person to whose income certain amounts have to be added under Section 16(2), in addition to the dividend, is the shareholder and no other. In my opinion, therefore, the assessees in the present case are not entitled to the benefit of either of those sections. Another question that is mentioned in the reference is, whether the assessees having failed to produce a certificate from the company under Section 20 of the Income-tax Act, the Income-tax Tribunal was right in not entertaining their claim for asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
