TMI Blog1956 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... a dividend warrant in the name of the assessee (a partner in Umamaheswara Motor Service) for a sum of ₹ 6,800 on the 9th June, 1949. The dividend itself was declared on 2nd March, 1949. (The figure 3 appears now to have been put on another figure already existing). The assessee, on the 27th August, 1949, made an application for refund of income-tax and stated as follows: I, L. Subba Ramayya..........do hereby declare that my total income computed in accordance with the provisions of the Indian Income-tax Act, 1922 (XI of 1922) during the year ending on 30th September, 1948, being the previous year for the assessment for the year ending on the 31st March, 1949, amounted to ₹ 17,698...and that total amount of income-tax and super-tax paid, or treated as paid under sub-section (5) of section 18 is ₹ 2,975.......... I, therefore, pray for a refund of ₹ 2,975............ 4. The Income-tax Officer wrote on 2nd August, 1950, as under: Please take notice that an arrear tax of ₹ 81-7-0 is due from you. If the same is not paid on or before 10th August, 1950, a heavy penalty will be levied. You are further informed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and forms part of the case. 7. The assessee carried the matter on appeal to the Tribunal and contended that as the assessee had filed the dividend warrant issued to him, which was the only way he could discharge his burden in claiming a refund, he was entitled to the refund. He further contended that the tax had been paid by the company on the dividends declared by it which was covered by the dividend warrant filed by the assessee as covered by the dividend warrant filed by him, he was entitled to the refund thereon. 8. The Tribunal found that having regard to the fact that for all the four years during which the company was in existence, it only declared an income of ₹ 34,532 on the whole in its accounts, that an estimate of income had been made, the tax on which amounted to ₹ 62,000 (after allowing rebate on undistributed profit) and had been paid, but that the dividend warrants issued to the tune of ₹ 1,16,280 (actually it is ₹ 1,52,280), the company would not have had the wherewithal to pay dividends to its shareholders of which the assessee was one. Based on the fundamental assumption that a question of refund arises only if tax has been paid upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st December, 1946, 31st December, 1947, 31st December, 1948, and 11th May, 1949, amounted in all to ₹ 34,532. The Revenue Authority declined to accept the books of the company and estimated; its income at a much higher sum on which tax to the tune of ₹ 62,000 was assessed and paid. The company purported to issue dividend warrants to its shareholders aggregating to a sum of ₹ 1,16,280. The assessee stated that he got dividends of ₹ 6,800 and ₹ 4,800 for the account years ending with 31st December, 1946, and 31st December, 1947, respectively, the dividends having been declared by the company on 2nd March, 1949. The assessee, however, claimed a refund on the basis of only one dividend warrant dated 9th June, 1949, for ₹ 6,800. The Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal all rejected the claim of the assessee to a refund. These authorities took the view that after the payment of the income-tax of ₹ 62,000 levied on the company there were no funds available with it out of which the dividends could have been declared and paid. The Appellate Assistant Commissioner concluded his order thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. Under section 49B of the Act when a dividend is paid to a shareholder by a company which is assessed to tax, the income-tax in respect of such dividend is deemed to have been paid by or on behalf of the shareholder at the rate applicable to the total income of the company. As the income-tax in respect of the dividend is deemed, under section 49B, to have been paid by the company on behalf of the shareholder, credit for the tax is given to the shareholder in his assessment under section 18(5) of the Act. Not only is the shareholder not liable to pay income-tax again on the dividend but he is entitled to claim a refund under section 48 if the maximum rate of income-tax with which companies are charged is not applicable to him. If the dividend has been paid partly out of profits which have not been charged to tax in the hands of the company, then under section 16(2) proviso, the credit given to the shareholder in the assessment under section 18(5) is calculated upon the proportion which the company's taxable profits bear to its total profits. It will be clear from what has been stated above that the right of a shareholder to a refund of the tax on dividends paid by a co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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