TMI Blog1968 (8) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ton West and Company Ltd., Kanpur, was a company in which at the relevant time " the public " were not " substantially interested " within the meaning of section 23A of the Indian Income-tax Act, 1922. At the general meeting of the company held on April 22, 1939, the company failed to declare dividend to the extent of 60% of the assessable income of the company of its previous year as reduced by the amount of income-tax and super-tax payable by the company in respect thereof. The Income-tax Officer, by order dated November 18, 1940, ordered in exercise of the power under section 23A of the Indian Income-tax Act, as then in force, that an amount of Rs. 3,32,691 shall be deemed to be distributed amongst the shareholders as on the date of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order under section 23A of the Indian Income-tax Act had already been made on 12th December, 1941, for the assessment year 1939-40 in the case of the Atherton West Co. Ltd. ?" The High Court answered the question referred in the affirmative. Against that order, with certificate granted by the High Court, this appeal is preferred. The appellant says that his proportionate share in the amount deemed to be distributed was liable to be taxed in the assessment year 1940-41 ; the Commissioner says that the dividend deemed to be distributed could have been taxed in the year 1940-41, but not having been assessed to tax in that year the share of the appellant in the amount actually distributed was liable to be assessed in the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the proportionate share of every shareholder to tax in the appropriate year of assessment. The date of the general meeting determines the date on which the dividend is deemed to be distributed amongst the shareholders, and the proportionate share is liable to be included in the total income of each shareholder of the previous year in which the date falls. Two other related provisions may also be noticed : Section 16(2), in so far as it is material, provides : " For the purposes 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, ......" Section 4(1)(b) of the India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d twice. Again, it is not open to the Income-tax Officer, if income has accrued to the assessee, and is liable to be included in the total income of a particular year, to ignore the accrual and thereafter to tax it as income of another year on the basis of receipt. The Attorney-General appearing on behalf of the Commissioner placed strong reliance upon sub-section (4) of section 23A which, as it stood at the material time, provided : " Where tax has been paid in respect of any undistributed profits and gains of a company under this section, and such profits and gains are subsequently distributed in any year, the proportionate share therein of any member of the company shall be excluded in computing his total income of that year. " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 23A], therefore, clearly contemplates the possibility of tax having been levied on a deemed dividend and also later when that dividend was in fact distributed by the company. This would indicate that the legislature never intended that there should be a bar to assessing a dividend when actually received or distributed although it had earlier been treated by the department and brought to tax as deemed dividend in the hands of the shareholders. " The observation is, in our judgment, contrary to the express words of the statute. The answer recorded by the High Court is, therefore, discharged, and the question submitted will be answered in the negative. The appeal is allowed with costs in this court. The High Court has passed no orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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