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TMI Blog1969 (8) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 per share and the other at Rs. 9-4-0 per share from one Beharilal Nathani, share broker, for a total consideration of Rs. 1,12,575. When the assessee purchased the said shares a large amount of dividends was in arrear as the previous owners had not claimed the dividends declared between 1936 and 1945, although a large part of the dividends on the said shares in respect of the years 1945 to 1954 had been collected by the previous owners of the said shares. A letter addressed by Beharilal Nathani to the assessee bearing the date September 30, 1954, goes to show that the shares had been "sold with arrear dividends". It is admitted that the dividends which had been declared between the years 1936 and 1945 and were received by the assessee dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But he held that, since the shares were purchased by the assessee with the knowledge that it would be entitled to receive the arrear dividends which represented profits arising on the acquisition of such shares, the assessee could be deemed to have entered into a scheme of profit making, an adventure in the nature of trade. The assessee brought a second appeal to the Appellate Tribunal but the appeal was dismissed. The Appellate Tribunal confirmed the findings by the income-tax authorities and held that the assessee acquired the shares on which the arrear dividends were received in the course of its share-dealing business an that the sum of Rs. 43,925 so received by the assessee formed an integral part of its income arising from business wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed either as dividend or as profit ?" It is manifest that dividends declared by Kedarnath Jute Manufacturing Co., between the years 1936 and 1945, were the property of the persons whose names stood on the share register on the relevant dates. When a company declares dividend the same can only be paid to the person who is then the registered holder. A purchaser of shares becomes entitled to all dividends declared since his purchase but not before. If the purchase is made on the eve of declaration of dividend but the purchaser does not get his name mutated in the records of the company in time to have the dividend-warrant issued in his own name he is entitled to call upon his vendor to make over the dividend to him if and when rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence, that such an arrangement implied that the value of Rs. 9-8-0 and Rs. 9-4-0 per share as settled into the broker's bills was not the real value of the share scrips alone but also included the element of the arrear dividends agreed to be receivable by the purchaser. The legal position, therefore, is that the arrear dividends were not claimable by the purchaser by virtue of his right as such purchaser and could not become his income from the shares. He was to get the same because the vendor had contracted to pass the arrear dividends on to him. They were the income of the vendors, i.e., the registered holders but they could not become the income of the purchaser. In fact the assessee had purchased the amount of arrear dividends for a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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