TMI Blog1990 (11) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... year in question is 1957-58 and the corresponding previous year is the year ended March 31, 1957. The dispute relates to the income of Rs. 77,500 representing the face value of 7,750 shares held by Dalmia Cement Bharat Co. (for short "the cement company") which was received on January 18, 1957, by the assessee-company from Raza Sugar Co. Ltd. and Buland Sugar Co. Ltd. (for short "the sugar companies"). The sugar companies by the general meeting of the shareholders in the extraordinary general meeting held on January 16, 1952, [each] resolved thus : "Resolved that a dividend be declared out of profits transferred to the Reserve Fund of the company by the distribution of one fully paid up ordinary share of Dalmia Cement Ltd. held by this company as its investment against every two shares held by the members of this company and the directors are permitted to appropriate the book value of the investments from the reserve fund for this purpose and further the directors are authorised to issue negotiable certificates in order to meet fractional distribution." It was further resolved authorising the directors thus : "Resolved further that, for the purpose of giving effect to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o forthwith by issuing and/or transferring to the shareholders of the sugar companies shares of the cement company. Accordingly, the shares were transferred and the assessee company received dividend on January 18, 1957. Initially, the assessee included the dividend income in the assessment year 1957-58 but, thereafter, a revised return was filed deleting the amount in question and claiming that the same was includible in the assessment year 1952-53 but not in the year 1957-58. The Incometax Officer included the income in the assessment year 1957-58. On appeal, the Appellate Assistant Commissioner upheld the same. On further appeal, the Tribunal held that the sugar companies irrevocably placed the shares of the cement company with the trustees for being distributed to the shareholders as dividend in specie. The dividend was unconditionally available to the members entitled thereto. If, however, the members themselves chose not to take it, it cannot be said on that ground that the dividend was not available to them. Since the dividend had been declared on January 16, 1952, and was unconditionally available to the assessee on that date it was an amount which fell to be taxed in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the resolutions dated January 16, 1952, and in terms thereof the payments were made on January 17, 1957. From these facts, the question is whether the dividend has been irrevocably placed for distribution to the shareholders of the sugar companies. Admittedly, the appellant was one of the shareholders whose names appeared on the registers of the sugar companies as on that date and the appellant is entitled to receive the dividend in dispute towards its share from the cement company, Section 16 (2) of the Indian Income-tax Act, 1922, reads thus: "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 16(2) of the Indian Income-tax Act, 1922, prescribes special rules relating to the determination of the previous year in which the dividend is liable to be included in the total income of the assessee. It is provided thereby 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., credite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to be paid, it is taxable only in the year in which it is paid, credited or distributed or is deemed to be paid, credited or distributed. This view was reiterated in Padmavati R. Saraiya v. CIT [1964] 54 ITR (Sh N) 5 (SC), Punjab Distilling Industries Ltd. v. CIT [1965] 57 ITR 1 (SC) and CIT v. Bikaner Trading Co. Ltd. [1970] 78 ITR 12 (SC). The settled law, therefore, is that, generally, the dividend would be said to have been paid within the meaning of section 16(2) when the company discharges its liability and makes the amount of dividend unconditionally available to the members entitled thereto. The Legislature had not made the dividend income taxable in the year in which it became due by express words of the statute. It was taxable only in the year in which it was paid, credited or distributed or was deemed to be paid, credited or distributed. From the facts, it is clear that the sugar companies had irrevocably placed the shares of the cement company with the trustees for being distributed to the shareholders as dividend on January 16, 1952. They have also authorised the trustees to distribute to the shareholders by issuing negotiable certificates which have been made re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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