9911796707
TMI Blog1962 (4) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... three shares. Kishinchand, Shewakram and Lokumal were directors of the company. At a general meeting of the shareholders of the company held on July 10, 1943, it was resolved to declare dividend at " 60% on the shares " of the company and for the purpose of that declaration the profits of the year 1941-42 were included in the profit of the year 1942-43. Pursuant to this resolution, Rs. 46,000 were credited in the books of the company to the account of Kishinchand Chellaram on March 31, 1944, and Rs. 23,000 were credited to each of the other three shareholders. Another meeting of the shareholders was held on July 15, 1944, and it was resolved to declare dividend at " 60% on the shares " out of the profit of the company for 1943-44. Pursuant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 18,000 15,000 38,000 -------------------------------------------------------------------------- Total 25,000 90,000 75,000 1,90,000 --------------------------------------------------------------------------------------------------------------------------------------------------- was sanctioned by the General Body inadvertently without taking into consideration the company's liability for taxation, including excess profits tax and all the shareholders having been fully apprised of the bona fide mistake it is hereby unanimously resolved that such dividend inadvertently paid be considered as loan to such individual shareholders, and be paid back to the company forthwith, and the consideration of any dividend to the shareholders be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not liable to be taxed in that year. But the Tribunal confirmed the orders of assessment as to the dividend for the year 1943-44, because, in their view, the resolution declaring dividend could not be reversed by a resolution at a subsequent general meeting after the dividends had been paid. At the instance of the assessees the Appellate Tribunal referred in each of the four cases the following two questions : "(1) Whether the shareholders of the company at the meeting held on December 4, 1947, could reverse the resolutions passed on July 10, 1943, and July 15, 1944 ? (2) Whether the sum of Rs .......... received by the assessees ......... as dividend in the account year 1944-45 relevant for the assessment year 1945-46 has been lawfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the company by a subsequent resolution to reverse an earlier resolution declaring the dividend. The Tribunal held that the earlier resolution could not be reversed by a subsequent resolution and, therefore, what was, paid and received as dividend could not by a subsequent resolution of the company be treated as paid otherwise than as dividend. The High Court held that the assessments were properly made by the Income-tax Officer. They observed that the assessment of an assessee for each year is self-contained and subsequent events cannot justify modification of the assessment. Section 16(2) provided (in so far as it is material) that " for the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any is being wound up at the instance of the liquidator--to compensate the company for loss occasioned by their wrongful or negligent conduct (In re Union Bank, Allahabad). In this case we are not concerned with the validity of the distribution of dividend, or the liability of the directors arising out of improper distribution of dividend. We are concerned with the true character of the payment made on September 29, 1944, to the assessees. If dividend is declared and the amount is credited or paid to the shareholders as dividend can the character of the credit or payment be altered by a subsequent resolution so as to alter the incidence of tax which attaches to that amount ? By virtue of section 16(2) the liability to pay tax attaches as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act. The jurisdiction of the High Court under section 66 being advisory, they were concerned to give their opinion on questions which fairly arose out of the order of the Tribunal, and were in fact raised and referred. The question whether the payment made by the company was not in the nature of dividend not having fairly arisen out of the order of the Tribunal, it cannot be raised in this court as it could not in the High Court. In any event, we are of the opinion that payment made as dividend by a company to its shareholders does not lose that character merely because it is paid out of capital. Under the Income-tax Act, liability to pay tax attaches as soon as dividend is paid, credited or distributed or is so declared. The Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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