Dividend accrual for income tax is triggered on declaration, not on later payment or receipt, under the statutory scheme.

Dividend income was held to accrue when the company declared the dividend, because the shareholder's right to receive it and the company's liability to pay arose on declaration. Deferred payment and later receipt did not postpone accrual for income-tax purposes, and the word "paid" in Section 16(2) of the Indian Income-tax Act, 1922 was read in the statutory context rather than as requiring cash realization. The dividend was therefore assessable in the earlier assessment year, not in the year of payment or receipt.

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Issues: Whether dividend income became taxable in the assessment year in which the dividend was declared or in the assessment year in which it was made payable and received.

Analysis: The assessee's shares yielded a dividend declared by the company on 18 October 1941, payable and paid on 3 November 1941. The question was whether, for purposes of assessment under Section 16(2) of the Indian Income-tax Act, 1922, the decisive date was declaration, payment, or receipt. The Court held that on declaration the shareholder became entitled to the dividend and the company's liability to pay arose then. The mere postponement of actual payment did not postpone accrual of the income. The expression 'paid' in Section 16(2) was construed in the context of the statutory scheme and not in a narrow literal sense requiring cash realization by the shareholder.

Conclusion: Dividend income accrued on the date of declaration, not on the date of payment or receipt. The dividend in question was assessable in the earlier assessment year.

Ratio Decidendi: For purposes of income tax, declared dividend becomes income when the company declares it, because the shareholder's right to receive it and the company's liability to pay arise on declaration; deferred payment does not postpone accrual.

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