Dividend taxable only on unconditional payment, credit, or distribution; recovery based on restricted declaration was struck down.

Dividend is taxable only when it is actually or deemed to be paid, credited, or distributed in an unconditional form under section 16(2) of the Indian Income-tax Act, 1922; a mere declaration subject to remittance restrictions does not create taxable income where the shareholder has no unconditional right to the amount. On that basis, inclusion of the disputed dividend in income was treated as without jurisdiction. A recovery action founded on such an unlawful inclusion could also be challenged in writ proceedings, and delay, laches, or the availability of an alternative statutory remedy did not bar relief where the demand itself was a nullity.

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Issues: (i) Whether dividend declared subject to remittance restrictions, but neither paid nor credited in an unconditional form, could be included in the assessee's income under section 16(2) of the Indian Income-tax Act, 1922 and taxed under section 3 of that Act; (ii) Whether the writ petitions could be declined on the grounds of delay and laches or availability of an alternative statutory remedy.

Issue (i): Whether dividend declared subject to remittance restrictions, but neither paid nor credited in an unconditional form, could be included in the assessee's income under section 16(2) of the Indian Income-tax Act, 1922 and taxed under section 3 of that Act.

Analysis: Under section 16(2), dividend is brought to tax only when it is paid, credited, distributed, or deemed to have been so paid, credited, or distributed. The governing principle applied was that declaration of dividend does not by itself amount to payment or credit unless the amount is unconditionally available to the shareholder. On the facts found, the dividend from Renwick & Company Private Ltd. was neither paid nor distributed nor credited in a form enabling unconditional access, and no statutory deeming provision applied. If the amount was not income under section 16(2), no charge arose under section 3 for the relevant assessment years.

Conclusion: The inclusion of the dividend in the assessee's income was without jurisdiction and was unsustainable; the issue is decided in favour of the assessee.

Issue (ii): Whether the writ petitions could be declined on the grounds of delay and laches or availability of an alternative statutory remedy.

Analysis: The impugned recovery was founded on a demand that was treated as wholly without jurisdiction. An order made without jurisdiction is a nullity and can be challenged when sought to be enforced. In the circumstances, no third-party rights were shown to be affected, and the existence of statutory remedies did not bar relief under Article 226 where the authority had arrogated to itself a power it did not possess.

Conclusion: Relief could not be refused on delay, laches, or alternative remedy grounds; the issue is decided in favour of the assessee.

Final Conclusion: The recovery demand and consequential recovery steps relating to the disputed dividend income were quashed, and the petitions succeeded with costs.

Ratio Decidendi: Dividend income is taxable under section 16(2) of the Indian Income-tax Act, 1922 only when it is actually or deemed to be paid, credited, or distributed in an unconditional manner; a recovery action based on inclusion of income outside that charging framework is without jurisdiction and may be struck down in writ proceedings notwithstanding delay or alternative remedies.

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