Deemed dividend taxation fails where the shareholder dies before distribution takes effect and no statutory machinery exists against the legal representative.

Dividends deemed distributed under section 23A of the Income-tax Act, 1922 were taxable only in the hands of the registered shareholder named in the company's books. A legal representative, even if holding probate or letters of administration, did not become a shareholder for this purpose. Section 24B was confined to recovery of tax that had accrued or become payable by the deceased during his period of legal personality, and did not extend to taxing notional income arising after death. In the absence of a specific statutory machinery to assess such deemed dividend in the estate or representative's hands, the assessment was invalid and the deemed dividend was not assessable against the legal representative.

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Issues: Whether dividends deemed to have been distributed under section 23A of the Income-tax Act, 1922 could be assessed in the hands of the legal representative of a deceased registered shareholder when the shareholder had died before the relevant distribution became effective.

Analysis: The statutory scheme of section 23A treats the dividend as distributed among shareholders and fastens tax liability on the shareholder whose name stands registered in the company's books. The legal representative of a deceased shareholder does not, merely by virtue of probate or letters of administration, become a shareholder for all purposes. Section 24B provides only a limited machinery for recovering tax that had accrued or would have been payable by the deceased within the relevant period of his legal personality, and it does not create a general machinery for taxing notional income arising after the close of that period. The absence of a specific statutory procedure for assessing such deemed income in the hands of the estate or legal representative prevents the charge from being sustained.

Conclusion: The assessment on the legal representative was invalid and the dividend deemed under section 23A was not assessable in his hands.

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