Deemed Dividends: not assessable against a deceased shareholder's legal representative absent statutory assessment machinery.

Deemed dividends under section 23A that are made effective after the death of a registered shareholder cannot be validly assessed against the deceased's legal representative because the Income-tax Act lacks statutory machinery to treat such notional post death distributions as assessable income of the representative. The Court applied the statutory text of section 23A and the limited liability concept of executors and administrators, interpreted the temporal scope of posthumous liability, rejected judicial supplementation of assessment procedure, and dismissed the revenue's appeal, holding the assessment invalid and ruling for the assessee.

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Issues: Whether dividends deemed to have been distributed under section 23A of the Income-tax Act, 1922 in respect of shares standing in the name of a deceased registered shareholder can be validly assessed in the hands of the legal representative or administrator where the order deeming distribution is made after the death of the registered shareholder and the representative is not entered in the company's register.

Analysis: The Court examined whether the Income-tax Act contains the procedural machinery to assess notional dividends created by an order under section 23A against the legal representative of a deceased registered shareholder when the fiction of distribution is made effective after the shareholder's death. The Court applied the statutory text of section 23A, which taxes the proportionate share of deemed dividends in the income of the shareholder, and considered section 24B (as enacted by the Indian Income-tax (Second Amendment) Act, 1933) which imposes limited liability on executors or administrators to pay tax assessed as payable by the deceased or tax which would have been payable by him if he had not died. The Court relied on precedent holding that "shareholder" for the purposes of section 23A means a shareholder registered in the company's books, and analysed prior decisions (including Amarchand N. Shroff) construing the temporal scope of section 24B and the extension of legal personality only for the previous year in which the deceased died. The Court rejected the submission that section 24B or any other provision supplies a general machinery to assess notional dividends arising after the account year in which the deceased's legal personality ends, and held that treating the legal representative as an assessee for such notional income would be to charge tax otherwise than in accordance with the Act. The Court further noted that where the Legislature has not provided assessment procedure for estate receipts or for taxation of notional income post the relevant account year, courts cannot supply such machinery.

Conclusion: The assessment of dividends deemed to have been distributed under section 23A made effective after the death of the registered shareholder cannot be validly assessed in the hands of the legal representative or administrator in the absence of statutory machinery permitting such assessment; the appeal by the Commissioner is dismissed and the assessment is invalid. (Decision in favour of the assessee.)

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