Section 23A deemed dividend taxable only in the hands of registered shareholders, not the beneficial owner.

For section 23A, deemed dividend was taxable only in the hands of the registered shareholder, because the statute used the term "shareholder" and not beneficial owner. A Hindu undivided family, even if beneficial owner of shares standing in the names of individual members, was not itself a shareholder or member of the company. The legal fiction in the provision could not be extended beyond its plain terms, so the deemed dividend could not be assessed in the hands of the Hindu undivided family and remained assessable only against the registered shareholders.

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Issues: Whether, for the purpose of section 23A, the deemed dividend of a company could be assessed in the hands of a Hindu undivided family which was only the beneficial owner of the shares, when the shares stood registered in the names of individual members.

Analysis: Section 23A provided that the notional dividend was to be treated as distributed amongst the shareholders and that the proportionate share of each shareholder was to be included in the total income of such shareholder. The provision referred to the shareholder and not to the beneficial owner of the shares. The expression was to be given the same meaning as in the related provisions of the Act, namely, the person registered in the books of the company as shareholder. A Hindu undivided family as such was not a shareholder or member of the company, and the legal fiction created by the section could not be carried beyond the plain terms of the statute.

Conclusion: The deemed dividend could not be assessed in the hands of the Hindu undivided family; it was assessable only in the hands of the registered shareholders. The answer was against the Revenue and in favour of the assessee.

Ratio Decidendi: In construing a fiscal fiction, the statutory term "shareholder" means the registered shareholder unless the statute expressly extends it to the beneficial owner.

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