Dividend taxed in shareholder's hands despite prior company tax, as double taxation was not attracted across different assessees.

Dividend received by a shareholder was held taxable in the shareholder's hands even though the company had already been taxed on the same amount as undistributed profits under section 104 of the Income-tax Act, 1961. Taxability was determined by the identity of the assessee, and taxing the same amount in the hands of different assessees was not impermissible double taxation. Once distributed, the amount changed character and became income of the shareholder distinct from the company's liability. The objection based on double taxation therefore failed, and the Revenue was entitled to tax the dividend in the shareholder's hands.

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Issues: Whether dividend received by a shareholder could again be taxed in the shareholder's hands merely because the company had already been taxed on the amount as undistributed profits under section 104 of the Income-tax Act, 1961.

Analysis: The liability to tax had to be examined with reference to the identity of the assessee. Taxation of the same amount in the hands of two different assessees did not amount to impermissible double taxation. Once the amount was distributed by the company, its character changed and it became income of the shareholder, distinct from the company's liability on undistributed profits.

Conclusion: The amount was taxable in the shareholder's hands notwithstanding the company's earlier liability; the objection based on double taxation failed.

Final Conclusion: The appeal succeeded and the writ petition stood dismissed, leaving the Revenue entitled to tax the dividend in the shareholder's hands.

Ratio Decidendi: Double taxation is not attracted where the same amount is taxed in the hands of different assessees, because taxability depends on the identity of the assessee and the character of the receipt in that assessee's hands.

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