Deemed dividend treatment under tax law: assessee cannot assign a different previous year for one dividend item.

Deemed dividend under section 23A of the Income-tax Act, 1922 was treated as dividend income for assessment purposes and had to be given full effect as a deeming provision. Where dividend income from shareholdings had already been returned on an adopted previous year accepted by the department, the assessee could not isolate one deemed dividend item and claim a different previous year merely because it was not actually declared. The statutory scheme of previous year and total income did not permit treating the deemed dividend as a separate source. It was therefore assessable in the assessment year 1954-55, not 1953-54.

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Issues: Whether deemed dividend arising under section 23A of the Income-tax Act, 1922 was assessable in the assessment year 1953-54 or in the assessment year 1954-55.

Analysis: The assessee had already adopted and the department had accepted a previous year ending on Asauj Sudi 9, Samvat 2010 for dividend income from other companies. Dividend income from various companies was treated as one source of income, namely shareholdings yielding dividends, and not as a separate source for each company. The deemed dividend under section 23A was not a wholly undisclosed source; it was dividend income in law and had to be given full effect as a deeming provision. The statutory scheme, including the definition of previous year and the inclusion of deemed dividend in total income, did not permit the assessee to carve out one dividend item and claim a different previous year merely because it was deemed rather than actually declared.

Conclusion: The deemed dividend was rightly assessable in the assessment year 1954-55 and not in assessment year 1953-54.

Ratio Decidendi: Deemed dividend under section 23A of the Income-tax Act, 1922 is dividend income for assessment purposes and, where dividend income from that source has been returned on an adopted previous year accepted in the past, the assessee cannot treat a deemed dividend from one company as a separate source to claim a different previous year.

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