Dividend tax timing follows the statutory deeming rule, overriding accounting method when income is unconditionally available to shareholders.

Dividend income is taxed under the deeming rule in section 16(2) of the Income-tax Act, 1922 in the year it is paid, credited, distributed, or otherwise made unconditionally available to the shareholder, not when the warrant is actually encashed. The provision prevents postponement of tax by delaying receipt, so later physical receipt does not change the statutory year of taxability. The assessee's regularly employed method of accounting under section 13 cannot override this specific rule, and prior departmental acceptance of a different year of disclosure does not alter the charge. The dividend was therefore taxable in the relevant assessment year.

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Issues: (i) Whether dividend declared in one year but received later was taxable in the assessment year in which it was declared under section 16(2) of the Income-tax Act, 1922. (ii) Whether the assessee's regularly employed method of accounting under section 13 could control the operation of section 16(2) in relation to dividend income.

Issue (i): Whether dividend declared in one year but received later was taxable in the assessment year in which it was declared under section 16(2) of the Income-tax Act, 1922.

Analysis: Section 16(2) creates a deeming rule for dividends and provides that dividend is income of the previous year in which it is paid, credited, distributed, or deemed to have been so paid, credited, or distributed. The provision is intended to prevent postponement of taxation by delaying encashment of the dividend warrant. The relevant point is when the dividend is made unconditionally available to the shareholder, not the date of actual encashment. On the facts, the dividend had become available earlier than the date of actual receipt, and the later receipt in the subsequent accounting year did not alter the statutory position.

Conclusion: The dividend was taxable in the assessment year 1953-54, against the assessee.

Issue (ii): Whether the assessee's regularly employed method of accounting under section 13 could control the operation of section 16(2) in relation to dividend income.

Analysis: Section 13 is permissive and governs computation of income according to the method of accounting regularly employed by the assessee. It cannot override the specific deeming provision in section 16(2), which fixes the year of taxability of dividend income. Prior acceptance by the department of returns showing the dividend in a different year did not create a controlling rule or alter the statutory charge.

Conclusion: The method of accounting could not control section 16(2), against the assessee.

Final Conclusion: Both referred questions were answered in favour of the Revenue, and the dividend income was held taxable under the statutory deeming rule rather than by reference to the assessee's accounting practice.

Ratio Decidendi: A specific deeming provision fixing the year of taxability of dividend income overrides the assessee's regular method of accounting, and dividend is taxable when it is made unconditionally available to the shareholder.

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