Dividend in specie is taxable when unconditionally made available, not when share scrips are later received.

Dividend declared in specie is treated as paid for tax purposes when the company discharges its liability and makes the amount unconditionally available to shareholders under section 16(2) of the Income-tax Act, 1922. On that principle, the dividend became assessable in the year of declaration and availability, even though the shareholder received the share scrips later and later injunction or compromise proceedings did not change the company's position. The taxpayer's inclusion of the amount in a later return did not create estoppel against assessment in the correct year.

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Issues: Whether dividend declared in specie became taxable in the assessment year in which it was declared and made unconditionally available, or in the later year in which the assessee actually received the share scrips.

Analysis: The dividend was declared on 16 January 1952 and the shares representing the dividend were handed over to trustees on the same date for distribution to the shareholders. Section 16(2) of the Income-tax Act, 1922 treated dividend as paid when the company discharged its liability and made the amount unconditionally available to the member entitled thereto. The subsequent injunction and compromise did not alter the position of the company, since the dividend had already been placed beyond the company's control for the benefit of the shareholders. The fact that the assessee included the amount in its return for the later year did not create estoppel against a correct assessment year.

Conclusion: The dividend income was assessable in the assessment year 1953-54 and was not assessable in assessment year 1958-59; the answer was therefore in favour of the assessee.

Final Conclusion: Dividend declared and made unconditionally available in specie is taxable in the year of such availability, not in the year of later physical receipt by the shareholder.

Ratio Decidendi: For purposes of dividend taxation under section 16(2) of the Income-tax Act, 1922, dividend is paid when the company discharges its liability and makes it unconditionally available to the shareholder, even if actual receipt is delayed by later disputes or proceedings.

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