Registered shareholder status governs dividend grossing up and tax credit; equitable ownership alone is insufficient.

Dividend grossing up and tax credit under the Indian Income-tax Act are available only to a registered shareholder. A purchaser of shares whose name is not entered in the register of members has merely an equitable interest and does not become the legal owner or shareholder for these tax provisions. Possession of share certificates alone is insufficient, and the benefit depends on a completed transfer reflected in the register. The stated principle is that transferor status continues until registration of the transferee, so statutory dividend relief is unavailable without registered membership.

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Issues: Whether an assessee who has purchased shares but whose name is not entered in the register of members is entitled to the benefit of grossing up of dividend under section 16(2) and credit for tax under section 18(5) of the Indian Income-tax Act.

Analysis: The dividend tax credit contemplated by the Act is available to the shareholder. For shares in a company limited by shares, the terms shareholder and member are treated as synonymous, and the legal incidents of share ownership depend on entry in the register of members. Under the Companies Act and the relevant Table A regulation, the transferor remains the holder until the transferee's name is entered in the register. A transferee who has only an equitable right to the shares does not become the legal owner and is not a shareholder within the meaning of the income-tax provisions. Possession of share certificates alone is insufficient, and the assessee failed to prove a complete transfer in his favour.

Conclusion: The assessee was not entitled to the benefit of section 16(2) or section 18(5) because he was not a registered shareholder.

Final Conclusion: The reference was answered against the assessee and the Revenue's position was upheld.

Ratio Decidendi: For the purpose of dividend grossing up and tax credit under the Indian Income-tax Act, only a registered shareholder, and not a person having merely an equitable interest in the shares, is entitled to the statutory benefit.

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