Registered shareholder status controls dividend grossing up and tax credit; unregistered transferees cannot claim the statutory benefit.

Dividend grossing up and the related tax credit were confined to a registered shareholder whose name appeared in the company's register of members. An unregistered transferee holding shares in blank transfer was not treated as a shareholder for the company's dividend payment or credit, even if the transferee had rights against the transferor in private law. The statutory language was directed to the company's relationship with the registered holder, not to equitable or trustee-based claims between transferor and transferee. On that basis, the unregistered transferee could not claim grossing up under section 16(2) or tax credit under section 18(5).

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Issues: Whether an unregistered transferee of shares holding them in blank transfer is entitled to grossing up of dividend income and credit for tax under the Income-tax Act.

Analysis: The relevant provisions contemplated a shareholder to whom dividend was paid, credited or distributed, and the statutory credit under section 18(5) followed only where the dividend had been grossed up under section 16(2). Reading these provisions with the company law rules governing transfer and registration, the expression shareholder was held to mean a person whose name stood on the register of members. An unregistered transferee, though entitled against the transferor in a private law sense, was not recognized by the company as the holder of the shares and the company could not pay, credit, or distribute dividend to him within the meaning of the taxing provisions. The alternative argument based on trustee principles was rejected because the statutory language was directed to the relationship between the company and the registered shareholder, not the equitable relationship between transferor and transferee.

Conclusion: The assessee was not entitled to grossing up under section 16(2) or to credit under section 18(5) in respect of shares held in blank transfer.

Final Conclusion: The statutory benefit attached only to a registered shareholder, so an unregistered transferee could not claim the dividend tax credit.

Ratio Decidendi: For purposes of dividend grossing up and tax credit, the term shareholder in the Income-tax Act means a registered shareholder whose name is entered in the company's register.

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