Dividend grossing up and tax credit require registered shareholder status; equitable ownership alone is insufficient without registration.

Under the 1922 Income-tax Act, dividend grossing up and credit for tax deducted at source depended on the recipient being a shareholder in the statutory sense. Reading the income-tax provisions with the companies law scheme, the term "shareholder" was treated as a registered member whose name appears in the register of members. A transferee under a blank transfer may have equitable rights against the transferor, but without registration he has no enforceable claim against the company as shareholder and cannot claim grossing up or tax credit.

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Issues: Whether an assessee who had purchased shares by blank transfer but whose name was not entered in the register of members was entitled, for dividend income, to grossing up under section 16(2) and credit for tax deducted at source under section 18(5) of the Indian Income-tax Act, 1922.

Analysis: The right to have dividend grossed up and to obtain credit for tax deducted was held to depend upon the assessee being a "shareholder" in the statutory sense. Reading sections 16(2), 18(5), 19A and 20 of the Indian Income-tax Act, 1922 together with the scheme of the Indian Companies Act, 1913, the expression "shareholder" was treated as synonymous with a member whose name stood on the register of members. A transferee under a blank transfer may have equitable rights against the transferor, but until registration he has no enforceable claim against the company as shareholder.

Conclusion: The unregistered transferee was not entitled to grossing up or tax credit under sections 16(2) and 18(5) of the Indian Income-tax Act, 1922.

Ratio Decidendi: For the purposes of dividend grossing up and tax credit, "shareholder" means a registered member of the company, and equitable ownership without registration is insufficient.

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