TaxTMI 
TaxTMI 
1959 (3) TMI 31
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.... sufficient fulness, yet briefly, in the statement of the case submitted by the Income-tax Appellate Tribunal (Calcutta Bench) and may be conveniently set out in its own words : "The applicant had received sums of Rs. 3,831, Rs. 6,606, Rs. 7,954 and Rs. 8,304 in the four years respectively (assessment years, 1944-45, 1945-46, 1946-47 and 1947-48) as income from dividends. The shares in respect of which this dividend income was received were the property of the applicant but in the books of the various companies these stood in the names of other persons. It appears that these shares were purchased by the applicant from other persons under a blank transfer but the transfers had not been registered with the various companies. The applicant's claim in these income-tax proceedings was that these shares although not registered in the name of the applicant were the property of the applicant. It was further claimed that this dividend income should be grossed up under section 16(2) and credit for the tax deducted should be allowed to the applicant under section 18(5)." The Income-tax Officer did not accept this claim, and the appeals of the assessee were rejected by the Appellate Assistan....
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....deemed in respect of such dividend himself to have paid income-tax (exclusive of super-tax) of an amount equal to the sum by which the dividend has been increased under sub-section (2) of section 16." It was contended in the High Court that inasmuch as section 16(2) referred to an "assessee", the assessee company was entitled to have the dividend "grossed up" by the addition of income-tax paid by the various companies at source and consequently to have the benefit of the credit allowed under the two remaining sections. In the opinion of the High Court, an assessee whose name was not in the register of members of the companies was not entitled to the benefit of these provisions. The learned Judges of the High Court were of the opinion that the word "shareholder" in section 18(5) had the same signification as the word "member" used in the Indian Companies Act; and that the assessee was not qualified to be considered as a shareholder, even though by a blank transfer it had purchased the relevant shares. In our opinion, the High Court was right in its conclusion. A company, when it pays income-tax, does not do so on behalf of the shareholders. It is itself chargeable under the Act. I....
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....Regulation 18 of Table A of the Indian Companies Act, 1913, or by what are known as 'blank transfers.' In such blank transfers, the name of the transferor is entered, and the transfer deed signed by the transferor is handed over with the share scrip to the transferee, who, if he so chooses, completes the transfer by entering his name and then applying to the company to register his name in place of the previous holder of the share. The company recognises no person except one whose name is on the register of members, upon whom alone calls for unpaid capital can be made and to whom only the dividend declared by the company is legally payable. Of course, between the transferor and the transferee, certain equities arise even on the execution and handing over of "a blank transfer", and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee. These equities, however, do not touch the company, and no claim by the transferee whose name is not in the register of members can be made against the company, if the transferor retains the money in his own hands and fails to pay it to him. ....
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....ame entered in the register of members relates it back to the time when the transfer was first made. See Nagabushanam v. Ramachandra Rao [1922] ILR 45 Mad. 537. During the period that the transfer exists between the transferor and the transferee without emerging as a binding document upon the company, equities exist between them, but not between the transferee and the company. The transferee can call upon the transferor to attend the meeting, vote according to his directions, sign documents in relation to the issuance of fresh capital, call for emergent meetings and inter alia, also compel the transferor to pay such dividend as he may have received. See E.D. Sassoon & Co. Ltd. v. Patch [1922] 45 Bom. LR 46 approved in Mathalone v. Bombay Life Assurance Co. Ltd. [1954] SCR 117; 24 Comp. Cas. 1. But these rights though they, no doubt, clothe the transferee with an equitable ownership, are not sufficient to make the transferee a full owner, since the legal interest vis-a-vis the company still outstands in the transferor; so much so, that the company credits the dividends only to the transferor and so calls upon him to make payment of any unpaid capital, which may be needed. The cases....
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....on term used, and only means the person who holds the shares by having his name on the register." Learned counsel for the assessee cited a number of authorities in which the ownership of the dividend was in question, and it was held that the transferee whose name was not registered was entitled to the dividend after transfer had been made. These cases are Commissioners of Inland Revenue v. Sir John Oakley [1925] 9 Tax Cas. 582, Spence v. Commissioners of Inland Revenue [1941] 24 Tax Cas. 311, and others cited at page 367 in Multipar Syndicate, Ltd. v. Devitt [1945] 26 Tax Cas. 359. No one can doubt the correctness of the proposition in these cases but from an equitable right to compel the transferor to give up the dividend to the transferee, to a claim to the dividend by him as a "shareholder" against the company is a wide jump. In so far as the company is concerned, it does not even issue the certificate under section 20 of the Income-tax Act in the name of an unregistered transferee but only in the name of the transferor whom it recognises, because his name is borne on its books. Section 20 lays down : "The principal officer of every company shall, at the time of distribution ....