TaxTMI 
TaxTMI 
1956 (2) TMI 55
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....ted company called the "Nellore Bus Transport Co. Ltd." For the accounting year ended 31st December, 1947, the Nellore Bus Transport Co. Ltd., issued a dividend warrant in the name of the assessee (a partner in Umamaheswara Motor Service) for a sum of Rs. 6,800 on the 9th June, 1949. The dividend itself was declared on 2nd March, 1949. (The figure 3 appears now to have been put on another figure already existing). The assessee, on the 27th August, 1949, made an application for refund of income-tax and stated as follows: "I, L. Subba Ramayya..........do hereby declare that my total income computed in accordance with the provisions of the Indian Income-tax Act, 1922 (XI of 1922) during the year ending on 30th September, 1948, being the previous year for the assessment for the year ending on the 31st March, 1949, amounted to Rs. 17,698...and that total amount of income-tax and super-tax paid, or treated as paid under sub-section (5) of section 18 is Rs. 2,975.......... I, therefore, pray for a refund of Rs. 2,975............" 4. The Income-tax Officer wrote on 2nd August, 1950, as under....
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....dividend warrants was bogus...........There is clear evidence in this case to show that the company did not have the wherewithal to declare and pay any dividends." He thus agreed with the Income-tax Officer and rejected the claim for refund. Copy of the Appellate Assistant Commissioner's order, dated 23rd July, 1952, is annexure "B" and forms part of the case. 7. The assessee carried the matter on appeal to the Tribunal and contended that as the assessee had filed the dividend warrant issued to him, which was the only way he could discharge his burden in claiming a refund, he was entitled to the refund. He further contended that the tax had been paid by the company on the dividends declared by it which was covered by the dividend warrant filed by the assessee as covered by the dividend warrant filed by him, he was entitled to the refund thereon. 8. The Tribunal found that having regard to the fact that for all the four years during which the company was in existence, it only declared an income of Rs. 34,532 on the whole in its accounts, that an estimate of income had been made, the tax on which amounted to Rs. 62,000 (after allowing rebate on undistributed profit) and ....
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....idends in question?" The facts are these. The assessee, Lagadapati Subba Ramayya, was a partner of a registered firm "Umamaheswara Motor Service" which was a shareholder of a private limited company styled, "The Nellore Bus Transport Co. Ltd." According to the books of the company, its profits for its entire period of existence, that is to say, for the years of account ending with 31st December, 1946, 31st December, 1947, 31st December, 1948, and 11th May, 1949, amounted in all to Rs. 34,532. The Revenue Authority declined to accept the books of the company and estimated; its income at a much higher sum on which tax to the tune of Rs. 62,000 was assessed and paid. The company purported to issue dividend warrants to its shareholders aggregating to a sum of Rs. 1,16,280. The assessee stated that he got dividends of Rs. 6,800 and Rs. 4,800 for the account years ending with 31st December, 1946, and 31st December, 1947, respectively, the dividends having been declared by the company on 2nd March, 1949. The assessee, however, claimed a refund on the basis of only one dividend warrant dated 9th June, 1949, for Rs. 6,800. The Income-tax Officer, the Appellate Assistant Commissioner and ....
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....older's income of the year in which it is paid, credited or distributed regardless of when the profits out of which the dividend is paid were earned by the company. A company is a corporate body distinct from the shareholders and, under the Income-tax Act, is chargeable to tax on its profits as a distinct taxable entity. The company pays tax in discharge of its own liability and not on behalf of or as agent for the shareholders. The shareholder himself is taxable on the dividends which he must include in his total income. Under section 49B of the Act when a dividend is paid to a shareholder by a company which is assessed to tax, the income-tax in respect of such dividend is deemed to have been paid by or on behalf of the shareholder at the rate applicable to the total income of the company. As the income-tax in respect of the dividend is deemed, under section 49B, to have been paid by the company on behalf of the shareholder, credit for the tax is given to the shareholder in his assessment under section 18(5) of the Act. Not only is the shareholder not liable to pay income-tax again on the dividend but he is entitled to claim a refund under section 48 if the maximum rate of inc....