TaxTMI 
TaxTMI 
1961 (9) TMI 73
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..... Ltd. held by her. 3. The following resolution was passed at the extraordinary general meeting of the shareholders of Mafatlal Gagalbhai&Co. Ltd. held on March 25, 1949, at the office of M.G. Investment Corporation Ltd., Navsari (in the former Baroda State): "That a further dividend of Rs. 17 per ordinary share free of income-tax for the year 1947 be and is hereby declared absorbing Rs, 4,29,250 and the same be payable in Navsari out of the profits of the year 1947 lying at Navsari." The following resolution was passed at the extraordinary general meeting of the shareholders of Mafatlal Gagabhai&Co. Ltd. held on April 29, I949, at the office of M.G. Investment Corporation Ltd., Navsari: "That a further dividend of Rs. 24 per ordinary share free of income-tax for the year 1948 be and is hereby declared absorbing Rs. 6,06,000 and the same be payable in Navsari out of the profits of the year 1948 lying at Navsari with Messrs. M.G. Investment Corporation Ltd. on and after 30th April, 1949." The following resolution was passed by the board of directors of Mafatlal Gagalbhai&Co. Ltd., at ....
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.... would be paid out of the profits lying at Navsari. 6. It was contended on behalf of the assessee before the Tribunal that inasmuch as the dividends in question were declared out of the accumulated dividends which had accrued in the Baroda State and which were not brought in British India, dividend income of Rs. 47,120 which the assessee received from Mafatlal Gagalbhai&Co. Ltd. accrued in the Baroda State. If this contention of the assessee is accepted, the assessee would, it is said, be entitled to certain concessions granted by the Merged States (Taxation Concessions) Order, 1949. What these concessions would be was not gone into by the Appellate Tribunal. The Tribunal did not accept the contention of the assessee that the dividend income accrued in the former Baroda State for reasons recorded by it in its order, a copy of which is annexure "C" and forms part of the case. 7. Out of the facts stated above the question of law that, therefore, arises is: "Whether the net dividend of Rs. 47,120 accrued to the assessee in the former Baroda State or whether it is income accrued or deemed to h....
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.... Gagalbhai & Co. Ltd. held on March 25, 1949, at the office of M.G. Investment Corporation Ltd., Navsari (in the former Baroda State): "That a further dividend of Rs. 17 per ordinary share free of income-tax for the year 1947, be and is hereby declared absorbing Rs. 4,29,250 and the same be payable in Navsari out of the profits of the year 1947 lying at Navsari." (2) Resolution passed at the extraordinary general meeting of the shareholders of Mafatlal Gagalbhai & Co. Ltd., held on April 29, 1949, at the office of M.G. Investment Corporation Ltd., Navsari: "That a further dividend of Rs. 24 per ordinary share free of income-tax for the year 1948, be and is hereby declared absorbing Rs. 6,06,000 and the same be payable in Navsari out of the profits of the year 1948 lying at Navsari with Messrs. M.G. Investment Corporation Ltd. on and after 30th April, 1949." (3) Resolution passed at the board of directors of Mafatlal Gagalbhai & Co. Ltd. at a meeting held on April 29, 1949, at the office of M.G. Investment Corporation Ltd., Nav....
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.... reference came up for hearing before this court on 28th September, 1955. This court took the view that it was necessary first to consider the applicability of the Merged States (Taxation Concessions) Order, 1949, to the case of the assessee before proceeding to answer the question referred to it. It therefore re-framed the question covering both the aspects of the case. The matter was further heard on 28th February, 1956, and this court held that the aforesaid order had no application to the case of the assessee, and accordingly, answered the re-framed question in the negative. The matter was taken up in appeal to the Supreme Court, and the Supreme Court held that the question of accrual of income has to be decided under the Income-tax Act, and has but little to do with the Concessions Order. In this view of the matter, the Supreme Court has remitted the case to decide the question originally framed by the Tribunal which we have reproduced above. We are here thus not concerned as to whether the said amount of Rs. 47,120 is chargeable to tax under the Indian Income-tax Act, or whether the assessee is entitled to any concession under the Merged States (Taxation Concessions) Order....
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....yable in Baroda State, has no relevance in determining the place of accrual of the dividend income. Now, the word "source" used in relation to a dividend income can have more than one meaning. Section 4, the charging section of the Act, provides that subject to the provisions of the Income-tax Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived. Section 6 enumerates the heads of income chargeable to income-tax and provides that "save as otherwise provided by this Act, the following heads of income, profits and gains shall be chargeable to income-tax in the manner hereinafter appearing". It then details six heads. It thus appears that in the Act, the expression "source" and the expression "heads of income" are used in one and the same sense and it means property, movable or immovable, belonging to an assessee or the activity of an assessee that yields or brings income to him, within the meaning of the Act. Therefore, the source of the said dividend income of Rs. 47,120 of the assessee is the packet of the said 760 shares held by her in Mafatlal Gagalbhai & Co. Ltd., which brings the said income to her. In th....
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....the assessee was residing and carrying on business in Bombay. As regards the speculation business, the assessee did it on his own account as well as on the account of his constituents. He carried on his business not only with the parties in British India, but also with the parties outside British India, i.e., Liverpool, London and New York, and profit and loss from such business, as was done on his own account, was his. Profits were earned by him by his operations on the New York Cotton Exchange. The assessee did not bring them to India, but retained them in America. The question arose as to his liabilities to pay tax on these profits earned by him as a result of his operations on the New York Cotton Exchange. It may be stated that the position then was that an assessee was liable to pay tax only if income was received in India or brought to India or arose or accrued to him in British India. Admittedly, the said profits were neither received by the assessee in British India nor brought by him to British India. It was, however, contended by the revenue that the said profits earned by the assessee in his foreign transaction were part of the profits of his Bombay business, which was l....
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....observations of their Lordships of the Supreme Court that the right of a shareholder to participate in the profits by getting dividend is derived from the investment made by him in the shares and the foundation of it rests on the contractual relationship between the company and the shareholder. But the enjoyment of that right and getting profits in hand is postponed till the dividends are declared. A declaration of a dividend thus brings into existence the results of the investments made by an shareholder. It is not in dispute that, once the dividend is declared by a company, it becomes a debt payable by the company to its shareholders. We have not been shown nor are we aware of any legal bar against a company from holding meetings of its directors or shareholders at a place other than at the head-office. Unless dividend is declared no shareholder is entitled to enforce payment of dividend. There is also no bar against a company making its dividend payable at a place other than its head-office. Therefore, even after dividend is declared, there would be no legal right in a shareholder to enforce its payment at a place other than the place at which the company had made its dividend p....
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....he shareholders in British India, and to get over that difficulty, by this explanation a legal fiction was created and the same was treated as if to have accrued in British India, provided certain conditions stated in the explanations were fulfilled. Navsari was in Baroda State on the dates the three dividends were declared. They were made payable at Navsari. The dividend income of the assessee, therefore, in our opinion, accrued to her at Navsari, a place in the former Baroda State. Thereafter, by virtue of the State Merger (Governors Provinces) Order, 1949, promulgated and published on 27th July, 1949, the former Baroda State merged in the Province of Bombay and became part and parcel of the said province from 1st August, 1949. It is, however, contended by Mr. Joshi that, even assuming that the dividend income had, in fact, accrued to the assessee in the former Baroda State, in law, it accrued to her in British India and, in this connection, he referred to certain provision of the Act and certain amendments introduced in the Income-tax Act. Clause (3A) of section 2 of the Income-tax Act modified up to 1st July, 1948, defined "British India" as follows: "British India means, as....
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....st, 1949. The three dividends were declared before the 1st August, 1949. The dividend income, therefore, cannot be said to have, in fact, accrued to the assessee in British India. It is true that by virtue of the above-referred provisions of the Taxation Laws (Extension to Merged States) Ordinance, 1949, as promulgated and published on 26th August, 1949, the Indian Income-tax Act has been extended and brought into force in all the merged States including the Baroda State and further a legal fiction has been created that the Indian Income-tax Act shall operate in the merged States as if it had been extended and brought into force in the merged States on the 1st April, 1949. These provisions of law, in our opinion, only create a legal fiction and, by that legal fiction, the territories of the merged States including the territories of the marked State of Baroda might be treated as a part of the Bombay Statue for the purpose of assessment. But, that cannot affect the factual position that, on the dates these dividends accrued to the assessee in the former Baroda State, it was not part of then British India. At the most, all that can be said for the revenue is that the dividend income,....
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....dend paid by an Indian company without the taxable territories shall be deemed to be income accruing and arising in the taxable territories to the extent to which it has been paid out of profits subjected to income-tax in the taxable territories." The Adaptation of Laws Order, 1950, promulgated on 26th January, 1950, introduced certain changes in the Income-tax Act. The expression "taxable territories" was substituted for the expression "British India". Clause (3A) defining "British India" was omitted. After clause (14), clause (14A) was inserted which defined "taxable territories" We are here concerned with a period after 14th August, 1947, and before 26 January, 1950. The definition of "taxable territories" so far as it relates to this period is in the following terms: "14A. 'Taxable territories' means--(i)..... (ii) as respects any period after the 14th day of August, 1947, and before the 26th day of January, 1950, the territories for the time being comprised in the Provinces of India...." The dividends have been declared on 25th March, 1949, and 29th April, 1949. As already stated, on these dates, the former Baroda State was not a part of the then Bombay Pro....