TaxTMI 
TaxTMI 
1990 (11) TMI 3
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....Buland Sugar Co. Ltd. (for short "the sugar companies"). The sugar companies by the general meeting of the shareholders in the extraordinary general meeting held on January 16, 1952, [each] resolved thus : "Resolved that a dividend be declared out of profits transferred to the Reserve Fund of the company by the distribution of one fully paid up ordinary share of Dalmia Cement Ltd. held by this company as its investment against every two shares held by the members of this company and the directors are permitted to appropriate the book value of the investments from the reserve fund for this purpose and further the directors are authorised to issue negotiable certificates in order to meet fractional distribution." It was further resolved authorising the directors thus : "Resolved further that, for the purpose of giving effect to the above resolution, the directors are authorised to settle any difficulty which may arise in regard to the distribution as they think expedient and may vest such specific assets in trustees upon trust for the persons entitled to the dividend as may seem expedient to the directors." On the same date, i.e, January 16, 1952, the board of directors of the su....
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....ng the amount in question and claiming that the same was includible in the assessment year 1952-53 but not in the year 1957-58. The Incometax Officer included the income in the assessment year 1957-58. On appeal, the Appellate Assistant Commissioner upheld the same. On further appeal, the Tribunal held that the sugar companies irrevocably placed the shares of the cement company with the trustees for being distributed to the shareholders as dividend in specie. The dividend was unconditionally available to the members entitled thereto. If, however, the members themselves chose not to take it, it cannot be said on that ground that the dividend was not available to them. Since the dividend had been declared on January 16, 1952, and was unconditionally available to the assessee on that date it was an amount which fell to be taxed in the assessment year 1952-53 and not in the assessment year in which it had been assessed. On a reference, the High Court, in its impugned judgment dated September 18, 1973, held that the shares were not unconditionally available for distribution to the shareholders. The main condition for unconditional distribution was missing, i.e., the complete transfer of....
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....gar companies as on that date and the appellant is entitled to receive the dividend in dispute towards its share from the cement company, Section 16 (2) of the Indian Income-tax Act, 1922, reads thus: "For the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been paid, credited or distributed to him . . . Section 16(2) of the Indian Income-tax Act, 1922, prescribes special rules relating to the determination of the previous year in which the dividend is liable to be included in the total income of the assessee. It is provided thereby that, for the purpose of inclusion in the total income of an assessee, any dividend shall be deemed to be income of the previous year in which it is paid., credited or distributed or deemed to have been paid, credited or distributed to him. The question, therefore, is when the declared dividend attracts the operation of section 16(2) of the Indian Income-tax Act, 1922 ? 'In 1. Dalmia v. CIT [1964] 53 ITR 83 (SC), the facts are that the interim dividend was declared to the appellant therein on December 28, 1950, and t....
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....law, therefore, is that, generally, the dividend would be said to have been paid within the meaning of section 16(2) when the company discharges its liability and makes the amount of dividend unconditionally available to the members entitled thereto. The Legislature had not made the dividend income taxable in the year in which it became due by express words of the statute. It was taxable only in the year in which it was paid, credited or distributed or was deemed to be paid, credited or distributed. From the facts, it is clear that the sugar companies had irrevocably placed the shares of the cement company with the trustees for being distributed to the shareholders as dividend on January 16, 1952. They have also authorised the trustees to distribute to the shareholders by issuing negotiable certificates which have been made ready. But for the order of injunction issued by the High Court at the behest of some of the shareholders, the board of trustees would have carried out the formal handing over of the dividend in specie to the respective shareholders. In view of the fact that the injunction was issued prohibiting the board of trustees or their servants from distributing the divid....