TaxTMI 
TaxTMI 
1982 (6) TMI 48
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....e same resolution, they had also declared a final dividend of 3% on first preference shares and 5 1/2% on second preference shares. The amount of dividend on such preference shares came to Rs. 40,000. Thus, in all, an aggregate amount of Rs. 1,48,797 was declared as dividend. After the declaration of the dividends as aforesaid, the undertaking of the company was taken over by the Government under the provisions of the Madras Electricity Supply Undertakings (Acquisition) Act, 1954. As a result thereof, the undertaking came to be vested in the Government with effect from 1st June, 1957. Consequent to the said take-over of the undertaking, under s. 6 of the said Act, all the property of the undertaking including all its liabilities became vest....
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....ssed, the amount deposited with the bank became payable to the company. The company, in fact, withdrew the amount deposited with the Central Bank of India pending the appeal, along with the accrued interest and later on the company paid the aggregate sum of Rs. 1,48,797 by way of dividends to the shareholders. But the amount received by them by way of interest from the deposit was not distributed to the shareholders but retained by the company. For the accounting year ending March 31, 1973, the company through its liquidator filed a return, showing a loss of Rs. 30,583. While considering the said return, the ITO held that a sum of Rs. 8,928, which had been received as interest from the Central Bank of India on the deposit of Rs. 1,48,797....
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....nterest which had accrued in respect of the said deposit could never be the income of the assessee. Thus, according to the Tribunal, as interest had not accrued on any funds belonging to the assessee, the same could never become the income of the assessee and, inasmuch as the interest was paid by the Central Bank on the amount which never belonged to the assessee, it is clear that the interest income had not accrued to the assessee and as such the interest income could not be assessed in the hands of the assessee even if it has been retained by the assessee. The question is, whether the view taken by the Tribunal that the amount deposited does not belong to the assessee, could legally be sustained. After hearing the counsel on either sid....
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....ompany for the acquisition of the undertaking, it should be taken to belong to the company. It is to be remembered that there was no privity between the shareholders and the Government which acquired the undertaking and the liability to pay dividends is only on the company and not on the Government. The liability of the Government is only to pay compensation to the company in relation to all the assets and liabilities taken over by them. The Government is not under liability to pay the dividends to the shareholders as that liability is entirely with the company. In this situation, we do not see how the sum of Rs. 1,48,797 deposited by the Electricity Board can be said to be an amount not belonging to the company. Once the said sum is treate....
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....(Ch D) at pp. 565 and 564 have also been referred to (p. 20 of 34 Comp Cas): " In the first place, they contend that the company was in the position of a trustee for them of these dividends. In my judgment, this was not so. The declaration that the dividend was payable did not make the company a trustee of it for the shareholders." (p. 565). " The dividends in question were declared and became payable more than twenty years before the present claims were made, and constituted debts due to the shareholders for which they could have sued at law, as was pointed out by Lindley L.J. in the passage in his Treatise on Company Law (p. 437), which was cited in the argument before me." (p. 564). Having regard to the above observations, which....