TaxTMI 
TaxTMI 
1984 (5) TMI 75
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....ional income-tax under section 104, it was obligatory on the assessee to make a further distribution of its profits and gains so that the total distribution made is not less than the statutory percentage of the distributable income. The shortfall was of Rs. 25,669 and it was this amount which the assessee-company was required to distribute as dividends within three months of 28-12-1979. 3. On 27-3-1980, an extraordinary general meeting of the shareholders of the assessee-company was held and following resolution was passed therein : "Resolved that the company pay and is hereby authorised to pay an amount of Rs. 25,669 as additional dividends for the year 1974-75 to the shareholders whose names appear in the register of members as on 30th June, 1975. Resolved further that the amount of dividends may be paid to the respective shareholders within 42 days from the date of this meeting, after deducting tax at source." 4. There were eleven shareholders of the assessee-company as on the relevant date. Consequently, additional dividends had to be distributed amongst those eleven shareholders. On 26-4-1980, the assessee apportioned the aforesaid amount of Rs. 25,669 amongst the sha....
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....eting of the shareholders on 27-3-1980 by the resolution, referred to above, amounted, in law, to the distribution of dividend within the meaning of that expression in section 105, and, as such, no additional income-tax was leviable under section 104. The Commissioner (Appeals) rejected this contention and he held that the term used in section 104 and section 105 was 'distribution of dividend' and not 'declaration of dividend'. Consequently, the so-called declaration at the extraordinary general meeting of the shareholders on 27-3-1980 did not, in law, amount to 'distribution of dividend' within the meaning of that expression in those sections. The distribution took place on 26-4-1980 (i.e., beyond three months of the date of receipt of the notice under section 105) and, as such, distribution made on that date could not be availed of by the assessee for avoiding levy of additional income-tax under section 104. Accordingly, he confirmed the order of the ITO. The assessee has now come in appeal before us. 9. The ground raised in the memorandum of appeal is that the Commissioner (Appeals) has erred in upholding levy of additional income-tax under section 104. The contention of the ....
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....on dividend income. The dividend should go to the shareholders when profits are earned and the same should be available for taxation in the hands of the shareholders. 13. In the present case, the shareholders of the assessee have declared additional dividend at an extraordinary general meeting held on 27-3-1980. The legal implication of this declaration is that the assessee-company became legally liable to pay dividends in question to the shareholders. The additional dividend to which each shareholder became entitled was liable to be included in his net income for the assessment year 1980-81 because that dividend income accrued to him on 27-3-1980, in view of the provisions of section 8 of the Act, although actual payment took place on 26-4-1980. Consequently, the purpose underlying sections 104 and 105 was satisfied when resolution dated 27-3-1980 was passed at the extraordinary general meeting of the shareholders. 14. Now, let us see whether there is anything in the language used in section 105 to disentitle the assessee from relief under section 105. As already stated, the word used is 'distribution'. The word 'distribution' has not been defined in the Act. However, it has....
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....niously with the provisions of the 1961 Act. Section 105 of the latter Act requires the company to make further distribution from profits and gains and such further distribution can only be made as a result of resolution at the general meeting of the shareholders. It, therefore, follows that the company would be under a legal obligation to convene an extraordinary general meeting of the shareholders for declaring additional dividend in compliance with the requirements of section 105. Such declaration must be held to have been authorised by the law. Such declaration would create an enforceable right to sue for dividends in favour of the shareholders with further consequence that the said declaration of additional dividend would amount to further distribution of profits and gains. 18. The contention that since the terms 'declaration' and 'distribution' are used in section 8, the term 'distribution' should be attributed a meaning different from 'declaration' is without substance. What section 8 lays down is that if dividend is declared by a resolution at a meeting of shareholders, then the date of such declaration would be the date on which dividend income accrued to the shareholde....