1973 PLP 482 (PTD)

(Appeal by special leave from the judgment and order of the Allahabad High Court, dated September 21, 1.964, in Income‑tax Misc. Case No. 121 of 1956). Income‑tax‑Dividend‑Right accruing in Benares State which merged on December 1, 1949‑Dividend declared in July 1949 Cheque encashed on December 31, 1949‑Dividend whether tax. able‑Income‑General principles‑Same income cannot be received more than once‑Reference‑Facts asserted to application for reference and not before Tribunal‑Indian Income‑tax Act, 1922, Ss. 2(14‑A), 4(1)(a), 14(2)(a), 16(2) & 66(1). The appellant, whose year of account was the calendar year, had its registered office in the Benares State, which merged with the Indian Union on December 1, 1949. A company which had its head office at Ramnagar in the Benares State and in which the appellant held shares declared a dividend on July 25, 1949, cheques were Issued in favour of the appellant for Rs. 69,000 in payment of the dividend, and the cheques were encashed by the appellant on December 31, 1969. There was no material on record as to when the cheques were handed over to the appellant. It was contended that the appellant could not be assessed to tax in respect of the dividend which accrued to it at a time when it was a non‑resident : Held, (i) that the State of Benares, after merger on Decem ber 1, 1949, formed part of the State of U. P. and was part of the "taxable territories" by virtue of the definition in sec tion 2(14‑A) of the Indian Income‑tax Act, 1922. Assuming that the dividend accrued within an Indian State, it was received in the taxable territories on December 31, 1949, and by the express words contained in section 14(2)(e) of the Act, it was not exempt from liability to payment of tax, even if the right thereto had accrued to the appellant in an Indian State : (ii) that, in view of the decision of the Supreme Court in J. Dalmia v. Commissioner of Income‑tax (1964) 53 I T R 83, the dividend could not be deemed to have been received on July ; 25, 1949, the date on which it was declared ; (iii) that, as there was no evidence that before December 31, 1949, the dividend was paid, credited or distributed, the dividend was properly taxable, by virtue of section 4(1)(a), in the assessment year 1950‑

51. For the purpose of the Income‑tax Act the same income cannot be received more than once. If there was no evidence before the Appellate Tribunal, any assertion which is made in an application under section 66(1) would serve no purpose, because the question to be decided by the High Court must arise out of the order of the Tribunal under section 33(4) and on materials before it, and not on materials brought before the Tribunal on an application under section 66(1). [Case‑Law referred]. Sans, J. [23‑8‑1968].‑The Benares State Bank Ltd., a public limited company registered according to the law in force in the Indian State of Benares in 1946, held shares, amongst others, of Vibhuti Glass Works Ltd. (hereinafter called "the Glass Works"), which had its head office at Ramnagar in the former Indian State of Benares. The Glass Works declared on July 25, 1949, dividend on its shares in respect of its year of account ending September 30, 1948. The Indian State of Benares merged with India and the territory became part of the taxable territories with effect from December 1, 1949. The Income‑tax Officer, Banares District, brought to tax the dividend received by the bank from the Glass Works in the assessment year 1950‑

51. The Appellate Assistant Commissioner affirmed the inclusion of the dividend in the banks income for the year in question. In appeal to the income‑tax Appellate Tribunal, counsel for the bank tendered in evidence a certificate dated November 18, 1954, from the Glass Works "that a sum of Rs. 69,000 (rupees sixty‑nine thousand only) was paid as dividend to the Benares State Bank Ltd. for the year ended 30th September 1948, on 31st December 1949". Relying upon the recitals in the certificate that the dividend of Rs. 69,000 was received by the bank on December 31, 1949, at Ramnagar, which was then part of the taxable territories, the Tribunal confirmed the order of assessment. In the opinion of the Tribunal, under section 4(1)(a) of the Income‑tax Act, 1922, the income, profits and gains received by the bank in the taxable territories within the previous year were liable to be included in its total income. The High Court of Allahabad in recording their opinion on the question submitted by the Tribunal held that the dividend warrants having been realised on December 31, 1949, were liable to be included In the total income of the bank. The bank has appealed to this Court with special leave. Counsel for the bank raised two contentions : (i) that on the facts found by the Tribunal income sought to be taxed had accrued to tee bank on July 25, 1949, outside the taxable territories when dividend was declared by the Glass Works ; and (ii) in any event income was received by the bank when dividend warrants were delivered to the bank by the Glass Works on August 3, 1949, at Ramnagar which was on that date not within the taxable territories. Section 16(2) of the Indian Income‑tax Act, 1922, prescribes a special rule relating to the determination of the previous year in which dividend is liable to be included in the total income of the assessee. In so far as it is material, it provides "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 . . . . . ." This Court in J. Dalmia v. Commissioner of Income‑tax ((1964) 53 I T R 83 (S C)) held that the expression "paid" in section 16(2) did not con template actual receipt of the dividend by the member in general, dividend may be said to be paid within the meaning of section 162) when the company discharged its liability and made the amount of dividend unconditionally available to the member entitled thereto. It was observed: "The Legislature had not made dividend income taxable in the year in which it becomes due : by express words of the statute, it is taxable only in the year in which it is paid, credited or distributed or is deemed to be paid, credited or distributed." That view was reiterated in Ramesh R. Saraiya v. Commis sioner of Income‑tax ((1965) 52 I T R 699 (S C)). The Court observed in that case that in order that dividend may be said to be "credited" within the meaning of section 16(2) of the Indian Income‑tax Act, 1922, the credit must be in such form that the dividend is made unconditionally available to the members. Similar observa tions were also made in Punjab Distilling Industries Ltd. v. Commissioner of Income‑tax ((1965) 57 I T R 1(S C)) where Subba Rao, J. delivering the majority judgment of the Court, observed at page 9: "The expression 'distribution' connotes something actual and not notional. It can be physical ; it can also be constructive. One may distribute amounts between different shareholders either by crediting the amount due to each one of them in their respective accounts or by actually paying to each one of them the amount due to him." After referring to the judgments of this Court in J. Dalmia's 5 case and Ramesh R. Saraiya's case it was observed: "The same meaning must be given to the word 'distribu tion'. The only difference between the expression 'paid' and the expression 'distribution' is that the latter necessarily involves the idea of division between several persons which is ; the same as payment to several persons." This Court expressly dissented in J. Dalmia's case from the view of the Bombay High Court in Commissioner of Income tax v. Laxmidas Mulraj Khatau ((1948) 16 I T R 248) that as soon as dividend is declared by a company it becomes income of the assessee t it is chargeable to tax as income of the year in which it is so declared, and the fact that the actual payment of the income is deferred is immaterial and irrelevant. At this stage we do not propose to express any opinion whether, apart from the declaration of dividend, there are other facts found by the Tribunal from which it may be legally inferred that there was payment or distribution of dividend on July 25, 1949, because the second argument raised by counsel for the bank cannot be considered without calling for a supplementary statement of the case. The High Court has observed in their judgment that warrants for the dividend declared on July 25, 1949, were delivered by the Glass Works to the bank on August 3, 1949. Prima facie, by delivering the dividend warrants, the Glass Works may, in law, be regarded as having made the amount represented thereby unconditionally available to the bank. There can be no doubt that for the purpose of the Income‑tax Act the same income cannot be received more than once. The High Court has observed in their judgment that dividend warrants were delivered to the assesses on August 3, 1949, but no such statement is found in the statement of the case made by the Tribunal or in the judgment of the Tribunal. It appears that in the application under section 66(1) of the Indian Income‑tax Act the bank expressly averred that the dividend warrants were delivered to it by the Glass Works on August 3, 1949, and copies of the dividend warrants were also annexed to the petition. We are unable, however, to decide whether there was evidence before the Tribunal that the dividend warrants were delivered on August 3, 1949, to the bank. If there was no evidence, any assertion which is made in an application under section 66(1) to that effect would serve no purpose, because the question to be decided by the High Court must arise out of the order under section 33(4) and on materials before it, and not on materials brought before the Tribunal in an application under section 66(1) of the Act. Since, however, the record is not clear as to the date on which the dividend warrants were handed over, vie deem it necessary in the interests of justice to direct the Tribunal to submit a supplementary statement of the case under section 66(4) of the Indian Income‑tax Act relating to the date on which the dividend warrants were delivered to the bank. We are of the opinion that the statements made in the statement of the case are not sufficient to enable us to determine the question raised over by the Tribunal. We may invite the attention of the Tribunal to the decisions of this Court in New Jehangir Vakil Mills Ltd. v. Commissioner of Income‑tax ((1959) 37 I T R 11 (S C)), Patlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income tax ((1963) 48 I T R 92 (S C)) and Keshav Mills Co. Ltd. v. Commissioner of Income tax ((1965) 56 I T R 365 (S C)), which have consistently laid down the rule that, in submitting a supplementary statement of the case, the Tribunal will restrict itself to the evidence on the record and will not be entitled to take any additional evidence. The Tribunal will submit a supplementary statement of the case within three months from the date on which the order of this Court is received by the Tribunal. The appeal to be placed for hearing after the supplementary statement of the case is received.