1987 (3) TMI 17 - HC - Income Tax

Summary

Issues:
1. Whether the assessee should be given credit for tax deducted at source on dividends derived from shares held in another individual's name.

Analysis:
The judgment pertains to an assessment year where the Income-tax Officer did not allow the claim of the assessee for tax deducted at source from dividends. The shares in question were held in the name of an individual, not the assessee. The Appellate Assistant Commissioner directed that the assessee should be taxed only on the net dividend income, which was upheld by the Tribunal based on a previous decision. However, the High Court found the facts of the previous case cited to be different from the present case. In the previous case, the shares were held by a trust, and the beneficiary sought credit for tax deducted at source, which was denied as the beneficiary was not the holder of the shares. In the current case, the assessee is a trust receiving dividend income, and the question arises whether tax deducted at source should be credited. The court reasoned that if the dividend income is treated as the income of the trust, then credit for tax deducted at source should also be given.

The court highlighted that the crucial factor is whether the dividend income received by the trust is in respect of the same shares from which tax has been deducted at the source. The court directed the Tribunal to verify this aspect. The court disagreed with the direction to tax only the net dividend income and held that the gross income from dividends should be treated as the income of the assessee, and tax deducted at source should be credited accordingly. The judgment clarified that if the dividend income is considered the trust's income, then credit for tax deducted at source should logically follow. The court answered the referred question in favor of the assessee, emphasizing that the tax deducted at source should be given credit to the assessee in accordance with the law.