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Interpretation of article 95 of the Indian Companies Act, 1913 regarding inclusion of dividend in assessment year 1952-53. Analysis: The case involved a reference under section 66(1) of the Income-tax Act regarding the inclusion of a dividend of Rs. 4,12,500 in the assessment year 1952-53. The dividend was declared by the directors of a company in August 1950, but the payment was made in December 1950, falling within the relevant accounting period. The lower authorities and the Appellate Tribunal held that the dividend was liable to be included in the assessment year 1952-53. The distinction between dividend declared and paid under article 95 and article 96 of the Indian Companies Act, 1913 was crucial in this case. While a dividend declared becomes the income of the assessee immediately, an interim dividend paid by directors is revocable until actually paid. The Tribunal's decision was based on the view that the decision of directors to pay an interim dividend does not constitute a declaration of dividend under article 95 until the actual payment is made. The case cited regarding interim dividend, Lagunas Nitrate Co. Ltd. v. Henry Schroeder & Co., emphasized the revocable nature of directors' decisions on interim dividends. The wording of the relevant articles in the company's memorandum and articles of association also played a role in the interpretation, with slight differences from articles 95 and 96 of Table "A" of the Indian Companies Act, 1913. The use of the word "declare" in the company's articles for interim dividends raised doubts about the status of such declarations compared to formal declarations at general meetings. Reference to Halsbury's Laws of England highlighted that interim dividends are usually declared by directors between general meetings, and such declarations can be rescinded before payment. The absence of a fixed payment date for the dividend in question further supported the Tribunal's decision that the dividend was not to be included in the assessment year 1952-53. In conclusion, the Court upheld the decision of the authorities and the Tribunal, ruling that the dividend was not liable to be included in the assessment year 1952-53. The question posed for consideration was answered in the affirmative, and the Commissioner was awarded costs from the assessee. Justice Capoor agreed with the judgment.
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