1981 (11) TMI 66 - AT - Income Tax

Summary

Issues:
1. Inclusion of dividend income in the assessment year.
2. Interpretation of provisions of section 8 of the Income-tax Act, 1961 and sections 205A and 207 of the Companies Act.
3. Right of the shareholder to receive dividend income.

Analysis:
The appeal before the Appellate Tribunal ITAT Ahmedabad-A concerned the inclusion of dividend income in the assessment year 1977-78. The dispute arose when the assessee challenged the addition of Rs. 59,375 as dividend income received from a company. The Income Tax Officer (ITO) included the dividend income in the total income for the relevant assessment year, based on the dates of declaration and issuance of the dividend warrant by the company. The assessee argued that the income should be assessed in the subsequent year as per the provisions of section 205A of the Companies Act, which allows a 42-day period for dividend payment. However, the ITO held that the right to receive dividend arises upon declaration, relying on previous court decisions.

The Commissioner (Appeals) rejected the assessee's contentions and upheld the ITO's decision. It was emphasized that the income from dividend was includible in the total income of the assessee on the date of declaration by law enacted in section 8 of the Income-tax Act. The Commissioner also dismissed the reliance on sections 205A and 207 of the Companies Act, stating that these provisions do not delay the accrual of the right to receive dividend income. The appeal was filed before the Tribunal challenging the Commissioner's decision.

During the appeal before the Tribunal, the assessee reiterated the argument that the right to receive dividend income arises only after the expiry of the 42-day period stipulated by the Companies Act. The departmental representative supported the decisions of the lower authorities. The Tribunal analyzed the provisions of section 8 of the Income-tax Act, which deems dividend income as the income of the previous year in which it is declared. The Tribunal concluded that the right of shareholders to dividend accrues upon declaration, and the 42-day period is for payment arrangements by the company, not for the accrual of the right to income. The Tribunal upheld the decisions of the lower authorities based on the Supreme Court judgments and dismissed the appeal, affirming the inclusion of dividend income in the assessment year 1977-78 as declared by the company.