1967 (11) TMI 29 - HC - Income Tax

Dividend paid to assessee in form of shares - ITO concluded that the total shares, received by the assessee were equivalent in terms of money to Rs. 2,44,526. Since the assessee had shown the value of the shares at Rs. 1,82,870 only he added back the difference of Rs. 61,656 to the assessee s income as dividend - held that tribunal was right in excluding the sum of Rs. 61,656 from being assessed as an extra dividend income of the assessee

Summary

Issues:
1. Valuation of shares received as dividend for income tax assessment.

The judgment pertains to a case where the assessee received shares as dividends from a company and the valuation of these shares for income tax assessment was in question. The Income-tax Officer valued the shares at market rate, resulting in an addition to the assessee's income as dividend. The Appellate Assistant Commissioner upheld this decision, considering the money's worth of the shares as income falling under the definition of dividend. However, the Appellate Tribunal overturned this decision, emphasizing that for a distribution to be considered as a dividend, it must be proved that accumulated profits were distributed. The Tribunal held that the value of the shares as adopted by the distributing company should be accepted, and no further valuation was necessary. The Tribunal ordered the deletion of the added sum from assessment.

The revenue appealed to the High Court, arguing that the Tribunal wrongly excluded the sum from being assessed as extra dividend income. The revenue relied on the Supreme Court decision in Kantilal Manilal v. Commissioner of Income-tax to support their position. In that case, the Supreme Court held that the distribution of a right with monetary value among shareholders constituted dividend. The High Court noted that in the present case, the amount received by the assessee was dividend, whether paid in cash or in kind. The key issue was whether the property received as dividend, in this case, shares of a company, could be valued at a rate higher than the declared dividend rate. The High Court analyzed the definition of dividend under the Income-tax Act, emphasizing that for a distribution to be considered a dividend, it must be the company's accumulated profit. The Court held that since the share scrips were accepted at the value set by the distributing company, there was no basis for a different valuation. The Court concluded that the assessee received what was declared as dividend and was not entitled to more. The Court answered the reference in the affirmative, stating that the Tribunal's decision was correct in the circumstances.