Issues Involved: 1. Assessability of dividend income in the assessment year 1958-59. 2. Valuation of dividend received in specie.
Detailed Analysis:
1. Assessability of Dividend Income in the Assessment Year 1958-59: The primary issue was whether the income from dividend should be assessed during the assessment year 1958-59. The assessee, a general reinsurance company, received dividends in the form of shares from two sugar companies, M/s. Raza Sugar Company Ltd. and M/s. Buland Sugar Company Ltd., declared on January 16, 1952. The dividend was to be paid in specie (shares of Dalmia Cement Ltd.). However, due to objections from some shareholders, an injunction was issued on February 22, 1952, restraining the distribution of the dividend in specie. This issue was resolved by a compromise on January 18, 1957, and the assessee received the shares.
The Tribunal held that the income from the dividend was assessable in the assessment year 1953-54, not in 1958-59, relying on the Supreme Court's decision in J. Dalmia v. Commissioner of Income-tax. The court agreed, stating that the dividend was declared and made unconditionally available to the shareholders on January 16, 1952. The companies had done all that was required to distribute the dividend, and the trustees were empowered to distribute the shares. The injunction did not negate the fact that the dividend had been declared and made available. Thus, the income from the dividend was assessable in the assessment year 1953-54.
2. Valuation of Dividend Received in Specie: The Income-tax Officer valued the dividend in specie at the market rate on the relevant date, relying on the Supreme Court's decision in Kantilal Manilal v. Commissioner of Income-tax. The assessee objected to this valuation method. The Appellate Assistant Commissioner upheld the Income-tax Officer's decision, confirming that the specie had to be valued at the market rate when received. The Tribunal did not specifically address this valuation issue, as it focused on the assessment year.
The court affirmed that the market value of the specie should be adopted for computing the actual dividend income, in line with the Supreme Court's ruling. However, since the dividend was unconditionally available in 1952, it should be taxed in the assessment year 1953-54, not 1958-59.
Conclusion: The court concluded that the income from the dividend was not assessable during the assessment year 1958-59 but was assessable in the assessment year 1953-54. The valuation of the dividend in specie should be based on the market rate at the time it was received. The question was answered in favor of the assessee and against the revenue, with no order as to costs.
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