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TMI Blog1948 (3) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... the Trust case 3. The Trustees of the Mulraj Khatau Trust received dividend income of ₹ 1,01,772 from the Khatau Makanji Spinning Weaving Co. Ltd., on 3rd November, 1941, on behalf of five beneficiaries, they being entitled to one-fifth share each. The dividend income was assessed in the hands of the trustees, but taxed in the hands of the beneficiaries. Besides income received from the Trust the beneficiaries individually also received dividend income from the same company under similar circumstances. This dividend income was not included in the assessment for the year 1942-43 but was included in the assessment for the year 1943-44. The Khatau Makanji Spinning Weaving Co., Ltd., is a public limited company. The assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee with the second contention of the assessee and held that it was possible that dividend income of two years from the same company can arise in the same accounting year. As regards the first contention, the point for our determination was, what was the exact time when a dividend that was declared became a dividend income of an assessee. Is it the date of the declaration of the dividend or is it the date when it is made payable or the date when it is received ? The Tribunal held that on the date the company declared the dividend, i.e., 18-10-1941, every shareholder became a creditor of the company to the extent of the dividend due to him, and that the income was the dividend income of the Trust and the beneficiaries of the assessment year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessees' contention was that as far as the dividend for the year ended 30th June, 1941, was concerned the dividend should be assessed for S. 1997 and for the accounting year 194243 because it was declared on 18th October, 1941 ; and Sir Jamshedji has contended that on the declaration of the dividend the shareholder became a creditor of the company and income accrued and arose to him although the payment thereof was deferred till 3rd November, 1941. On the other hand, the Advocate-General's contention is that it was only on 3rd November, 1941, that the assessees could have demanded the payment of the dividend from the company and therefore it was only on 3rd November, 1941, that the dividend became the income of the assessees. We th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction were to be given, then it would amount to this that until the dividend warrant was actually cashed and the dividend amount was actually realised it cannot be stated that the dividend was paid to the shareholder. Even the Advocate-General concedes that that is not the meaning to be attributed to the words of that sub-section. According to the Advocate-General once the dividend is made payable, whether it is paid or not, it is immaterial. If that be so then a literal construction is impossible as far as the word paid used in that sub-section is concerned. I think the proper construction to give to that word is when the dividend is declared then a liability arises on the part of the company to make that payment to the sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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