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TMI Blog1966 (11) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... 27th February, 1953, the assessee's share of dividend deemed to have been declared was determined at Rs. 3,56,888. Besides this deemed dividend, the assessee had other dividend income which was actually received during the previous year ending on Asauj Sudi 9, Sambat 2010. The latter dividend income was entered in the books of account and duly returned as income from other sources, under the residuary head, section 12, for the assessment year 1954-55. In response to the notice under section 23(3) in respect of the said sum of Rs. 3,56,888, the dividend income under section 23A of the Act, the assessee submitted that since the dividend deemed to have been distributed to the assessee was on the 27th February, 1953, the date of the general meeting of the aforesaid private limited company, the said amount fell to be assessed during the assessment year 1953-54, on the basis of the financial year and not on the basis of the previous year commencing in September, 1953, which the assessee had adopted and the department had accepted in respect of all other income including dividend income from other companies and not in the assessment year 1954-55. This submission was rejected by the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ources so as to enable the assessee to adopt different previous years for each one of such dividend income within the meaning of section 2(11)(i)(a) of the Act. In order to resolve this question it is necessary to advert to the provisions of the Act which have a bearing thereon. Section 2(11)(i)(a) defines "previous year" the material portion thereof runs : " 'Previous year' means- (i) in respect of any separate source of income, profits and gains--- (a) the twelve months ending on the 31st day of March next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then, at the option of the assessee, the year ending on the date to which his accounts have been so made up : Provided that where in respect of a particular source of income, profits and gains an assessee has once been assessed ... he shall not, in respect of that source or, as the case may be ... exercise the option given by this sub-clause so as to vary the meaning of the expression 'previous year' as then applicable to him except with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. It was undoubtedly a known source declared by statute. It was again a source which like dividend from any other company could have been anticipated. There is also no dispute in the present case that such dividend could have been declared by the Income-tax Officer under section 23A of the Act. The dispute only is as to which year the deemed dividend income so declared fell to be assessed in. Section 16(2) makes a specific provision for the previous year in which the deemed income has to be included. This reads: " For the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is deemed to have been paid, credited or distributed to him. . . " According to section 23A, the previous year in which the deemed dividend income will be deemed to have been distributed is the date of the general meeting at which such dividend should have been declared. The deemed dividend income declared under section 23A would have to be included in the total income of the assessee in his previous year. If the previous year of the assessee referred to in section 16(2) is the previous year which he has adopted for al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractical test it may be difficult to find a hard-headed businessman who would be prepared to treat every dividend received by him as being from a different source. The source of dividend income is the shares held in various companies. Therefore, when a business man talks of a source of dividend income he obviously refers to his shareholdings in various companies which result in dividend income to him. Each separate company is not considered by him as a different source of dividend income in the real sense of that word. A money-lender would not dream of treating every client of his as being the source of interest earned by him but that source would be one from the loaning of capital to various constituents for the return in the shape of interest. So also the source of dividend income would be the shareholding in the various companies. A practical man would not ordinarily regard each company as the real and separate source of his dividend income. It is, however, contended that the meaning so attributed to source would make the use of the word "separate" before "source of income" in sub-clause (i) of section 2(11) and the word "particular" before "source of income" in the proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be wholly undisclosed and no reference to it in any manner whatsoever should have been made in the return. Further, it was held that the income from other sources which had been disclosed had nothing whatsoever to do with the impugned sum of Rs. 60,395 which was distributed to the shareholders including the assessee as pre-incorporation assets of the limited company. Reliance was also placed by the learned single judge on two decisions of the Patna High Court in Commissioner of Income-tax v. Meghu Sao Jhandu Sao and Commissioner of Income-tax v. P. Darolia Sons for holding that if the source was wholly unknown then the previous year would be the financial year. These two cases of the Patna High Court were in respect of cash credits which were added as income from a wholly undisclosed source, and, in those circumstances, it was held that the previous year in which such income could be taxed would be the financial year. The Calcutta and the Patna cases have little or no relevance to the point which arises for decision in the present case. In the instant case the deemed dividend income was from a known source and not from a wholly undisclosed source and, as such, there can be no jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs : it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. " What the learned counsel for the assessee wants this court to do is to hold that the income was not dividend income but only deemed dividend which is something illusory. To do so would indeed be to boggle the imagination and not to take the deeming clause to its logical conclusion. The deemed dividend income for the purposes of the Income-tax Act is as real as if the company had itself declared such income. If it was real income in law to be treated as such, a fortiori, it must be dividend income and, therefore, there can be no warrant for making any distinction between such deemed income and real dividend income which the assessee himself had returned in the relevant assessment year. The view that we are taking is supported by a decision of the Punjab High Court in Bharat Fire and General Insurance Ltd. v. Commissioner of Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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