9911796707
TMI Blog1955 (9) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... 45-46, and our decision with regard to Kishinchand will also apply to the facts relating to the assessment of his two sons and grandson. It appears that in the year of account of these assessees, which was the financial year 1944-45, this limited company passed a resolution on the 15th July, 1944, declaring a dividend at 60% and pursuant to this resolution a sum of ₹ 30,000 was credited to Kishinchand's account on the 29th September, 1944. An extraordinary general meeting of the shareholders was held on the 4th of December, 1947, and at that meeting a resolution was passed that the company had discovered that the dividends were paid not only for the year 1943-44, with which we are concerned in this reference, but also for the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, and inasmuch as dividend was paid out of profits without marking any provision for taxation, the result was that dividend was paid out of capital and not out of profits and therefore the payment of dividend was illegal. It is further pointed out that it is well established under companies law that the funds of the company constituted trust funds which are under the direction and control of the directors, and the directors are not authorised to pay out of those trust funds dividend unless they are paid out of profits, and if the directors paid dividends out of capital they are liable to refund that amount. It is also pointed out on the authority of Palmer's Company Precedents at page 637 that even a shareholder who has knowledge that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that the assessment was not finalised but that the appeal from the assessment was pending before the Appellate Assistant Commissioner. There may have been an appeal preferred to the Appellate Assistant Commissioner in respect of this assessment, in which case the assessment would have been completed after the Income-tax Officer had passed the assessment order. Then sir Jamshedji concedes, as he must concede, that it would have been his misfortune and he could not have taken up this contention. Are we to take the view that the correctness of an assessment with regard to a particular income depends upon a pure accident of the time when the objection is taken and the stage at which the assessment has reached? If we look upon the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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