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TMI Blog1975 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders whose names appear in the company's register of members on the 26th March, 1965, or to their mandates on and after the lst April, 1965." It is not disputed that the net dividend payable to the assessee in terms of the said resolution amounted to Rs. 60,144. In her return for wealth-tax for the said assessment year 1965-66, the assessee did not include the said amount of Rs. 60,144. It was contended by the assessee that she did not receive the said amount prior to the valuation date for the said assessment year, namely, 31st March, 1965. It was further contended by the assessee that the dividend warrant issued in the instant case was dated the 1st April, 1965, and the amount thereof could not, in any event, be received prior to the said date. At the assessment, the Wealth-tax Officer included this amount in computing the net wealth of the assessee. The officer held that the declaration of dividend on the 26th March, 1965, resulted in an indisputable right in favour of the assessee as on the 26th March, 1965, prior to the date of valuation. He also held that as the dividend warrant in the instant case was issued within six days of the declaration of dividend, the marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th of the assessee, but in the instant case the resolution was conditional and not absolute and unless the condition was fulfilled, no right could be stated to have accrued in favour of the assessee, much less any enforceable right. On this finding the appeal was disposed of in favour of the assessee. From the decision of the Tribunal, the department has come up before this court under section 27(1) of the Wealth-tax Act and the following question of law has been referred for our consideration : " Whether, on the facts and in the circumstances of the case, the amount of Rs. 60,144 being the dividend declared by M/s. Martin Burn Co. Ltd., at its annual general meeting held on 26th March, 1965, and made payable on or after 1st April, 1965, did not constitute taxable wealth in the hands of the assessee on the valuation date 31st March, 1965 ? " Mr. Suhas Sen, learned counsel appearing for the revenue, contended, firstly, that the declaration of a dividend created a debt in favour of the shareholder. The question of payment, either immediate or deferred, was not a relevant consideration and was inconsequential in determining the wealth of the assessee at any relevant time. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of the amount. In short, a debt owed within the meaning of section 2(m) of the Wealth-tax Act can be defined as a liability to pay in praesenti or in futuro an ascertainable sum of money. " The Supreme Court quoted with approval the judgment of this Court in Banchharam's case as follows : The decision of a Full Bench of the Calcutta High Court in Banchharam Majumdar, v. Adyanath Bhattacharjee throws considerable light on the connotation of the word 'debt '. Jenkins C. J. defined that word thus : ' I take it to be well established that a debt is a sum of money which is now payable or will become payable in future by reason of a present obligation. ' Mookerjee J. quoted the following passage with approval from the judgment of the Supreme Court of California in People v. Arguello : ' Standing alone, the word "debt " is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two, we say of the former that it is a debt owing, and of the latter that it is a debt due. In other words, debts are of two kinds : solvendum in praesenti and solvendum in futuro ...... A sum of money wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Wealth-tax , where it was observed that the shareholders had no right in the assets of the company except when dividends were declared or when the assets of the company were distributed in liquidation. Until a company in its general meeting accepted the recommendation of the directors and declared dividends, no part of the profits of the company became debt due to the shareholders. The earlier decision in the case of Kesoram Cotton Mills was noted. Mr. Sen also relied on another decision of the Supreme Court in the case of J. Dalmia v. Commissioner of Income-tax . In that case the Supreme Court had discussed the nature and the effect of declaration of dividends by a limited company and had observed as follows : " There is no doubt that a declaration of dividend by a company in general meeting gives rise to a debt. ' When a company declares a dividend on its shares, a debt immediately becomes payable to each share-holder in respect of his dividend for which he can sue at law, and the statute of limitation immediately begins to run ' : In re Severn and Wye and Severn Bridge Railway Company . But this rule applies only in case of dividend declared by the company i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable under the Bihar Land Reforms Act, 1950, and the right to receive such compensation, even though the date of payment was deferred, was " property " and also whether the same constitute an " asset " for the purpose of the Wealth-tax Act, 1957, and laid down the law as follows : " Perusal of the different provisions of the Bihar Land Reforms Act shows that as soon as the estate or tenure of a proprietor or a tenure-holder vests in the State, he becomes entitled to receive compensation. The fact that the payment of compensation in terms of the provisions of the Act may be deferred and be spread over a number of years does not affect the right of the proprietor or tenure-holder to the compensation. The assessee, in our opinion, was vested with a right to get compensation immediately his land was vested in the State. Section 2(e ) of the Act defines ' assets ' to include property of every description, movable or immovable ....... The word ' property ', as mentioned by this court in the case of Ahmed G. H. Ariff v. Commissioner Wealth-tax is a term of the widest import and, subject to any limitation which the context may require, it signifies every possible interest which a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in the case of Pandit Lakshmi Kant Jha . This judgment of the Calcutta High Court has necessarily to be construed and applied in the light of the latter decision of the Supreme Court and must be held to be applicable only to the facts of that case in the background of the particular statute concerned. Dr. Pal concluded by contending that a right must be enforceable in praesenti to come within the definition of the words " asset " or " property " within the meaning of the Wealth-tax Act, i.e, such a right must be immediately available. In the absence of such availability or enforceability in praesenti the right is a mere inchoate right and cannot be construed to be a debt. In view of the law clearly laid down by the Supreme Court and this court and discussed above, the contentions of Dr. Pal cannot be accepted. The debt in the instant case cannot but be held to be an existing debt resulting in the vesting of an immediate right in favour of the assessee though the payment of the debt is to take place in future. Looking at the matter from another point of view, in the instant case the company having declared its dividends, the amount set apart for such payment ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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