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TMI Blog1964 (9) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,71,992 declared by the company on October 14, 1952, is properly includible in the total income of the assessee of the previous year S. Y. 2008 for the assessment year 1953-54 ? " (The figures in these questions are in respect of Shri Purshottamdass Thakurdass.) In C. A. 709/63 and C. A. 713/63 questions 1, 2 and 3 arise. Only questions 2 and 3 arise in C. A. 710/63, C. A. 711/63, C. A. 704/63, C. A. 707/63, C. A. 714/63 and C. A. 706/63. Question " D " arises in C. A. 712/63, C. A. 705/63, C. A. 708/63, C. A. 712/63 and C. A. 715/63. The appeals involving question " D " are by the Commissioner of Income-tax and appeals involving questions 1 to 3 are by the assessees. It will be convenient to give the facts in the case of the assessee, the late Shri Purshottamdass Thakurdass, hereinafter referred to as assessee " A ". He was a shareholder in Narandas Rajaram Ltd., which carries on business both in India and Pakistan. Profits accrued to it both in India and Pakistan. The company declared dividend out of the above profits. In the case of assessee " A ", the portion of the dividend attributable to the profits that accrued in Pakistan amounted to Rs. 2,722 for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er charged this sum to tax and the assessment was confirmed both by the Appellate Assistant Commissioner and the Appellate Tribunal. Two questions were referred to the High Court. The second question is the same as question No. 3 reproduced in the beginning of the judgment. The first question was in substance the same as question No. 2. The High Court on July 10, 1959, granted the certificate of fitness under section 66A(2) of the Act. The fourth question " D " arose in the case of assessee " A " for the assessment year 1953-54 under the following circumstances. On October 14, 1952, the following resolution was adopted at the ordinary general meeting of Narandas Rajaram & Co. Ltd. : " Dividends, as mentioned below, be and are hereby declared out of the profits of the company : (a) A dividend of 4 per cent. on ' A ' preference shares and 4 per cent. on ' B ' preference shares. (b) A dividend of 32 per cent. free of income-tax on the ordinary shares and a consequential additional dividend at the rate of 13 per cent. free of income-tax on ' B ' preference shares. (c) A moiety of the amount of the dividend be paid to the shareholders on and after 16th October, 1952, whose nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontends that on the true interpretation of the agreement each Dominion is entitled to charge only on the proportion of income allotted to it under the Agreement. The reply on behalf of the revenue is that each Dominion is entitled to assess an assessee on the total income in the normal way but it has to allow an abatement subject to the conditions mentioned in the Agreement being satisfied. Section 49AA was in the following terms : " The Central Government may enter into an agreement with Pakistan or the United Kingdom for the avoidance of double taxation of income, profits and gains under this Act and under the corresponding law in force in Pakistan or the United Kingdom, and may, by notification in the official gazette, make such provision as may be necessary for implementing the agreement. " In pursuance of this section, an agreement for the avoidance of double taxation of income was entered into between the Government of the Dominion of India and the Government of the Dominion of Pakistan. The following portions of the agreement are relevant for disposing of the point argued before us : " Article IV.---Each Dominion shall make assessment in the ordinary way under its ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he profits cess income-tax deemed to be tion to the pro- by the Domi- paid by the shareholder shall fits of the com- nion in which be allowed by each Dominion pany chargeable goods are in proportion to the profits of by each Domi- sold. the company chargeable by nion under this each under this Agreement. " Agreement. -------------------------------------------------------------------------------------------------------------------------------------------------- It seems to us that the opening sentence of Article IV of the Agreement that each Dominion is entitled to make assessment in the ordinary way under its own laws clearly shows that each Dominion can make an assessment regardless of the Agreement. But a restriction is imposed on each Dominion and the restriction is not on the power of assessment but on the liberty to retain the tax assessed. Article IV directs each Dominion to allow abatement on the amount in excess of the amount mentioned in the Schedule. The scheme of the Schedule is to apportion income from various sources among the two Dominions. In the case of dividends each Dominion is entitled to charge " in proportion to the profits of the company chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income-tax deducted from the dividend payable to non-resident shareholders) ....... 355 ---12 --- 0 " Subsequently, after making payment, the seventh dividend account showed a credit balance of Rs. 2,92,500 representing a moiety of the dividend that remained to be paid out of the total dividend declared of Rs. 5,85,000. We are unable to accept the contention. In J. Dalmia v. Commissioner of Income-tax, Shah J., speaking for the court, had observed : " In general, dividend may be said to be paid within the meaning of section 16(2) when the company discharges its liability and makes the amount of dividend unconditionally available to the member entitled thereto. " This condition must also be fulfilled in case a dividend is credited. In other words, the credit must be in such form that the dividend is unconditionally available to the member. It will be noticed that the dividend due to the assessee has not been credited to any separate account of the assessee, so that he could, if he wished, draw it. Before the High Court it was never suggested that the dividend was credited or distributed. Accordingly we hold that the Pakistan portion of the dividend has not been credited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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