9911796707
TMI Blog1962 (4) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... hereto. The answer to the contention for reasons already set out by us must be in the negative. Appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,90,000 paid to the shareholders during the year 1944-45 as per details given below, viz : --------------------------------------------------------------------------------------------------------------------------------------------------- For 1941-42 1942-43 1943-44 Total --------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. Rs. Rs. Mr. Kishinchand Chellaram 10,000 36,000 30,000 76,000 Mr. Shewakram Kishinchand 5,000 18,000 15,000 38,000 Mr. Lokumal Kishinchand 5,000 18,000 15,000 38,000 Mr. Murli Tahilram 5,000 18,000 15,000 38,000 -------------------------------------------------------------------------- Total 25,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent resolution, liable to be taxed as dividend income. The Appellate Assistant Commissioner rejected this plea. The assessees then appealed to the Appellate Tribunal and contended that the dividends for the three years in question were declared out of capital and such declaration of dividend being under the Indian Companies Act invalid, in the assessment the amounts credited to their accounts as dividends should be excluded. The Income-tax Appellate Tribunal held that the dividends in respect of the years, 1941-42 and 1942-43, having been received before the year of account relevant to the year of assessment 1945-46, were not liable to be taxed in that year. But the Tribunal confirmed the orders of assessment as to the dividend for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend has been declared out of capital and that question will have to be examined at the time of passing the order under section 66(5) of the Act, in view of question No. 2." The High Court declined to answer the first question because in their view it was unnecessary, and answered the first part of the second question in the affirmative, and held that the second part did not on that view arise for decision. Against the order of the High Court these four appeals have been preferred by the assessees. The only question material to these appeals which was argued by the assessees before the Tribunal was whether it was competent to the company by a subsequent resolution to reverse an earlier resolution declaring the dividend. The Tribunal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the shares. On that assumption it may be inferred that the dividend or a part thereof was in truth paid out of the capital of the company. Payment of dividend otherwise than out of profits of the year, or other undistributed profits was at the material time prohibited by article 97 of Table A of the Companies Act, 1913, as amended by Act XXXII of 1936 read with section 17(2) of the Act ; and therefore such payment may be regarded as unlawful. If the directors of a company have deliberately paid or negligently been instrumental in paying dividend out of capital, they may have, in an action by the company--or if the company is being wound up at the instance of the liquidator--to compensate the company for loss occasioned by their wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lders as dividend are to be treated as loans cannot retrospectively alter the character of the payment and thereby exempt it from liability which has already attached thereto. Before this court two contentions were raised by counsel for the assessees : (1) that on the amount received by each of the assessees tax was not exigible because it was not dividend at all, and (2) that what was declared and paid as dividend ceased to be such by virtue of the subsequent resolution. The first plea was not raised before the Tribunal, and on the question as framed it did not arise for decision on a reference under section 66 of the Indian Income-tax Act. The jurisdiction of the High Court under section 66 being advisory, they were concerned to give th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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