# LAXMIPAT SINGllANIA v. COM.'\IISSl01''ER (>I' INCOME-TAX, U.P

- **Citation:** [1969] 1 S.C.R. 904
- **Court:** Supreme Court of India
- **Decided:** 1968-08-30
- **Case number:** Civil Appeal No. 1188 of 1967
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/laxmipat-singllania-v-com-iissl01-er-i-income-tax-u-p-4537
- **Pages:** 6

## Headnote

•
904
LAXMIPAT SINGllANIA
v.
COM.'\IISSl01''ER (>I' INCOME-TAX, U.P.
August 30, 1968
fJ. C. SHAH, V. RAMASWAM! A~D A. N. GROVER, JJ.)
lnconzc-ta.x Act (11 of 1922), s. 28A---Ord£'r by Jnco,ne-tax Officer
that inconie of conzpany deen1ed to be distributed a111ong slu:rcho/ders -
Asses.nnent of inconie of individual shareho/cfers for
appropriate year-
/Jeenzed inco111e not included-A mount actually distributed to shareholders
in later year-An1ount included in csses.fnrent of inco111c
of
individual
A
B
slU1re/ioldcrs for that year-If permissible.
c
lbc appellant was a 5hareholder in a company in which 'the pub'io
v;cre not suhstanrially interested' \li'ithin lhe meaning of s. 23A of the
Income-tax • .\ct, 1922.
At the company's gert.:ral meeting held on April
22, 1939, the con1pany failed to declare dividend to lhc extent of 60'}&
of it'i a'\s.cssable income of its pNvious year as reduced hy the amount of
income-tax and super-tax payahlc in rc'ipect thereof.
By order
dated
November 18, 1940
the Income-tax
Officer,
acting under !-..
2~A( 1).
D
ordered that a certain sum shall be deemed to have hcen distributed a'\
dividend amongst the shareholders of the company as at the date of its
general meeting.
On December 12, 1941 the Income-tax ()fficcr
dclcrminc<l the shares of the different shareholders but did not include the
proportionate shares of the deemed income in the individual ;:1s.'\es-.ments Of
the shareholders for the asscs.<ment year 1940-41.
On April 24, 1942.
the company in a general meeting resolved to make a pa'rt of its rcscrve
available as dividend to the shareholders and actually
distributed
the
E
amount by crediting the acrount of each shareholder v.·ith his respective
share therein.
In proceedings for as<ies:.mcnt of the income of the appt·llant for the assessment year 1943-44, the Incoine-tax Officer brought
to
tax the amount distributed and credited to the appellant, as amount liable
to be taxed in that year.
the ~eo~~f~":n':~· t~ri~u~~~rri~~t~e c~~ ~~r~~~ ~~~f~~·t~:l~<>st~~~
I'
ment year 19404 I. but not having been assessed to rax in that year the
appellant's shar-: in the amount actually distributed \Vas
liahle
to
be
asses_<;;ed in the assessment year 1943-44.
In appeal to this Court,
HELD: \Vhcn the
Income-tax
Officer makes
an
order under s.
23A( I). the dividend is deemed to he dislribute~ :-imong:st the "harcholders
as at rhe date of the !!Cner~il meeting.
By
v1r1ue
of
ss. 16(2)
and
4(1)(b), the deemed dividend income i<> liahlc to he included in the total
income of the shareholder<> on the date of the- general meeting.
l"hc
section expre<;;sly enjoin.; the Income-tax Officer to. bring the proportionate
share of evcrv shareholder lo tax in tho appropn;ite year of assessment
by including ·the amonnt in the total income of the. shareholder ~f the
previous year in \Vhich the da~e. of the general rncel1ng f;1lls.
It 1s nc:>t
open to the Income-lax Officer, 1f .income ha<; accrl~ed to the asseo;~ec, <tnd JS
liable to be included in the total 1ncon1c of a particular year, to 1gnon~ t~c
accrual and thereafter 10 tax it as income of another year on the basis of
receipt. [907 C-D; 908 A-B, DJ
G
H
A
-
B
c
D
E
F
G
H
L. SINGHANIA V. C. I. T. (Shah, J.)
905
Section 23A(4) does not confer any option on the Income-I.ax Office.r
to tax either the deemed income of the shareholder on the footing that it
has accrued at th-e da\e of distribution under s. 23A(l) or the actual
income at the date of actual receipt of the share, under s. 23A(4). Under
the sub-section, if tax is paid by an assessee in respect of the proportionate
share in the dividend deen1ed to be distributed in consequenoe of an order
under s. 23A(l), any actual distribution of that dividend. wiU not be
liable to b·o taxed. A provision which prevents double taxat10n m respect
of the same income one at the stage of deemed 'receipt, and another at
the stage of actual r~ceipt, cannot be converted into an en~ctment enabling.
taxation at the stage of receipt, if for an

## Text

•
904
LAXMIPAT SINGllANIA
v.
COM.'\IISSl01''ER (>I' INCOME-TAX, U.P.
August 30, 1968
fJ. C. SHAH, V. RAMASWAM! A~D A. N. GROVER, JJ.)
lnconzc-ta.x Act (11 of 1922), s. 28A---Ord£'r by Jnco,ne-tax Officer
that inconie of conzpany deen1ed to be distributed a111ong slu:rcho/ders -
Asses.nnent of inconie of individual shareho/cfers for
appropriate year-
/Jeenzed inco111e not included-A mount actually distributed to shareholders
in later year-An1ount included in csses.fnrent of inco111c
of
individual
A
B
slU1re/ioldcrs for that year-If permissible.
c
lbc appellant was a 5hareholder in a company in which 'the pub'io
v;cre not suhstanrially interested' \li'ithin lhe meaning of s. 23A of the
Income-tax • .\ct, 1922.
At the company's gert.:ral meeting held on April
22, 1939, the con1pany failed to declare dividend to lhc extent of 60'}&
of it'i a'\s.cssable income of its pNvious year as reduced hy the amount of
income-tax and super-tax payahlc in rc'ipect thereof.
By order
dated
November 18, 1940
the Income-tax
Officer,
acting under !-..
2~A( 1).
D
ordered that a certain sum shall be deemed to have hcen distributed a'\
dividend amongst the shareholders of the company as at the date of its
general meeting.
On December 12, 1941 the Income-tax ()fficcr
dclcrminc<l the shares of the different shareholders but did not include the
proportionate shares of the deemed income in the individual ;:1s.'\es-.ments Of
the shareholders for the asscs.<ment year 1940-41.
On April 24, 1942.
the company in a general meeting resolved to make a pa'rt of its rcscrve
available as dividend to the shareholders and actually
distributed
the
E
amount by crediting the acrount of each shareholder v.·ith his respective
share therein.
In proceedings for as<ies:.mcnt of the income of the appt·llant for the assessment year 1943-44, the Incoine-tax Officer brought
to
tax the amount distributed and credited to the appellant, as amount liable
to be taxed in that year.
the ~eo~~f~":n':~· t~ri~u~~~rri~~t~e c~~ ~~r~~~ ~~~f~~·t~:l~<>st~~~
I'
ment year 19404 I. but not having been assessed to rax in that year the
appellant's shar-: in the amount actually distributed \Vas
liahle
to
be
asses_<;;ed in the assessment year 1943-44.
In appeal to this Court,
HELD: \Vhcn the
Income-tax
Officer makes
an
order under s.
23A( I). the dividend is deemed to he dislribute~ :-imong:st the "harcholders
as at rhe date of the !!Cner~il meeting.
By
v1r1ue
of
ss. 16(2)
and
4(1)(b), the deemed dividend income i<> liahlc to he included in the total
income of the shareholder<> on the date of the- general meeting.
l"hc
section expre<;;sly enjoin.; the Income-tax Officer to. bring the proportionate
share of evcrv shareholder lo tax in tho appropn;ite year of assessment
by including ·the amonnt in the total income of the. shareholder ~f the
previous year in \Vhich the da~e. of the general rncel1ng f;1lls.
It 1s nc:>t
open to the Income-lax Officer, 1f .income ha<; accrl~ed to the asseo;~ec, <tnd JS
liable to be included in the total 1ncon1c of a particular year, to 1gnon~ t~c
accrual and thereafter 10 tax it as income of another year on the basis of
receipt. [907 C-D; 908 A-B, DJ
G
H
A
-
B
c
D
E
F
G
H
L. SINGHANIA V. C. I. T. (Shah, J.)
905
Section 23A(4) does not confer any option on the Income-I.ax Office.r
to tax either the deemed income of the shareholder on the footing that it
has accrued at th-e da\e of distribution under s. 23A(l) or the actual
income at the date of actual receipt of the share, under s. 23A(4). Under
the sub-section, if tax is paid by an assessee in respect of the proportionate
share in the dividend deen1ed to be distributed in consequenoe of an order
under s. 23A(l), any actual distribution of that dividend. wiU not be
liable to b·o taxed. A provision which prevents double taxat10n m respect
of the same income one at the stage of deemed 'receipt, and another at
the stage of actual r~ceipt, cannot be converted into an en~ctment enabling.
taxation at the stage of receipt, if for any reason, th_e income wa·s not
taxed in the year in which it was by law expressly required to be assessed-
(208 F-H; 909 A-BJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1188 of
1967.
Appeal from the judgment and decree dated September 28,.
1962 of the Allahabad High Court in Misc.
I.T.
Reference
No. 250 of 1953.
M. C. Chagla, A. N. Pareekh and B. P. Maheshwari, for the
appellant.
C. K. Dap~tary, Attorney-General,
T. A. Ramachandran,
R. N. Sachthey and B. D. Sharma, for the respondent.
The Judgment of the Court was delivered by
Shah, J.
Aterton West and Company Ltd., Kanpur, was a
company in which at the relevant time "the public" were not
"substantially interested" within the meaning of s. 23A of the
Indian Income-tax Act, 1922. At the general meeting of the
Company held on April 22, 1939, the Company failed to declaie
dividend to the extent of 60% of the assessable income of the
Company of its previous year as reduced by the amount of
income-tax and super-tax payable by the Company in respect
thereof.
The Income-tax Officer by order dated November 18,
1940, ordered in exercise of the power under s. 23A of the Indian
Income-tax Act, as then in force, that an amount of Rs. 3,32,691
shall be de.emed to be distributed amongst the shareholders as on
the date of the general meeting of the Company. On December
12. 1941, the Income-tax Officer determined the shares of the
different shareholders to whom the income was deemed to be distributed, but gave no effect to the order. by including the proportionate shares in the amount of the deemed income in the individual ass.essments of the shareholders for the appropriate assessmtp.t year. On April 24, 1942, the Company in a general meeting resolved to make available out of its reserve Rs. 2,98,000 as
dividend to the shareholders and to credit the account of each
shareholder his respective share therein.
Pursuant to that reso1 u+ion Rs. 23,328 '\yere credited to the account of the appellant
who held 1333 shares of the Company.
•
•
•
• '906
SlJPREME COlJRT REPORTS
[1969] 1 SCR
In proceedings for assessment of the income of the appellant
for the year 1943-44 the Income-tax Officer brought the· amount
·distributed by the Company to tax, after rejecting the contention
-0f the appellant that the amount was not liable to be taxed in that
year. The Income-tax Appellate Tribunal agreed with the order
·Of the Income-tax Officer.
The following question under s. 66( I) of the Indian Income-
·tax Act, 1922, was referred to the High Court of Allahabad for
.opinion :
"Whether on the facts and in the circumstances of
this case, the dividend of Rs. 23,328 which was credited
in the accounts of the asscssee during the accounting
period of the assessment year 1943-44 could be subjected to tax under s. 16, sub-clause (2) of the Incometax Act although an order under s. 23A of the Indian
Income-tax Act had already been made on 12th December. 1941, for the assessment year 1939-40 in the
case of the Atherton West & Co. Ltd.?"
The High Court answered the question referred in the affirmative.
Against that order with certificate granted by the High
Court this appeal is preferred.
The appellant says that his proportionate share in the amount
<leemed to be distributed was liable to be taxed in the assessment
year 1940-41; the Commissioner says that the dividend deemed
to be distributed could have been taxed in the year 1940-41, but
not having been assessed to tax in that year the share of the appellant in the amount actually distributed was liable to be assessed
in the assessment year t 943-44.
The statutory provisions may first he noticed.
Section 23A
:as it stood at the rekvant time provided :
" ( 1) Where the Income-tax Officer is satisfied that
in resoect of any previous year the profits and gains
distributed as dividends by any company up tq the end
of the sixth month after its ;iccounts for that previous
year are laid before the company in general meeting are
less than sixty per cent of the assessable income of the
company of that previous year,
as
reduced
by the
amount of income-tax and
super-tax payable by the
company in
respect
thereof
he
shall, ..... make
..... an order in writing that the undistributed
portion of the assessable income of the company of that
previous year a' computed for income-tax
purposes
and reduced hy the amount of income-tax and super-tax
payable hy the eompany in respect thereof shall
be
•
deemed to have been distributed as dividends amongst
A
n
c
D
E
F
G
II
L. SINGHANIA V. C. I. T. (Shah, J.)
907•
A
the shareholders as at the date of the general meeting
aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purpose of assessing
his total income.
B
c
D
E
F
G
H
•
"
Where the Income-tax Officer makes an order against the Company in the conditions prescribed by s. 23A ( 1), dividend is
deemed to be distributed amongst the shareholders as at the date
of the general meeting. The distribution is purely notional : but
by the express provision contained in s.
23A the Income-tax
Officer is enjoined to bring the proportionate share of every
shareholder to tax in the appropriate year of assessment.
The
date of the general meeting determines the date on which the
dividend is deemed to be distributed amongst the shareholders,
and the proportionate share is liable to be included in the total
income of each shareholder of the previous year in which the
date falls.
Two other related provisions may also be noticed : Section
16 ( 2) insofar as it is material, provides :
"For the purposes of inelusion in the total income
of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited
or distributed or deemed to have been paid, credited or
distributed to him,
"
Section 4 ( 1 )(b) of the Indian Income-tax Act, 1922 insofar as it is material, provides :
'
" ( 1) Subject to the provisions of this Act, the total
income of any previous year of any person includes all
income, profits and gains from whatever source derived,
which
(a)
(b) if such person is resident in the taxable territories during such year,-
( i) accrue or arise or are deemed to accrue
or arise to him in the taxable territories
during such year, or
(ii)
(iii)
..
:•.
•
•
•90s
SUPREME COURT REPORTS
[ 1969) t S.C.R
By virtue of s. 16(2) read withs. 4( l )(b) the deemed dividend
income is liable to be included in the total income of the shareholders on the date of the general meeting of the Company. The
Act leaves no option to the Income-tax Officer : he is enjoined
to include the amount in the total income of the shareholder of
the previous year in which the date of the general meeting fall>.
In the present case the dividend was deemed to be distributed
by the Company as on April 22, 1939. The proportionate share
of the dividend was liable to be included in the total income of
each shareholder of the previous year in which the date April 22.
1939. fell.
But the amount was never included in the assc"ec\
total income of that previous year : it was sought to be brOL1ght
to tax when a pan of the reserve of the Company was
actu~lly
distributed by crediting to the shareholders' accounts their proportionate shares on ~1ay 29, 1942. It is a fundamental ruk of
the law of taxation that unless otherwise expressly provided, income cannot he taxed twice. Again it is not open to the Incometax Officer. if income has accrued to the assessce. and is liable.
to be included in the total income of a particular year, to ignore
A.
c
the accrual and thereafter to tax it as income of another year 011.
D·
the basis of receipt.
The Attorney.General appearing on behalf of the Commissioner placed strong reliance upon suh-s. ( 4) of s. 2>A which
as it stood at the mJterial time prnvidcJ :
"Where tax has been paid in respect of any undistributed profits <11><1 gains of a company under this section. and such profits and gains arc subsequently distribu:ed in any year, the proportionate share therein of
any member o.: the company shall be excluded in computing his total income of that year.'"
This clause was enacted with the object of preventing double
taxation of the same income : it was enacted thereby that if tax
is paid by an asse>see i1!1. respect of hi, proponionatc share in the
dividend deemed to be distributed in consequence of an order
under s. 23A. anv actual distribution of that dividend will not he
liable to be taxed.
The clause docs not mean nor docs it imply
that if in contravention of the express
statutory
provision
in
s. 23A tlv: proportionate share of the shareholder in the deemed
income is not included in the total income of the
appropn<ite
vear of assessment. it is liable to he included when the dividend
i~ actually paid. credited or distributed to the shareholder..
It
does not confer any option to the Income-tax Officer Ill tax either
the deemed income in the hands of the shareholder on the footing that it has accrued at the dat.~ of distribution under s. 23A ( 1),
nr .. at the date of actual receipt of the share under s. 23A(4). A
provision which prevents double taxation .in respect of the same •
income, once at the stage of deemed receipt, and another at the
E
F
G
H
A
B
c
L. SINGHANIA v. C.I.T. (Shah, J.)
stage of actual receipt, cannot be converted into an enactment enabling taxation at the stage of receipt, if for any reason the income
is not tax.ed in the year in which it was by express injunction of
Jaw reg uired to be assessed nnder the provisions of the statute.
We are, therefore, unable to agree with the observations of
the High Court that-
·
"It [sub-s. ( 4) of s. 23A], therefore clearly contemplates the possibility of tax having been levied on
a deemed dividend and also later wben that dividend
was in fact distributed by the company.
This would
indicate that the legislature never intended that there
should be a bar to assessing a dividend when actually
received or distributed although it had earlier been
treated by the .pepartment and brought to tax as deemed
dividend in the hands of the shareholders."
The observation is, in our judgment, contrary to the express words
of the statute.
D
The answer recorded by the High Court is,
therefore, discharged, and the question submitted will be answered in the
negative.
The appeal is allowed with costs in this Court.
The
High Court has passed no order as to costs, and we do not propose to interfere with that order.
-V.P.S.
Appeal allowed .
•
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•