BENARAS STATE BANK LTD. versus COMMISSIONER OF INCOME-TAX, LUCKNOW

Citation: [1970] 1 S.C.R. 669 · Decided: 25-07-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
.D 
F 
G 
H 
BENARAS STATE BANK LTD. 
v. 
COMMISSIONER OF INCOME-TAX, LUCKNOW 
July 25, 1969 
[J. C. SHAH, AG. C.J., V. JlAMASWAMI AND 
A. N. GROVER, JJ.] 
669 
Indian Income-tax Act (II of 1922). ss. 2(14·A), 14(2)(c) and 16(2) 
and Adaptation of Laws Orderi 1950--Dividend inco1ne accruing in Indian 
State-Re.ceived within ta.r:able territories-Liability to tax. 
The appellant-Bank (assessee) w&s a share-holder in a company which 
declared a dividend on July 25, 1949. 
The State of Benares in which 
the Bank had its registered office merged with the Indian 
Union on 
December I, 1949. 
Cheques for the amount ·of dividend were encashed 
by the assessee on December 31. 1949. 
The assessee's year of account 
\Va.)- the ca1endar year. 
The dividend was sought to be taxed in the 
assessment year 
1950-51, but the assessee contended that : 
(1) the 
dividend income \Vas exempt .from tax under s. 14(2) (c), as it !Stood in 
th~ year of assessment; and (2) that it must be deemed to have been 
rccciv~d by the assessee even 011 July 25, 1949, on which date the 1.1ssessee 
v..'as a non-resident. 
HELD : (1) On Decerrtber l, 1949, by merger, the State of Benares 
became part of the taxable .territories as defined in s. 2(14-A) of the Act. 
Hence, though the dividend: might have accrued in an Indian State, it was 
received by the assessee in· the taxable territories OIL Dr.cember 31, 1949, 
and. by the express words ins. 14(2)(c), as modified by the Adaptation of 
Laws Order, 1950, the dividend income was not exempt frorn tax liability. 
[671 C-E] 
(2) Dividend income i!i deemed to have been received by an rssessee, 
under s. 16(2), only when· jt is paid, ,pr.edited or distributed, or, is deemed 
to be paid. credited or diStributcd, 
Though paid does, not contemplate 
'actual receipt' the dividend can only said to be paid, not when it is 
declnred, but when the cdmpany discharges its liability and makes the 
amount of dividend unconditionally available to the member 
entitled 
thereto. In the present. case, ther~ was tio evidence that before December 
31, 1949' the dividend income was paid, credited or distributed to the 
"-'"'"ee.within the meanin)l ors. 16(2). [671 E-G; 672 A-BJ 
J. Dalmia v. C.I.T. Delhi, 53 I.T_.R.- 83 (S.C.), followed. 
CIVIL APPELLATE iuRJSDICTION: Civil Appeal No. 1033 of 
1966. 
! 
Appeal by special !~ave from thl' judgment and order dated 
September 21, 1964 of' lthe Allahabad High Court in Income-tax 
Misc. Case No. 121 of :1956. 
. 
' 
S. T. Desai, A. K. Verma and J.B. Dadachanji, for the appel-
lant. 
Jagdish Swarup, Solicitor-Genera/, S. K. Aiyar, R. N. Sachthey 
and. B. D. Sharma, for the' respondent. 
G70 
SUPREME COURT RBPORTS 
[1970] 1 S.C.R. 
The Judgment of the Coun was delivered by 
Shah, Ag. C.J. 
By order dated August 23, 1968, we called 
for a supplementary statement on the issue whether dividend 
warrants were delivered by he Glass Works to the Bank on 
August 3, 1949. The Tribunal has submitted a statement of the 
case that the only relevant facts proved are that the dividend was 
declared on July 25, 1949 and the Bank encashed the dividend 
warrants qn December 31, 1949. The appeal must therefore be 
decided on the footing that the dividend warrants were handed 
over to the Bank by the Glass Works on August 3, 1949, is not 
proved. 
The material facts which have a bearing on the point in issue 
are theac. The year of account of the Bank is the calendar year. 
The State of Benaras in which the Bank had its realatered o!Bce 
merged with the Indian Union on December 1, 1949. The Glass 
Works declared a dividend at a General Meetina on July 25, 
1949. Cheques for Rs. 69,000 issued by the Glass Works In 
favour of the Bank in payment of the dividend were encuhed by 
the Bank on December 31, 1949. 
The dividend received by the Bank has been brought to tax 
in the 115Se6Sment year 1950-51. Counsel for the Bank urged that 
the Bank cannot be assessed to tax in respect ol dividend accruing 
to It at a time when the Bank was a non-resident. It is urged that 
by virtue of s. 14(2) (c) of the Income-tax N:t, 1922, as then In 
force, the income received by the Bank was not liable to be taxed. 
At the relevant times. 14(2)(c) read as follows: 
"(2) The tax shalJ not be payable by an assessee--
( c) in respect of any income, profits or gains 
accruing or arising to him within an Indian State, unless 
such income, profits or gains are received or deemed to 
be received In or are brought into B

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