LAXMIPAT SINGHANIA versus COMMISSIONER OF INCOME-TAX, U.P.

Citation: [1969] 1 S.C.R. 904 · Decided: 30-08-1968 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

• 
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 
dclcr-
minc<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·l-
lant 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 
app

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