Law:

Section:

Section 199 of the Income-tax Act, 1961 [Corresponding to section 18(5) of the Indian Income-tax Act, 1922] - Deduction of tax at source - Credit for tax deducted - Assessment years 1947-48 and 1948-49 - Whether benefit of section 18(5) of 1922 Act is limited to registered holder and does not extend to an unregistered purchaser - Held, yes FACTS The assessee was an unregistered firm, resident and ordinarily resident in India. In the relevant assessment years, the assessee showed a net dividend income. As to the shares upon which the said dividend amounts had been received, the assessee-company could establish the ownership of only few. The ITO refused to gross up the rest of the dividend income on the ground that as the assessee had not proved itself to have been the holder of the shares concerned at the time the dividend was declared, it was not entitled to the benefit of section 18(5) of the 1922 Act. That decision of the ITO was upheld by the AAC and on further appeal by the Tribunal. On reference: HELD The "shareholder" contemplated by the section 18(5) of the 1922 Act is obviously the holder of the shares and the holder of the shares is the person whose name stands registered in the share register of the company concerned. He alone is the shareholder in the eye of the company and it is to him alone that the dividend on the shares can be paid. If then section 18(5) of the 1922 Act provides that the sum by which a dividend amount to be grossed up shall be treated as payment of tax on behalf of the shareholder, it only provides that the credit for the payment can be claimed by the person who stands registered for the time being as the holder of the shares and by him alone. For these reasons, the benefit of section 18(5) of the 1922 Act is limited to the registered holder and does not extend to an unregistered purchaser. For the above reasons, the assessee was not entitled to claim rebate under section 18(5) of the 1922 Act. Note: The case was decided against the assessee. CASES REFERRED TO Shree Shakti Mills Ltd. v. CIT [1948] 16 ITR 187 (Bom.), CIT v. Bai Navajbai N. Gamadia[1948] 16 ITR 109 (Bom.) and Jaluram Bhikulal Firm v. CIT [1952] 22 ITR 490 (Nag.).…

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