Law: Income Tax Act, 1922

Section: 2(14-A), 4(1)(a), 14(2)(a), 16(2), 66(1)

(Appeal by special leave from the judgment and order of the Allahabad High Court, dated September 21, 1.964, in Income-tax Misc. Case No. 121 of 1956). Income-tax-Dividend-Right accruing in Benares State which merged on December 1, 1949-Dividend declared in July 1949 Cheque encashed on December 31, 1949-Dividend whether tax. able-Income-General principles-Same income cannot be received more than once-Reference-Facts asserted to application for reference and not before Tribunal-Indian Income-tax Act, 1922, Ss. 2(14-A), 4(1)(a), 14(2)(a), 16(2) & 66(1). The appellant, whose year of account was the calendar year, had its registered office in the Benares State, which merged with the Indian Union on December 1, 1949. A company which had its head office at Ramnagar in the Benares State and in which the appellant held shares declared a dividend on July 25, 1949, cheques were Issued in favour of the appellant for Rs. 69,000 in payment of the dividend, and the cheques were encashed by the appellant on December 31, 1969. There was no material on record as to when the cheques were handed over to the appellant. It was contended that the appellant could not be assessed to tax in respect of the dividend which accrued to it at a time when it was a non-resident : Held, (i) that the State of Benares, after merger on Decem ber 1, 1949, formed part of the State of U. P. and was part of the "taxable territories" by virtue of the definition in sec tion 2(14-A) of the Indian Income-tax Act, 1922. Assuming that the dividend accrued within an Indian State, it was received in the taxable territories on December 31, 1949, and by the express words contained in section 14(2)(e) of the Act, it was not exempt from liability to payment of tax, even if the right thereto had accrued to the appellant in an Indian State : (ii) that, in view of the decision of the Supreme Court in J. Dalmia v. Commissioner of Income-tax (1964) 53 I T R 83, the dividend could not be deemed to have been received on July ; 25, 1949, the date on which it was declared ; (iii) that, as there was no evidence that before December 31, 1949, the dividend was paid, credited or distributed, the dividend was…