Law:

Section:

Section 5 of the Income-tax Act, 1961 [Corresponding to section 4(1) of the Indian Income-tax Act, 1922] - Income - Accrual of - Assessment year 1943-44 - Assessee was a shareholder of a company having 1333 shares - Following failure of said company to declare dividend to extent of 60 per cent in its general meeting held on 22-4-1939, ITO acting under section 23A by an order dated 18-11-1940 held that an amount of Rs. 3,32,691 would be deemed to be distributed amongst shareholders as on date of general meeting of company - On 12-12-1941 ITO determined shares of different shareholders to whom income was deemed to be distributed but gave no effect to order by including proportionate shares in amount of deemed income in individual assessments of shareholders for said assessment year - On 24-4-1942 company in a general meeting resolved to make available out of its reserves Rs. 2,98,000 as dividend to shareholders and to credit account of each shareholder with his respective share therein - Accordingly Rs. 23,328 was credited to account of assessee - In assessment proceedings for assessment year 1943-44, ITO brought amount distributed by company to tax after rejecting contention of assessee that amount was not liable to tax in relevant year - Whether, on facts, dividend of Rs. 23,328 credited in accounts of assessee during assessment year 1943-44 could not be subjected to tax under section 16 sub-clause(2) although an order under section 23A of 1922 Act had already been made on 12-12-1941 for assessment year 1939-40 in case of AWC Ltd. - Held, yes FACTS 'AWC', Kanpur, was a company in which at the relevant time the public were not substantially interested within the meaning of section 23A. At the general meeting of the company held on 22-4-1939, the company failed to declare dividend to the extent of 60 per cent 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 ITO, by order dated 18-11-1940, ordered in exercise of the power under section 23A, as then in force, that an amount of Rs. 3,32,691 would be deemed to be distributed amongst the shareholders as on…

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