Law:

Section:

Section 9 of the Income-tax Act, 1961 (Corresponding to section 4(1)(a) of Indian Income-tax Act, 1922) - Income - Deemed to accrue or arise in India - Assessment year 1950-51 - Assessee-bank received dividend on its shares held in a company having head office in former Indian State of Benares - This Indian State merged with India and became part of taxable territories with effect from 1-12-1949 - ITO brought dividend amount to tax - Tribunal relying on a certificate issued by company that said amount of dividend was paid on 31-12-1949 after merger, confirmed order of assessment - High Court concurred with Tribunal's view - Whether assuming that dividend accrued within an Indian State, it was received by assessee-bank in taxable territories on 31-12-1949, therefore it was not exempt from liability to payment of tax even if right thereto had accrued to assessee-bank in an Indian State - Held, yes FACTS The assessee-bank, registered in the Indian State of Benares held shares of a company which had its head office also in that Indian State. The company declared on 25-7-1949 dividend on its shares in respect of its year of account ending 30-9-1948. The Indian State of Benares merged with India and the territory became part of the taxable territories with effect from 1-12-1949. the ITO, brought to tax the dividend received by the bank from the company in the assessment year 1950-51. The AAC affirmed the inclusion of the dividend in the bank's income for the year in question. The Tribunal relying on the certificate issued by the company that the dividend was received by the assessee-bank on 31-12-1949 at a place which was then part of the taxable territories, confirmed the order of assessment, holding that under section 4(1)(a) of 1922 Act, the income, profits and gains received by the assessee in the taxable territories within the previous year were liable to be included in its total income. On reference, the High Court upheld the Tribunal's decision. On appeal to the Supreme Court : HELD The State of Benares, after merger on I-12-1949, with the dominion of India, formed part of the State of Uttar Pradesh and was on that account part of the taxable territories by…

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