Hardayal Hardy, J.
1. The following question of law arising out of the order of March 30, 1965, passed by the Income-tax Appellate Tribunal, Delhi Bench B, has been referred to us for opinion :
' Whether, on the facts and in the circumstances of the case, the income from dividend fell to be assessed during the assessment year 1958-59?'
2. The respondent which is a general re-insurance company, whom we shall describe in this case as an assessed, is a joint stock public limited company.
3. The assessment year is 1958-59 for which the relevant previous year is the calendar year ending on December 31, 1957. The assessed held shares in M/s. Raza Sugar Company Ltd. and M/s. Buland Sugar Company Ltd. These two sugar companies were under the common management of M/s. Govan Brothers (Rampur) Ltd. For their accounting year ended the 31st October, 1951, the said two sugar companies declared dividend on 16th January, 1952. Under the resolution passed by each of the aforesaid two sugar companies at their extraordinary general meetings held on the same date, namely, 16th January, 1952, it was decided that the dividend was to be paid to the shareholders in specie, being the shares of Dalmia Cement Ltd. held by the said sugar companies. In accordance with the said resolution and in accordance with the number of shares held by it, the assessed became entitled to receive 5,453 and a half shares of Dalmia Cement Ltd. The face value of each of these shares was Rs. 10.
4. Immediately after the declaration of the dividend and the resolution for the payment of the dividend to be made in specie, a body of trustees was formed who took over charge of all the dividend in specie for being distributed to the various shareholders. This happened on the same date as the declaration of the dividend and the resolution to pay it in specie, namely, on the 16th January, 1952. Some of the shareholders, however, objected to the payment of the dividend in specie and filed applications under the Indian company law before the High Court of Allahabad against both the sugar companies seeking an injunction restraining them from distributing the dividend in that form. These applications were filed some time in January, 1952, and the learned judges were pleased to issue injunction on 22nd of February, 1952, against the said two sugar companies restraining them from distributing the dividend in specie, in the form of shares of Dalmia Cement Ltd.
5. There was, however a compromise between the petitioners and the opposite party to those proceedings on 18th January, 1957, as a result of which it was agreed that the resolution passed by the sugar companies on 16th January, 1952, distributing the dividend in the shape of shares of M/s. Dalmia Cement Ltd. was to be given effect to. The assessed-company then received its dividend in the shape of share scrips of Dalmia Cement Ltd. of the face value of Rs. 10 each from the trustees. The total number of such shares actually received was 5,402 and a half shares. The assessed returned the amount of Rs. 54,035 as its dividend income received on its shares of the said two sugar companies during the relevant previous year.
6. The only question that the Income-tax Officer considered was whether for determining the assessed's income from dividend for the year in question, the specie had to be valued in terms of the market rate. The Income-tax Officer relied upon the decision of the Supreme Court in the case ofKantilal Manilal v. Commissioner of Income-tax, : [1961]41ITR275(SC) and held that the specie had to be valued at the market rate on the relevant date. He, accordingly, held that the total dividend received by the assessed-company amounted to Rs. 66,839.50.
7. On appeal before the Appellate Assistant Commissioner, the assessed objected to the inclusion of the dividend income as an income pertaining to the relevant previous year and also objected to increasing the quantum of dividend received by adopting the market value of the specie in which it had been, received. The Appellate Assistant Commissioner, however, rejected both the contentions. He held that the dividend received in specie became the property of the assessed only during the accounting year relevant to the assessment year in question and was thereforee correctly assessed for the year in question. He also confirmed the view that the specie, in which form the dividend had been received, had to be valued in accordance with the market rate prevailing on the date when such specie was actually received. Thus the valuation, as computed by the Income-tax Officer, was confirmed.
8. The assessed preferred a second appeal to the Tribunal. The only question that was argued on behalf of the assessed was whether the dividend received in the form of specie was assessable during the assessment year in question or in the year in which the dividend had been declared, namely, for the assessment year 1953-54. The Tribunal, relying upon some of the observations of their Lordships of the Supreme Court in the case of J. Dalmia v. Commissioner of Income-tax, : [1964]53ITR83(SC) held that the income from dividend was not assessable in the assessment year 1958-59 but it was assessable in the assessment year 1953-54. It could not, thereforee, be taxed in the assessment year in which it had been assessed, namely, for assessment year 1958-59. The assessed's appeal on this issue was allowed.
9. It is on these facts that the question mentioned at the-beginning of this order was referred by the Tribunal to this court, at the instance of the Commissioner of Income-tax.
10. It appears to us that the order made by the Tribunal is correct. It was common ground between the assessed and the revenue that, in accordance with the decision of the Supreme Court in Kantilal Manilal v. Commissioner of Income-tax, : [1961]41ITR275(SC) whenever the question of valuing the dividend declared in specie arose, the specie had to be valued in accordance with the market rate prevailing at that time. The market value of the specie has to be adopted for computing the actual dividend income of the assessed. The only question that remains is whether this income was assessable during the year in which it was assessed by the Income-tax Officer or was it assessable in the year in which the dividend was declared.
11. It is clear that the dividend, in this case, was declared on 16th of January, 1952, at the general meeting of the shareholders and as a matter of fact the specie had been made over to the trustees on the same date to hold the same ' in trust for the shareholders of the company whose names appear on the register of the company on 16th day of January, 1952 '. The purpose for which they were holding the shares was to distribute them amongst the shareholders of the company. So far as the aforesaid sugar companies were concerned they had declared the dividend and had done all that lay in their power to declare and distribute the dividend. They had handed over the share scrips to the trustees and the trustees had been empowered to distribute them amongst such shareholders of the companies whose names appeared on the register of the companies on the 16th day of January, 1952. There was, however, an objection by some of the shareholders to the payment of dividend in specie as a result of which an injunction was issued restraining such distribution, which was ultimately resolved on 18th January, 1957, by the compromise effected in the matter.
12. In our opinion, on the facts as they stand, it cannot be said that merely because an injunction had been issued, so far as the companies were concerned they had not distributed the dividend. As a matter of fact the companies had distributed the dividend. It was some of the shareholders who refused to take them in that form. Section 16(2) of the Income-tax Act, 1922, which was repealed subsequently, applied to the year in question. That section was interpreted by their Lordships of the Supreme Court in the case of J. Dalmia v. Commissioner of Income-tax, : [1964]53ITR83(SC) , to mean that a dividend may be said to be paid within the meaning of Section 16(2) when the company discharges its liability and makes the amount of dividend unconditionally available to the member entitled, thereto. In the instant case the two sugar companies had irrevocably placed the shares of Dalmia Cement Ltd. with the trustees for being distributed to the shareholders as dividend. The dividend was unconditionally available to the members entitled thereto. If, however, the members themselves chose not to take them, it cannot be said on that ground that the dividend was not available to them. Since the dividend had been declared on the 16th of January, 1952, and was unconditionally available to the assessed on the date, it was an income which fell to be taxed in the assessment year 1953-54 and not in the assessment year in which it has been assessed.
13. It is true that the assessed itself had included that dividend income in its return for the year in question but there is no estoppel in the Income-tax Act and the assessed having itself challenged the validity of taxing the dividend during the year of assessment in question, it must be taken that it had resoled from the position which it had wrongly taken while filing the return. Quite apart from it, it is incumbent on the income-tax department to find out whether a particular income was assessable in the particular year or not. Merely because the assessed wrongly included the income in its return for a particular year, it cannot confer jurisdiction on the department to tax that income in that year even though legally such income did not pertain to that year. We are, thereforee, of the view that the income from dividend was not assessable during the assessment year 1958-59 but* it was assessable in the assessment year 1953-54. It cannot, thereforee, be taxed in the assessment year 1958-59.
14. On behalf of the revenue, jt is contended that in J. Dalmia v. Commissioner of Income-tax, : [1964]53ITR83(SC) the Supreme Court was concerned with interim dividends and as such the decision has no relevance to the question of final dividends. The argument is without substance. It was inevitable for the Supreme Court to lay down the law relating to dividends, interim as well as final, so that the position of interim dividends could be ascertained in that case. The court thereforee observed :
' Other sources of income--and dividends are included in this residuary class--become taxable in the year in which they are received or accrue or arise or are deemed to be received, accrue or arise according to the nature of the particular income. The year in which a particular class of income becomes taxable must, thereforee, be determined in the light of its true character, and subject to the special provisions, if any, applicable thereto. The legislature has enacted an express provision making dividend income taxable in the year in which it is paid, credited or distributed' or is to be deemed, so paid, credited or distributed. '
15. It is no doubt true that while dealing with this question their Lordships did not approve of the view of Chagla C.J. when he said that because the dividend becomes due to the assessed who has the right to deal with or dispose of the same in any manner he likes, it is taxable in the year in which it is declared, cannot be regarded as correct. The expression ' paid ' in Section 16(2), it is true, does not contemplate actual receipt of the dividend by the member. The general dividend may be said to be paid within the meaning of Section 16(2) when the company discharges its liability and makes the amount of dividend unconditionally available to the member entitled thereto.
16. In the present case, however, it is not a question of the sugar companies having made a declaration of dividend in general, for that by itself cannot be regarded as payment within the meaning of Section 16(2). What happened in this case was that a dividend was declared on January 16, 1952. The amount was, thereforee, made unconditionally available to the shareholders of the sugar companies on the same day, the specie was made over to the trustees to hold the same ' in trust for the shareholders of the assessed (company) whose names appear on the register of the company on 16th January, 1952 '. The sugar companies had already declared the dividend and had done all that lay in their power to declare and distribute the dividend. Even the share scrips were handed over to the trustees and the trustees had been empowered to distribute the same amongst such shareholders whose names appeared on the register of the companies on the 16th day of January, 1952. If any of the shareholders objected to that course, their decision did not affect the sugar companies or the present assessed. Even that dispute was later compromised on I8th January, 1957. The declaration thus made was neither contingent nor subject to any other limitation.
17. One other case, Ramesh R. Saraiya v. Commissioner of Income-tax, : [1965]55ITR699(SC) was also cited by the counsel for the revenue. The assessed held shares in Narandas Rajaram Ltd., which carried on business in India as well as in Pakistan. Profits accrued to the company in both these countries. By a resolution passed at a general meeting held on October 14, 1952, a dividend was declared but by the same resolution it was provided that half of the amount of the dividend was payable on or after October 16, 1952, and the other half was postponed for payment within two months from the date on which remittances from Pakistan became free and the moneys were actually received. The company had debited the aggregate amount of the dividends in its profit and loss account and credited the moiety postponed for payment to the dividend account.
18. It was held that the moiety of the dividend that was postponed for payment after moneys were remitted from Pakistan could not be included in the total income of the assessed for the accounting year relevant to the assessment year 1953-54 as it was neither paid nor credited to the assessed. In order that a dividend may be said to be ' credited ' within, the meaning of Section 16(2) of the Indian Income-tax Act, 1922, the credit must be in such form that the dividend is unconditionally available to the member concerned.
19. It is apparent that, on the facts in that case, the dividend amount was not unconditionally available to the shareholders. The declaration of dividend itself said that the payment of the moiety was postponed for payment within two months from the date on which remittances from Pakistan became free and the moneys were actually received.
20. This particular decision was actually on appeal from the two earlier decisions of the High Court of Bombay, viz., Parshotamdas Thakurdas v. Commissioner of Income-tax, [1958] 34 I.T.R 204 and Purshotamdas Thakurdas v. Commissioner of Income-tax, : [1960]39ITR700(Bom) in which a contrary view was taken by the High Court of Bombay and that view was affirmed by the Supreme Court on the basis of its decision in J. Dalmia v. Commissioner of Income-tax, : [1964]53ITR83(SC) .
21. The result of the foregoing discussion is that the question is answered in favor of the assessed and against the revenue. But, in the circumstances, we do not propose to make any order as to costs.