SUBBARAMAIAH Vs. COMMISSIONER OF INCOME TAX MADRAS

JUDGEMENT

(1.) Judgment of the Court was delivered by the Hon'ble Mr. Justice Viswanatha Sastry. The question referred to us for decision is:

(2.) The Appellate Tribunal also took the view that there was no proof of the receipt of the dividends by the assessee from the company either in cash or by adjustment. The account-s of the company were not forthcoming on the plea that they had been destroyed on its liquidation. The Tribunal observed :

(3.) In our opinion, the assessee's case fails on this ground. A dividend involves a distribution of the company's current or accumulated profits and a company cannot pay dividends otherwise than out of such profits Under section 16 (2) of the Incometax Act, a dividend is deemed to be the shareholder's income of the year in which it is paid, credited or distributed regardless of when the profits out of which the dividend is paid were earned by the company. A company is a corporate body distinct from the shareholders and under the Income tax Act, is chargeable to tax on its profits as a distinct taxable entity.