Judgment

SHAH, J.: Atherton West and Company Ltd. Kanpur, was a company in which at the relevant time "the public " were not "substantially interest within the meaning of S. 23A of the Indian Income-tax Act 1922. At the general meeting of the Company held on April 22, 1939, the Company failed to dividend to the extent of 60% 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 Income-tax Officer by order dated November 18, 1940, ordered in exercise of the power under S. 23A of the Indian Income-tax Act, as then in force, that an amount of Rs. 3,32,69l/- shall be deemed to be distributed among the shareholders as on the date of the general meeting of the Company. On December 12, 1941, the Income-tax Officer determined the shares of the different shareholders to whom the income was deemed to be distributed but gave no effect to the order by including the proportionate shares in the amount of the deemed income in the individual assessments of the shareholders for the appropriate assessment year. On April 24, 1942 the Company in a general meeting resolved to make available out of its reserve Rs. 2,98,000 as dividend to the shareholders and to credit the account of each shareholder his respective share therein. Pursuant to that resolution Rs. 23,328 were credited to the account of the appellant who held 1933 shares of the company.

2. In proceedings for assessment of the income of the appellant for the year 1943-44 the Income-tax Officer brought the amount distributed by the Company to tax, after rejecting the contention of the appellant that the amount was not liable to be taxed in that year. The Income-tax Appellate Tribunal agreed with the order of the Income-tax Officer.

3. The following question under Section 66 (1) of the Indian Income-tax Act, 1922, was referred to the High Court of Allahabad for opinion: .

"Whether on the facts and in the circumstances of this case, the dividend of Rs.23,328 which was credited in the accounts of the assessee during the accounting period of the assessment year 1943-44 could be subjected to tax under Section 16, sub-clause (2) of the Income-tax Act, although an order under Section 23A of the Indian Income-tax Act had already been made on l2th December, 1941, for the assessment year 1939-40 the case of the Atherton West and Co. Ltd.?"

The High Court answered the question referred in the affirmative. Against that order with certificate granted by the High Court this appeal is preferred.

4. The appellant says that his proportionate share in the amount deemed to be distributed was liable to be taxed in the assessment year 1940-41; the Commissioner says that the dividend deemed to be distributed could have been taxed in the year1940-4l, but not having been assessed to tax in that year the share of the appellant in the amount actually distributes was liable to be assessed in the assessment year 1943-44

5. The statutory provisions may first be noticed. Section 23A as it stood at the relevant time provided:

"(1) Where the Income-tax Officer is satisfied that in respect of any previous year the profits an gains distributed as dividends by any company up to the end of the sixth month its accounts for that previous year are laid before the company in general meeting are less than sixty per cent of the assessable income of the company of that previous year, as reduced by the amount of income-tax and super,tax payable by the company in respect thereof he shall, * * * make * * an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income-tax purposes and reduced by the amount of income-tax and Super-tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the share-holders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each sharehold