JUDGMENT - CHAGLA, C. J. :

M/s. Narandas Rajaram and Co. Ltd., carried on business both in taxable territories and also in Pakistan. During the S. Y. 2007 (10th of November, 1950 to 30th of October, 1951), profits accrued to this Company both in India and Pakistan. On 14-10-1952, the company declared dividend for S. Y. 2007. The total dividend in respect of the shares held by the assessee came to Rs. 1,71,992, and the dividends were declared out of profits which partly accrued in India and partly in Pakistan. The resolution declaring the dividends states :

A moiety of the amount of the dividend be paid to the share-holders on and after 16-10-1952, whose names appear on the Register of the Company as on 6-10-1952, and the other moiety be postponed for payment within two months from the date on which remittances from Pakistan become free and the monies are actually received." Now, the dispute arises with regard to the moiety of dividends which were to be paid two months after remittances from Pakistan became free and the moneys were actually received. The contention of the Department was that these dividends were liable to tax for the assessment year 1953-54, and the assessee contended that inasmuch as these dividends had never been paid to him, he was not liable to tax.

(2) The question as to the year in which the dividends should be considered as part of the total income of an assessee is dealt with by the Legislature in Sec. 16 (2) and that section provides that for the purpose of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been paid, credited or distributed to him. Therefore, a special provision is made by the Legislature with regard to a special type of income and that special type of income is dividend income," and this income is to be included in the total income of the previous year in which the dividend is paid.

(3) Mr. Palkhiwalla has contended that the assessee maintains his books of account on a cash basis, and he says that whenever the income might have accrued, as far as the) assessee is concerned, he can only be made liable to tax provided the dividend is received by him. He says that the assessee must receive the dividend warrant by which the dividend is payable, in which case although he may not receive the actual cash, he receives the moneys worth. We are unable to accept Mr. Palkhiwallas contention that Sec. 16 (2) can be controlled by Sec. 13. The method of keeping accounts cannot possibly control the clear provisions of the law that the dividend income is to be included in a particular year. The only question that we have, therefore, to consider is what is the interpretation to be placed on the expression "paid, credited or distributed" used by the Legislature. If in law, the dividend has been paid, then it must be considered to be the income of the year in which it is paid.

(4) The Tribunal relield on a judgment of this court reported in Commr. of Income-tax, Bombay City v. "Laxmidas Mulraj Khatau (1948), 16 ITR 248 for coming to the conclusion that the expression paid" must be construed to mean "declared," and, therefore, the view taken by the Tribunal was that when the dividend was declared on 14-10-1952, for the purpose of Sec. 16 (2), it was paid on that date, and therefore, it must be included in the total income of the assessee for the assessment year 1953-54. We agree with Mr. Joshi that there are various provisions in the Income-tax Act under which an assessee has to pay tax on an income which is purely notional and which he has never received, and Mr. Joshi says that the Legislature wanted to tax this income whether in fact the income was received by the assessee Or not; and, therefore, what Mr. Joshi says is that it is irrelevant to consider whether in fact the assessee received the payment or whether the assessee was likely to receive the income. All that we have to consider

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