A dividend declared by a company creates a debt in favor of the shareholder, and such debt is an asset in the hands of the shareholder within the meaning of the Wealth-tax Act.

( 1 ) THE relevant facts in this reference under Section 27 (1)of the Wealth-tax Act, 1957, as appearing from the statement of the case and the annexures thereto may be shortly stated as follows: the assessee in the instant case held certain shares of Martin Burn Co. Ltd. during the assessment year 1965-66, On the 26th March, 1965, Martin Burn Co. Ltd. , at its annual general meeting, declared dividends. The relevant resolution in respect of such declaration was as follows :"that for the year ended 30th September, 1964, a total dividend of Rs. 2. 50 per share on the ordinary share capital of the company be and is hereby declared out of the general reserve of the company and that out of the said dividend an interim dividend of Re. 1 per ordinary share having been declared by the directors and already paid to shareholders on the 1st October, 1964, which is hereby confirmed, the balance of Rs. 1. 50 per ordinary share be paid to those shareholders whose names appear in the company's register of members on the 26th March, 1965, or to their mandates on and after the 1st April, 1965. "

( 2 ) IT is not disputed that the net dividend payable to the assessee in terms of the said resolution amounted to Rs. 60,144. In her return for wealth-tax for the said assessment year 1965-66, the assessee did not include the said amount of Rs. 60,144. It was contended by the assessee that she did not receive the said amount prior to the valuation date for the said assessment year, namely, 31st March, 1965. It was further contended by the assessee that the dividend warrant issued in the instant case was dated the 1st April, 1965, and the amount thereof could not, in any event, be received prior to the said date.

( 3 ) AT the assessment, the Wealth-tax Officer included this amount in computing the net wealth of the assessee. The officer held that the declaration of dividend on the 26th March, 1965, resulted in an indisputable right in favour of the assessee as on the 26th March, 1965, prior to the date of valuation. He also held that as the dividend warrant in the instant case was issued within six days of the declaration of dividend, the market value of such right which accrued to the assessee as a shareholder should be the same as the declared amount in the warrant.

( 4 ) ON appeal by the assessee, the Appellate Assistant Commissioner of Wealth-tax held that on account of the specific stipulation that the dividend would be paid on or after the 1st April, 1965, the amount of dividend did not accrue as income on the valuation date. He held that in the circumstances the amount of dividend could not be treated or assessed as an asset in the hands of the assessee on such valuation date.

( 5 ) AGAINST the order of the Appellate Assistant Commissioner, the department came up on appeal to the Tribunal. It was contended on behalf of the department before the Tribunal that a valuable right had arisen in favour of the assessee prior to the valuation date which had to be valued under Section 2 (e) (iv ). The department also relied on Section 8 of the Income-tax Act, 1961, and contended that on the date of valuation the assessee was registered in the books of the company as a shareholder and, as such, the dividend should be deemed to have accrued to her.

( 6 ) IT was contended on behalf of the assessee before the Tribunal that prior to the 1st April, 1965, the assessee was not entitled to receive the dividend. The declaration of such dividend was conditional and no right arose or could be said to have arisen on or prior to the relevant valuation date, namely, 31st March, 1965, and in fact there was no debt which could be enforced and as such the same could not be an asset in the hands of the assessee.

( 7 ) IN disposing of the appeal the Tribunal followed its earlier decision in Wealth tax Appeal No. 37 of 1965-66. From the said earlier decision which has been included in the paper book, it appears that Section 34 (1) (b) of the Income-