October 2008
Income : Dividend : In whose hands to be taxed : A sold shares to B : Change in ownership of shares not registered : Income from dividend assessable in the hands of A and not in the hands of B
By K. B. Bhujle, Advocate
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7 Income : Dividend : In whose hands to be
taxed : A.Y. 1994-95 : A sold shares to B : Change in ownership of shares not
registered : Income from dividend assessable in the hands of A and not in the
hands of B.
[CIT v. Aatur Holdings P. Ltd., 302 ITR 92 (Bom.)]
For the A.Y. 1994-95, the Assessing Officer made an addition
to the total income of the assessee as dividend income. The CIT(A) found that
the shares were not registered in the name of the assessee and deleted the
addition holding that the dividend income had to be received by the registered
share holders only. The Tribunal upheld the decision of the CIT(A).
On appeal by the Revenue, the Bombay High Court upheld the
decision of the Tribunal and held as under :
“(i) Merely because a person may have purchased or been in
receipt of shares, in the absence of the shares being registered in his name
in the books of account of the company, such a person is not entitled to
receive the dividend. The dividend has to be paid by the company in the name
of registered shareholders and it is the registered shareholders alone who
can claim dividend u/s.27 of the Securities Contracts (Regulation) Act,
1956.
(ii) Nothing was brought to show that under the provisions
of the Companies Act or the provisions of Securities Contracts (Regulation)
Act, 1956, there were any other standard or statutory rules under the
Income-tax Act by which dividend could be taxed in the hands of the assessee.
Moreover, the burden of proving that an amount received in the year of
account was taxable lies on the Department.”
