K. Ramaswamy, J. - (1.) This appeal by special leave is directed against the finding of the High Court of Allahabad in favour of the revenue and against the appellant to the following question:-"Whether on the facts and in the circumstances of the case any amount was includible in the assessment of the assessee for the assessment year 1957-58 by way of dividend by reference to the value of the shares of the cement company received by it from sugar companies -
(2.) The appellant is a limited company running a distillery. The assessment year in question is 1957-58 and the corresponding previous year is the year ended March 31, 1957. The dispute relates to the income of Rs.77,500/- representing the face value of 7750 shares held by Dalmia Cement Bharat Co. (for short 'the Cement Company') which was received on January 18, 1957 by the assessee company from Raza Sugar Co. Ltd. and Buland Sugar Co. Ltd. (for short 'the sugar company). The sugar company by the general meeting of the shareholders in the extraordinary general meeting held on January 16, 1951 resolved thus: "Resolved that a dividend be declared out of profits transferred to the Reserve Fund of the company by the distribution of one fully paid up ordinary share of Dalmia Cement Ltd. held by this Company as its investment against every two shares held by the members of this Company and the Directors are permitted to appropriate the book-value of the investments from the Reserve Fund for this purpose and further the Directors are authorised to issue negotiable certificates in order to meet fractional distribution. It was further resolved authorising the Directors thus: Resolved further that for the purpose of giving effect to the above resolution the Directors are authorised to settle any difficulty which may arise in regard to the distribution as they think expedient may vest such specific assests in trustees upon trust for the persons entitled to the Dividend as may seem expedient to the Directors."
(3.) On the same date, i.e. January l6, 1952, the Board of Directors of the sugar company transferred their holdings of the shares of the cement company to trustees under trust to hold the said shares and the income thereof in the trust for the shareholders of the sugar company whose names appeared on the register of the sugar company as on January 16, 1952 and to distribute amongst the shareholders of the sugar company the said shares in accordance with resolution passed at the extraordinary general meeting of the sugar companies. Pursunat to the above resolution negotiable certificates were also issued. Some of the shareholders of the sugar company thereafter filed company application in the High Court of Allahabad at Lucknow against the sugar company restraining the company or its agents/ servants to give effect to the resolution. The High Court by its order dated February 22, 1952 granted injunction restraining the sugar company or its agents/ servants etc. from acting upon the resolution of the company or from issuing and/ or transferring to the shareholders of the company shares of the cement company and further from getting their names entered into the registers of the cement company as shareholders. The shares in the cement company, therefore, were not transferred in the names of the assessee company etc. immediately. The sugar company in its balance sheets noted that the shares in the cement company included in their investments were held by the trustees for the shareholders for distribution of dividend in specie and the cost of those had to be adjusted out of general reserves in terms of there solution passed on January16, 1952 by theshares-holders in general meetings of the companies. In view of theinjunction order issued by the High Court no further action in this regard was taken topay over to the shareholders of the sugar company. Ultimately the matter was compromised in the beginning of the year 1957 and a decree was passed upholding the validity of the resolution passed on January 16, 1952 and the same had to be given effect to forthwith by issuing and/ or transferring to the shareholders of the sugar company shares of the cement company. Accordingly the shares were transferred to cement company and the assessee company received dividend on January 18, 1957. Initially the assessee included the dividend income in the assessment year 1957-58 but thereafter a revised assessment was filed deleting the amount in question and claiming that the same was to be includable in the assessment year 1952-53 but not in the year 1957-58. The Income-tax Officer included the income in the assessment year 1957-58. On appeal the Appellate Assistant Commissioner upheld the same. On further appeal the Tribunal held that the sugar company irrevocably placed the shares of the cement company with the trustees for being distributed to the shareholders as dividend in specie. The dividend was unconditionally available to the members entitled thereto. If, however, the members themselves chose not to take it, it cannot be said, on that ground, that the dividend was not available to them. Since the dividend had been declared on January 16, 1952 and was unconditionally available to the assessee on that date it was an amount which fell to be taxed in the assessment year 1952-53 and not in the assessment year in which it had been assessed. On a reference the High Court on the impugned date September 18, 1973 held that the shares were not unconditionally available for distribution to the shareholders. The main condition for unconditional distribution was missing i.e. the complete transfer of shares in law either to the trustees or to the shareholders by execution of formal documents of law. It was only after fulfilling this condition the distribution became complete. Actual transfer did not take place in the relevant accounting year but in a subsequent year. The sugar company in its balance sheet was still treating the shares as part of its investment. Therefore, the amount having been received in the previousyear, the amount was liable to assessmentin the assessment year 1957-58. Thus the question was answered in favour of the revenue and against the appellant.;