Shah, C. J. - (1.) By order dated August 23, 1968, we called for a supplementary statement on the issue whether dividend warrants were delivered by the Glass Works to the Bank on August 3 1949. The Tribunal has submitted a statement of the case that the only relevant facts proved are that the dividend was declared on July 25, 1949 and the Bank encashed the dividend warrants on December 31, 1949. The appeal must therefore be decided on the footing that the dividend warrants were handed over to the Bank by the Glass Works on August 3, 1949, is not proved.
(2.) The material facts which have a bearing on the point in issue are these. The year of account of the bank is the calendar year. The State of Benaras in which the Bank had its registered office merged with the Indian Union on December 1, 1949. The Glass Works declared a dividend at a General Meeting on July 25, 1949. Cheque for Rs. 69,000 issued by the Glass Works in favour of the Bank in payment of the dividend were encashed by the Bank on December 31, 1949.
(3.) The dividend received by the Bank has been brought to tax in the assessment year 1950-51. Counsel for the Bank urged that the Bank cannot be assessed to tax in respect of dividend accruing to it at a time when the Bank was a nonresident. It is urged that by virtue of Section 14 (2) (c) of the Income Tax Act, 1922, as then in force, the income received by the Bank was not liable to be taxed. At the relevant time Section 14 (2) (c) read as follows: " (2) The tax shall not be payable by an assessee - ********** (c) in respect of any income, profits or gains accruing or arising to him within an Indian State, unless such income, profits or gains are received or deemed to be received in or are brought into the British India in the previous year by or on behalf of the assessee, or are assessable under Section 12B or Section 42." By the Adaptation of Laws Order, 1950, the words "an Indian State" were substituted by the words "a Part B State", and the words "British India" were substituted by the "taxable territories" Section 2 (14A) - (which was also incorporated by the Adaptation of Laws Order, 1950, with effect from April 1, 1950) insofar as it is material provides: "taxable territories means - (a) ********** (b) as respects any period after the 14th day of August, 1947, and before the 26th day of January, 1950, the territories for the time being comprised in the Provinces of India, but excluding the merged territory of Cooch-Bihar. ********** Provided that the taxable territories shall be deemed to include - (a) the merged territories - (i) as respects any period after the 31st day of March, 1949 for any of the purposes of this Act, and ********** " ;