Case: Messrs. Howrah Trading Co., Ltd, Vs. The Commissioner Of Income-Tax, Calcutta

2. The facts of the case hake been stated with sufficient fulness, yet briefly, in the statement of the case submitted by the Income-tax Appellate Tribunal (Calcutta Bench) and may be conveniently set out in its ownapplicant had received sums of Rs. 3,831, Rs. 6,606, Rs. 7,954 and Rs. 8,304 in the four years, respectively (assessment years, 1944-45, 1945-46, 1946-47 and 1947-48) as income from dividends. The shares in respect of which this dividend income was received were the property of the Applicant but in the books of the various companies these stood in the names of other persons. It appears that these shares were purchased by the Applicant from other persons under a blank transfer but the transfers had not been registered with the various companies. The Applicants claim in these income-tax proceedings was that these shares although not registered in the name of the applicant were the property of the applicant. It was further claimed that this dividend income should be grossed up under S. 16(2) and credit for the tax deducted should be allowed to the Applicant under S.Income-fax Officer did not accept this claim, and the appeals of the assessee were rejected by the Appellate Assistant Commissioner of Income-tax, Calcutta, "A" Range and by the Appellate Tribunal. The Tribunal, however, on being moved, referred the following question to the Highin the facts and circumstances of this case, the Applicant (the assessee) was entitled to have this dividend income grossed up under Section 16(2) and claim credit for tax deducted at source under S. 18(5) of the Income-taxHigh Court answered the question in the negative, thus affirming the decisions of the Department and the Appellate Tribunal.

Reasoning: 14. No one can doubt the correctness of the proposition in these cases, but from an equitable right to compel the transferor to give up the dividend to the transferee, to a claim to the dividend by him as a "shareholder" against the Company is a, wide jump.In so far as the company is concerned, it does not even issue the certificate under S. 20 of the Income-tax Act in the name of an unregistered transferee but only in the name of the transferor whom it recognises, because his name is borne on its books. Section 20 laysprincipal officer of every company shall, at the time of distribution of dividends, furnish to every person receiving dividend a certificate to the effect that the company has paid or will pay income-tax on the profits which are being distributed, and specifying such other particulars as may bemeaning of S. 20 as also of S. 18(5) is clear if they are read with S. 19A, under which information regarding dividends has to be supplied by the company when demanded by the Income-tax Officer. It laysprincipal officer of every company.... shall, on or before the 15th day of June in each year, furnish to the prescribed officer a return in the prescribed form and verified in the prescribe manner of the names and of the addresses, as entered in the register of shareholders maintained by the company, of the shareholders to whom a dividend or aggregate dividends exceeding such amount as may be prescribed in this behalf has or have been distributed during the preceding year and of the amount so distributed to each such shareholder." (Italics (here in )19-A makes it clear, if any doubt existed, that by the term "shareholder" is meant the person whose name and address are entered in the register of "shareholders" maintained by the company. There is but one register maintained by the Company. There is no separate register of "shareholders" such as the assessee claims to be but only a register of "members". This takes us immediately to the register of members, and demonstrates that even for the purpose of the Indian Income-tax Act, the words "member" and "shareholder" can be read synonymous.15. The words of S. 18(5) must accordingly be read in the light in which the word "shareholder" has been used in the subsequent sections, and read in that manner, the present assessee, notwithstanding the equitable right to the dividend, was not entitled to be regarded as a "shareholder" for the purpose of S. 18(5) of the Act. That benefit can only go to the person who, both in law and in equity, is to be regarded as the owner of the shares and between whom and the company exists the bond of membership and ownership of a share in the share capital of the company.