HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Kishinchand Chellaram v. Commissioner of Income-tax, Central Bombay
Civil Appeal Nos. 462 to 465 of 1960
[1963] 2 SCR 268 ·
Indian Income-tax Act, 1922: section 16(2) · Indian Income-tax Act, 1922: section 66 · Indian Companies Act, 1913: section 17(2) and article 97 of Table A
Sources & disclosures includedDownload original judgment / order
Three-judge bench; unanimous judgment delivered by J. C. Shah, J. · S. K. Das, J. · M. Hidayatullah, J. · J. C. Shah, J.
Assessment years: 1945-46
01 · Facts of the case
Chellsons Ltd. declared dividends for earlier years and credited amounts to its four shareholders, including Kishinchand Chellaram. The shareholders included the credits as dividend in their returns for assessment year 1945-46. In December 1947, after recognising that tax and excess-profits-tax liabilities had not been provided for and that the distributions may have come from capital, the company resolved that the dividends should instead be treated as shareholder loans and repaid. The tax authorities, Tribunal and Bombay High Court did not accept that later recharacterisation for the 1943-44 dividend credited on 29 September 1944 (SCR pp.270-274; PDF pp.3-7).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
Section 16(2) deemed dividend income to arise in the previous year when it was paid, credited or distributed. The amounts had been declared, credited, received and returned as dividend. Even if the company had improperly distributed capital without adequate tax provision, possible company-law consequences for directors or possible recovery from shareholders were separate questions. Once the tax liability attached, a later resolution treating the amounts as loans could not retrospectively change the original receipt or remove that liability (SCR pp.274-276; PDF pp.7-9). The broader contention that the payment was not dividend at all had not arisen before the Tribunal and was outside the section 66 reference; in any event, the Court said a payment made as dividend does not lose its character merely because it came from capital (SCR pp.276-277; PDF pp.9-10).
Source: Primary judgment: discussion
03 · Judicial decision
The Court rejected the attempt to undo the tax character of the credited dividend by the later resolution. All four appeals failed and were dismissed; there was no order as to costs (SCR p.277; PDF p.10).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of Revenue. The dividend remained taxable for the relevant year notwithstanding the company's later unanimous resolution describing it as a loan. The Court did not adjudicate a separate company recovery claim against the shareholders (SCR pp.275-277; PDF pp.8-10).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: a later corporate resolution or bookkeeping reversal should not be assumed to reopen a tax consequence that attached when an amount was originally declared, credited or paid. Analyse the taxing provision's event and timing first, then separately examine company-law validity, restitution and director liability. Preserve the distinction between an issue decided on merits and one that was outside the scope of the statutory reference.
Source & verification
Download original judgment / order · Open cited source rendition
Exact 10-page catalogue asset read and visually inspected in full. The Kishinchand report ends on SCR p.277 / PDF p.10; the balance of PDF p.10 begins the next reported case and is excluded from the note.
- Catalogue asset 1963_2_268_277: exact SHA-256 a643fc04fbe2ff9fe38c0844788fc4dcb029d127a4f2ce302618fa92c5db337d; 10 pages.
- The source verifies the parties, docket, Bombay High Court origin, bench, decision date, statutory provisions and operative dismissal.
- The only published name collision is a materially different 1980 Kishinchand Chellaram judgment. No exact source-hash, asset-ID, SCR-citation or civil-appeal-number match was found.
Statutory scope
Historical section 16(2) of the repealed 1922 Act and historical company-law rules. No automatic equivalence to current dividend taxation or Companies Act provisions is asserted.
Later treatment
Source checked 2026-10-11. Later judicial treatment and present statutory applicability were not comprehensively checked; no current-law or citator clearance is represented.
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