1. SAJJAD AHMAD, J.-This is a certified appeal from a decision of the former High Court of West Pakistan, Lahore, made in Civil Reference No. 9 of 1964, in which the question referred to the High Court by the Income-tax Appellate Tribunal was "when is dividend paid within the purview of section 16(2) of the Income-tax Act?"
2. The facts leading to the reference were that the respondent, Mst. Wazirunnisa Begum, as an assessee for the charge year 1957-58, claimed refund of Income-tax on a dividend of Rs. 2,000, which was received by her in June 1956 as a shareholder from the Rawalpindi Electric Power Co. Ltd.
3. This dividend was formally declared by the Company at the annual general meeting of the shareholders on the 30th of March 1956. The Income-tax officer was-of the opinion that the dividend warrant pertained to the assessment year 1956-57 as it had been declared by the Company on the 30th of March 1956, and since the assesses had preferred the claim for its refund m 1957-58, it could not relate to the assessment year 1957-58. On appeal, the Appellate Assistant Commissioner held that in terms of sections 16(2) and 50 of the Income-tax Act, the claim had been rightly made, as relating to the year 1957-58. He directed the Income-tax Officer to admit the resident's claim after proper verification and allow the necessary refund to her. The Income-tax Appellate Tribunal, on the department's appeal, confirmed the view of the Appellate Assistant Commissioner, holding that the material date was the 1st of June 1956 when the dividend warrant was actually made out by the Company for payment to the respondent. On an application by the department, under section 66(I) of the Income-tax Act, 1922, the Tribunal referred the question stated above to the High Court, which, in the precise terms, was as follows "Whether on the facts and circumstances of the case the Tribunal was right in holding that dividend of Rs. 2,000 pertained to the assessment year 1957-58 and not 1956-57."
4. A Division Bench of the High Court has held that the word "pay" in section 16(2) means to satisfy, to set at rest, to discharge, to require with what is due or deserved etc., and that it is obvious that the words as used in the aforesaid provision means when the money is actually delivered and not when a decision is made to make the payment. We have no hesitation in affirming this view of the High Court. A mere declaration of the dividend at the annual general meeting of the Company amounts only to a decision .By the Company to pay to the shareholders dividend at a certain rate.
5. It creates a right in favour of the shareholders and a corresponding liability on the Company to pay the amount but it does not at all mean actual payment. It is only when the warrant for payment is made out that the shareholders get into the position to receive the actual payment. Since the dividend warrant in 'this case was issued on the 1st of June 1956, it obviously pertained to the assessm ent year 1957-58, the previous account year having ended on the 31st of March 1956.
6. It is further submitted by the learned counsel for the respondent that as a result of the amendment of section 16(2) of the Income-tax Act by clause 9 (b) of section 11 of the Finance Act, 1956, in subsection (2) of section 16 and the proviso thereto, for the words and commas "paid" credited or distributed or deemed to have been paid, credited or distributed" wherever the3 appear, the word "paid" shall be substituted. The amended law, which was in force on the 1st day of the charge year in question would obviously apply, and this being the case, it is difficult to sustain the appellant's point of view, as stressed in this appeal.
7. We are, therefore, constrained to dismiss this appeal with costs