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Mrs. Bacha F Guzdar vs. CIT

Vishal D. Darji (Qualified CA and CS) (162 Points)

05 September 2010

Hello friends,

Can anyone explain in detail the famous case of Mrs. Bacha F. Guzdar vs. CIT.

The case says that the Dividend received by the shareholder is not exempt u/s 10(1).

I am a bit confused if the income recd by the shareholder is exempt u/s 10(34).

Thanks.

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5 Replies

Sowmya P K (Chartered Accountant) (251 Points)
Replied 05 September 2010

This case was decided when there was no Dividend Distribution Tax on companies.

Dividend received from a company having agricultural income does not have the character of agricultural income in the hands of the shareholders. This is because of the separate legal entity concept.

Hence such income WAS taxable as dividend income.

Now, with the introduction of Section 10(34), dividend received from a company is exempt as dividend income because tax for the same is paid by the company as DDT/CDT u/s 115 O.

3 Like

Vishal D. Darji (Qualified CA and CS) (162 Points)
Replied 05 September 2010

Thank you for the answer...

Amit Gupta (Loosening Myself) (1508 Points)
Replied 05 September 2010

Basically it says company has its own income and its shareholder have their own..no matter if the income earned by the company is tax free, it can be (dividend) taxable in the hands of shareholder

3 Like

Pradeep Patankar (IFRS ( London)) (289 Points)
Replied 05 September 2010

there was no Dividend Distribution Tax on companies at that time...

n dividend was wholly taxable in the hands of shareholders.....

shivam garg (garh) (25 Points)
Replied 22 February 2014

In this case court decided that company was different person from shareholders. Hence every co. must pay tax upon its income and sharehold. also must pay income tax on their dividend income