JUDGMENT S. Velu Pillai, J. 1. In this Second Appeal by the defendant, which is directed against a decree for money passed by the Subordinate Judge, and confirmed on appeal by the District Judge of Palghat, the only question for decision is, whether the appellant is an agriculturist, entitled to the benefit of the Madras Agriculturists Relief Act, 1938 (Act IV of 1938). The appellant had at the material time a saleable interest in agricultural land and thereby fulfilled one or more of the conditions in clauses (a) to (d) of Section 3(ii) of that Act which defines the term 'agriculturist' and the controversy now is about the applicability of proviso (A) to the Section which reads : "Provided that a person shall not be deemed to be an 'agriculturist' if he -- (A) has in both the financial years ending 31st March, 1938 been assessed to income tax under the Indian Income Tax Act, 1922, or under the income tax laws of any Indian State." Admittedly, there has been no assessment against the appellant, but he had received dividends on the shares which he held in four limited companies and the companies themselves had been assessed to income tax during the relevant years. It was contended that such assessments on the companies are equivalent to assess­ments on the appellant and are sufficient to attract the proviso. Under the definition in Section 3(ii) once it is proved that a person has satisfied one or the other of the conditions specified in clauses (a) to (d), as held by the Privy Council in A. Veerayya Vandayar v Sivagami Achi (A. I. R. 1949 P. C. 319) he "would be entitled to relief unless they were (he was) deprived of the privilege by one of the provisos, and the burden would lie upon anyone so asserting to prove his case". See Section 102, Evidence Act and illustration (b). It was also held in Venkadari Somappa v Narasepally Venkataswamy Chetty (A. 1. R. 1941 Madras 672) that the words "assessed to income tax" in the proviso are not to be construed strictly or narrowly, but comprehensively and would include all cases, where a man's income is subjected to assessment, whether in proceedings against him or in his name or not. R. 1941 Madras 672) that the words "assessed to income tax" in the proviso are not to be construed strictly or narrowly, but comprehensively and would include all cases, where a man's income is subjected to assessment, whether in proceedings against him or in his name or not. The short point, however, is whether or not this rule against strict inter­pretation compels me to hold that by assessing a company under the Indian Income Tax Act, 1922, on its profits a shareholder of the company can be said to be assessed to income tax on the dividend which he has received in respect of his shares. 2. The definition of the term 'dividend' in the Indian Income Tax Act so far as it is relevant is that it is a distribution by a company of accumulated profits. In the language of the Supreme Court in Mrs. Bacha F. Guzdar, Bombay v Commissioner of Income Tax., Bombay (A. I. R. 1955 S. C. 74) it is "derived from the investment made in the shares of the company and the foundation of it rests on the contractual relations between the company and the shareholder". A company has a legal personality and is separate and distinct from its shareholders. This distinguishes a company from a partnership, which in law is not a legal entity, or distinct from its partners, but is only a compendious expression to describe the various persons who are engaged in carrying on its business. In general law, the income of a company is not the income of its shareholders; a company pays income tax on its profits as a distinct taxable unit and when it does so, it discharges its liablility under the taxing statute. Kanga and Palkhivala have at page 37 of their book on Income Tax, 4th Edition, set forth the points of distinction as regards liability to tax between a company and other assessees to be, firstly, that under the Finance Acts the maximum taxable limits are not the same for companies and other assessees, and a company is liable to both income tax and supertax, whatever be its income, and secondly that a company has to pay income tax and supertax at a flat rate on the whole of its income while assessees are taxed according to a graduated scale or slab system. A company which has no income during the previous year need not pay tax; but may distribute dividends out of its reserve fund and in the hands of the shareholders the dividends form part of their total income and may be assessed. On an examination of the provisions of the Income Tax Act, Beaumont C. J. in Bai Lalita Ratanchand Khimchand v Tula Iron & Steel Co. Ltd., A. I. R. 1940 Bombay 97, observed thus: "In my opinion the scheme of the Income Tax Act is that a company is assessed to income tax on its profits and pays the tax..........Income Tax has to be discharged out of profits before any distribution can be made, and where tax has been paid, the company must apportion the burden amongst the different classes of shareholders, according to their legal rights." The learned Chief Justice concluded thus : "It is therefore, in my opinion, clear, that in the case of a company the tax has to be paid by the company direct and not on behalf of the shareholders." In Mrs. Bacha F. Guzdar v The Commissioner of Income Tax, Bombay City, A. I. R. 1953 Bombay 1, Chagla C. J. distinguished the case of a partnership and said: "Entirely different is the position with regard to a company. It cannot be said that the income of the company is the income of the shareholders. Not only is a company and a shareholder separate and independent entities under the general law, but even under the Indian Income Tax Act a company is a separate entity for the purpose of assessment from a shareholder. A company pays income tax on its income or its profits. It does not pay income tax on behalf of the shareholders. A shareholder pays tax on his own income which may include income derived from dividends.................. In fact and in law income tax is paid by the company as a company on its own income and the shareholder also in fact and in law has to pay tax on his own income." Kanga and Palkhivala have deduced the same rule at page 37 on citing decided cases on the subject. 3. In fact and in law income tax is paid by the company as a company on its own income and the shareholder also in fact and in law has to pay tax on his own income." Kanga and Palkhivala have deduced the same rule at page 37 on citing decided cases on the subject. 3. But under section 48 of the Income Tax Act, the shareholders have a right of refund of income tax in certain circumstances when the company has paid the same, and it was contended that this right of refund is the strongest indication that the payment of income tax was for and on behalf of the shareholders. "Under Section 18(5) and Section 49B of the Act, when a dividend is received by a share­holder, he is deemed to have paid income tax, though not supertax, on the profits represented by the dividends at the rate applicable to the total income of the company" (Kanga page 38). As a consequence, the net or tax-free dividend received by the shareholder is grossed up under Section 16(2) by adding the amount of the income tax paid by the company under the Act, and Section 18(5) provides that credit shall be given to the shareholder in his assessment for the same on the production of the certificate furnished to him by the company under Section 20 and he may claim a refund under Section 48, if the maximum rate of income tax which is applicable to the company is not applicable to him ; but he is still liable to pay supertax on the dividend, though the company has already paid the same on the profits represented by dividends, for Section 49B does not apply to supertax. This is the scheme of the Act for refund of tax in so far as it relates to dividends. In Mrs. Bacha F. Guzdar v The Commissioner of Income Tax, Bombay City, cited earlier, Chagla C. J. Said : ".................... it is true.................. that the law provides that a share­holder is entitled to refund if tax has been paid by the company on the income which is represented by the dividends received by him. But this is merely as a legal fiction that it is recognised that the tax has been paid by the company on behalf of the shareholder and therefore the shareholder is entitled to a refund." 4. But this is merely as a legal fiction that it is recognised that the tax has been paid by the company on behalf of the shareholder and therefore the shareholder is entitled to a refund." 4. It is not therefore possible to accept the contention of the respondent that by the assessment of the companies to income tax during the relevant years there had been an assessment on the appellant himself to income tax. The decree under appeal is therefore modified by holding that the appellant is entitled to the benefit of Act IV of 1938. Subject to this modification, the decree is confirmed in other respects. The case is sent back to the trial court for giving effect to the benefit of the provisions under Act IV of 1938, and making the necessary modi­fication, if any, in the decree. The respondent shall pay the costs of the appellant in this appeal and in the appeal before the District Judge.