- (1.) The question of law referred to the High court under section 66(1) of the Indian Income-tax Act, 1922, is : "Whether, on the facts and in the circumstances of the case, the amount amount of Rs. 2,344.00 was rightly included as dividend in the total income of the assessee for the assessment year 1949-50 " STATEMENT OF CASE TO THE HIGH court During the previous year relevant to the assessment year 1949-50 the among other dividends, dividend amounting to Rs. 3,127.00 from Ukhra Estate Zamindaries Ltd., and while submitting his return of income claimed that these dividends were not taxable because they came out of the company which were not in any sense taxable profits.. Before the actual assessment was made, the assessee went on giving slightly different explanations about the source of the funds from which dividends were declared, but his main contention was that the said dividends had been distributed by the company out of its capital gains which arose to the company after 31.03.1948, and that dividends under sec. 2(6A) did not include any distribution by the company of capital gains arising after 3 1.03.1948. The Income-tax Officer thought that the assessee was varying his explanations from time to time about the source of founds of company from which the dividends were paid, but he also that dividends were paid partly from the accumulated capital receipts of company. He, however, took the view that in determining the real nature of a receipt it was the immediate and effective source that counted and not the remote or ultimate source and he relied on. the decision of the Bombay High court in Bacha F. Guzdar V/s. Commissioner of Income-tax . He, therefore, included the dividend which to have come from capital receipts, but did not gross it up company had not paid tax on the same. When the matter went up to the Appellate Assistant Commissioner analysed the funds of the company from which dividends were found that out of the total dividends of Rs. 2,04,000.00 declared company about Rs. 54,000.00 came from profits which had been income-tax, about Rs. 38,000.00 came from capital gains arising 1.04.1946, and 31.03.1948, which were liable to capital Rs. 1,12,500 came from capital gains arising after 1st April, 19 liable to capital gains tax or income-tax. He went on to co-apart of the dividend traceable to the last part, viz., non-taxable gains was not dividend at all in view of the fact that accumulated gains of a company arising before 1.04.1946, and after 31.03.1948, have been specifically excluded from the category of divided under section 2(6A). He realised that the definition of dividend in section 26(A) was not exhaustive and that the distribution of current profit out of its ambit, but he took the view that distribution of current profit became income apart from the definition of dividend whereas distribution of accumulated profits became income only by virtue of the definition under sec. 2(6A). And since according to him by virtue of the definition in sec. 2(6A) certain accumulated capital gains, i.e., definition before 1.04.1946, and after 31.03.1948, were excluded from the category of dividends, distribution of such gains could not taxed in the hands of the shareholders. He, accordingly, excluded divide ends amounting to Rs. 2,344.00 out of the amount of Rs. 3,127.00. The department came up in appeal before the tribunal and it was their contention that sec. 2(6A) had no relevance to the issue in dispute at all and that if the amount distributed was dividend in the ordinary parlance, it became taxable under the general charging section. Reliance was placed on the Supreme court decision in the case of Bacha F. Guzdar v. Commissioner of Income-tax ' and the decision of the Bombay High court in the case of Executors and Trustees of Sir Cawasji Jehang (First Baronet) V/s. Commissioner of Income-tax and it was contended that the dividend had to be traced only to the contractual nexus between and the company and not to the fund from which the Company pays the dividend. It was, on the other hand, contended for the assessee that the dividend had been paid out of a fund which was essentially of that all dividends were not paid from profits and were not profits in the hands of the shareholders and that the dividend could be distributed from any found of the company as long as the paid up capital of the company was kept intact. Strong reliance was placed on Neumann V/s. Commissioners of Inland Revenue, and it was suggested that the decision of the Supreme court at Bacha F. Guzdar V/s. Commissioner of Income-tax " does not lay down any general proposition that dividends must be considered in all cases without reference to the ultimate source from which they are paid. we accepted the departmental contention and held that the Appellate Assistant Commissioner erred in presuming that dividends in order to be taxed as dividend must come within the definition of sec. 2(6A). We took the view that sec. 2(6A) was concerned only with deemed dividends and that the exclusion of certain capital gains from accumulated profits for the purposes of sec. 2(6A) had no bearing on the issue in dispute. We also held that the ratio of the decision in Bacha F. Guzdar V/s. Commissioner of Income-tax was applicable to all cases in which dividends are paid from sources which are not liable to income-tax like agricultural income and also relied on the House of Lords' decision in Inland Revenue Commissioners V/s. Trustees Reid '. We, accordingly, hold that from whatever sources the company might have paid them, by whatever name the paying company might have called them, the payments were in the nature of a return to the shareholders on their outlay on the shares and they had been paid periodically and regularly by reference to the holding of shares and that they had the attributes of income and they were taxable as such. It is now suggested that the following questions of law arise from our order: "(1) It the sum of Rs. 3,127.00 received as dividend from the Ukhara Estate Zamindaries out of capital receipts of the company of any part thereof, taxable in the hands of the assessee (2) Is the sum of Rs. 2,344.00 out of Rs. 3,127.00 received as dividend from the Ukhara Estate Zamindaries Ltd., distributed out of accumulated capital gains of the Company arising after 31.03.1948, taxable in the hands of the assessee '' It will be seen that the first question does not arise from our order. The Income-tax Officer had added an amount of Rs. 3,127.00 as taxable divided from Ukhara Estate Zamindaries Ltd. and the Appellate Assistant Commissioner had deleted an amount of Rs. 2,344.00 out of the same. The department came up in appeal against the deletion of Rs. 2,344.00 but the assessee accepted the inclusion of Rs. 783.00 being the balance and did not come up in appeal to the tribunal. We have, therefore, given our finding only in respect of Rs. 2,344.00 being an amount of dividend traceable to certain capital gains made by the company. The first question therefore does not arise from our order.
(2.) This question is concluded by the decision of this court in Commissioner of Income-tax V/s. Nalin Behari Lall Singha Following that decision this appeal is dismissed.;