SIKRI, - (1.) THE following judgment of the court was delivered by
(2.) THIS judgment will dispose of 12 appeals from the judgments of the High court of Bombay, dated 17/03/1958, whereby the High court answered the questions referred to it partly in favour of the assessee and partly in favour of the Department. The four questions answered by the High court are: ' I. Whether the initiation of action under section 34 for the purpose of bringing to tax the net dividend income of Rs. 579.00 (suitably grossed) was valid ? 2. Whether the said 'P. portion of the dividend income' forms part of the assessee's total income as that term is defined in section 2(15) of the Indian Income Tax Act, 1922 ? 3. Whether having regard to the provisions of the Indo-Pakistan Agreement, the assessee is entitled to any 'relief' on the said 'P. portion of dividend income'? 4. D. Whether the other moiety of the dividend of Rs. 1,71,992.00 declared by the Company on 14/10/1952 is properly includible in the total income of the assessee of the previous year S.Y. 2008 for the assessment year 1953-54 ?' (The figures in these questions are in respect of Shri Purshottamdas Thakurdass.) In C.A. 709/63 and C.A. 713/63 questions 1, 2 and 3 arise. Only questions 2 and 3 arise in C.A. 710/63, C.A. 711/63, C.A. 704/63, C.A. 707/63, C.A. 714/63, and 706/63. Onestion'D' arises in C.A. 712/63, C.A. 705/63, C.A. 708/63, C.A. 712/63 and C.A. 715/63. The appeals involving question 'D' are by the Commissioner of Income Tax and appeals involving questions 1 to 3 are by assessees. It will be convenient to give the facts in the case of the assessee, the late Shri Purshottamdas Thakurdass, hereinafter referred to as Assessee 'A'. He was a shareholder in Narandas Rajaram, Ltd., which carries on business both in India and Pakistan. Profits accrued to it both in India and Pakistan. The company declared dividend out of the above profits. In the case of Assessee 'A', the portion of the dividend attributable to the profits that accrued in Pakistan amounted to Rs. 2,722.00 for the assessment year 1949-50. On 20/05/1952, the I.T.O. included this sum of Rs. 2,722.00 in the total income but held that no income tax or super-tax was payable in respect of this amount. The Income Tax Officer reopened the assessment of 1949-50 because Assessee 'A' was a shareholder in Industrial Corporation Ltd., and an order had been passed under s. 23A of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act) in respect of this Corporation. As a result of this order, Rs. 579.00 was deemed to have accrued to him. But in his re-assessment order, dated 17/01/1955, the Income Tax Officer brought to charge not only the said Rs. 579.00 but also the said sum of Rs. 2,722.00, i.e., the Pakistan portion of the dividend received from Narandas Rajaram Ltd. The Appellate Assistant Commissioner upheld the assessment order both in respect of Rs. 579.00 and Rs. 2,722.00. The Appellate tribunal also upheld the order. The Appellate tribunal then referred the first three questions to the High court but refused to refer the following question: 'Whether on the facts and circumstances of the case, the relief allowed in the assessment under section 23(3) on that portion of dividend income from Narandas Rajaram and Co. Private Ltd., which is attributable to the, income of the Company arising in Pakistan can be withdrawn while making re-assessment under section 34(1) (b)?' Assessee 'A' took out a notice of motion for a reference of the said question. The High court, by its judgment dated 17/03/1958, answered the three questions against the Assessee. The High court also directed the Appellate tribunal to refer the above question hereinafter to be referred to as the 'Supplementary Question' which the Appellate tribunal had declined to refer. On the Appellate tribunal referring the said question, the High Court by its judgment dated 14/04/1960, answered the question in favour of the assessee.
(3.) ON 7/02/1961, the High court granted the necessary certificate to Assessee 'A'. The Commissioner of Income Tax, however, did not appeal against the judgment of the High court on the supplementary question. For the assessment year 1952-53, the net dividend received by Assessee 'A' from Narandas Rajaram and Co., Ltd. was Rs. 1,12,867.00 out of which Rs. 23,167.00 was attributable to the profits of that company which accrued in Pakistan. The I.T.O. charged this sum to tax and the assessment was confirmed both by the Appellate Assistant Commissioner and the Appellate tribunal. Two questions were referred to the High court. The second question is the same as question No. 3 reproduced in the beginning of the judgment. The first question was in substance the same as question No. 2. The High court on 10/07/1959, granted the certificate of fitness under S. 66A(2) of the Act. The fourth question 'D' arose in the case of Assessee 'A' for the assessment year 1953-54 under the following circumstances. On 14/10/1952, the following resolution was adopted at the ordinary general meeting of Narandas Rajaram and Co. Ltd. 'Dividends, as mentioned below, be and are hereby declared out of the profits of the Company: (a) A dividend of 4 per cent on 'A' Preference Shares and 4 per cent on 'B' Preference Shares. (b) A dividend of 32 per cent free of income-tax on the Ordinary Shares and a consequential additional dividend at the rate of 13 per cent free of income-tax on 'B' Preference Shares. (c) A moiety of the amount of the dividend be paid to the share-holders on and after 16/10/1952 whose names appear on the Register of the Company as on 6/10/1952, and the other moiety be postponed for payment within two months from the date on which remittances from Pakistan become free and the moneys are actually received.' ;