Chakravartti, C.J. - (1.) The question involved in this Reference is covered by the decision of the Bombay High Court in -- 'Shree Shakti Mills Ltd. v. Commr. of Income-tax, Bombay', AIR 1948 Bom 394 (A), by the decision of the Nagpur High Court in -- 'Jaluram Bhikulal Firm v. Commr. of Income-tax, M. P.', AIR 1953 Nag 187 (B), and by a decision of ourselves in -- "Bikaner Trading Co., Calcutta v. Commr. of Income-tax, West Bengal', (1953) 24 ITR 419 (Cal) (C). Mr. Mitra, who appears for the assessees, however, wanted to argue the point again. We readily agreed to allow him to do so, because in the case where we had occasion to decide the point the assessee was not represented. In the next Reference the same point is involved and Mr. A. K. Sen, who appears for the assessees in that Reference made a request to us that we might defer our judgment till we had heard him. Accordingly, we heard the two References together and are now able to pronounce our judgment after having had the benefit of elaborate and careful arguments.
(2.) The facts of the present case are simple and may be given in the words of the Tribunal. They have stated them as follows: "The assessee is a Public Limited Company. It had during the previous year relevant to the assessment year 1948-49, received dividend income out of which income amounting to Rs. 24318/- was not grossed up under Section 16(2) and the assessee was not given credit under Section 18(5) for the relevant tax paid by the various companies. The shares in respect of which this dividend income of Rs. 24,318/- was received, were held by the Assessee Company in blank transfer. The transfer of these shares had not thus been registered in the name of the Assessee Company with the various companies. Thus the registered shareholders in the books of those companies were some other persons from whom the Assessee Company purchased the shares."
(3.) The contention of the assessees (I shall use the plural number) was that since the amount of Rs. 24,318/- was a dividend amount and it was being included in their total income, it had to be grossed up under Section 16(2), Income-tax Act, for the purposes of such inclusion and they were to be given credit under Section 18(5) of the Act for the sum by which the amount might be increased, as tax paid on their behalf by the companies which had paid the dividend. The Income-tax Authorities repelled that contention on the ground that the assessees not being registered holders of the shares on which the dividend had been paid, were not entitled to the benefit of Sections 16(2) and 18(5) and in support of the view taken by them they relied on the decision of the Bombay High Court to which I have just referred. On behalf of the assessees reliance was sought to be placed on a subsequent Circular of the Board of Revenue Circular No. 1 of 1949, dated 5-5-1949, but it was pointed out that while the Circular gave directions for not applying the Bombay decision to certain cases, it expressly excluded the case of persons holding shares on blank transfers without having their names registered. Before the Tribunal, the Bombay decision was sought to be distinguished on the ground that, there, no certificate granted under Section 20 of the Act had been produced as had been done" in the present case, but the Tribunal held that the basis of the decision was that the benefit of Section 18(5) could be claimed only by a registered shareholder and, therefore, the production of certificates issued under Section 20 of the Act could not take the present case out of the principle of the decision.;