- (1.) The questions referred to this Court under Section 66(1) of the Income-tax Act are as follows: (1) Whether on the facts and in the circumstances of the case the sum of Rs. 59,650, Rs. 23,060 and Rs. 42,618 were deductible in computing the business profits of the Assessee for the assessment years 1951-52, 1952-53 and 1953-54 respectively? (2) Whether the sums of Rs. 21,006, Rs. 14,221 and Rs 13,869 were income-taxable under the Indian Income-tax Act for the assessment years 1951-52, 1952-53 and 1953 54 respectively?
(2.) The first question is not pressed and accordingly need not be considered.
(3.) With regard to the second question the facts are as follows: The Assessees are a registered firm dealing in shares and also acting as brokers, financiers and dealers in jute. The assessment years in question are 1951-52, 1952-53 and 1953-54, the relevant accounting years being Dewali years 2006-2007, 2007-2008 and 2008-2009. The Income-tax Officer included in the assessment for these three years three sums of Rs. 21,306, Rs. 14,221 and Rs. 13,869 being the amounts received from Messrs. Midnapur Zemindary Co. Ltd., holding that the receipts were in the nature of income because these were periodical monetary returns coming in with some sort of regularity or expected regularity from a definite source. The Appellate Assistant Commissioner agreed with the Income tax Officer relying on the decision of the House of Lords in the case of Inland Revenue Commissioners v. Trustees of Reid (1949) I.T.R. Suppl. 41. Before the Tribunal it was contended that the payments made to the Assessees were not dividends in the ordinary sense of the terms, nor were they dividends in the special sense contemplated in Section 2(6A) of the Act which excluded capital gains earned outside certain periods from the accumulated profits for the purpose of determining whether any payment was made out of accumulated profits. It was further contended that dividend could only come out of current profits or accumulated profits and that the amounts received from Midnapur Zemindary Company were received from money received on share premium account and not from current profits or accumulated profits. The fund out of which these amounts were distributed was formed in the following way: From time to time Midnapur Zemindary Co. Ltd. issued shares at a premium to its members. The premium thus collected was first credited into a share premium account. They were afterwards transferred to a capital reserve account and it was from the capital reserve account that the payments to shareholders in the years in question were made. The Income-tax Officer relied strongly on the fact that the Assessees were dealers in shares and stocks and any amount' received by them based on the share holding of Midnapur Zemindary Company must be treated as received in the nature of income. The Appellate Assistant Commissioner took the same view which was confirmed on appeal to the Tribunal.;