R.N.PYNE,J. - (1.) IN this reference under Section 66(1) of the Indian Income -tax Act, 1922 we are concerned with two assessment years i.e. 1953 -54 and 1954 -55, the respective relevant previous years of which were 2009 Diwali (30 -10 -51 to 18 -10 -1952) and year ended 31 -3 -1953 for dividend, and 2010 Diwali (19 -10 -1952 to 16 -11 -1953) and year ended 30 -3 -54 for dividend. During relevant previous years the assessee held shares in three companies, namely, Dhanlakshmi Trading Corporation Private Ltd., Bhagat Land Development Private Ltd. and Shri Gouri Shankar Jute Mills Private Ltd. Undisputedly these were companies where public were not substantially interested within the meaning of Section 23 -A of the Indian Income tax Act. 1922 (as it stood prior to its amendment in 1955). In course of the assessment proceedings the Income -tax Officer H.C.E.P.T., District I, Calcutta received intimation of the assessees share of dividend from the Income -tax Officer assessing the aforesaid companies consequent to the application of Section 23 -A to the companies as the shares in question were registered in the name of Bansidhar Durgadutt according to the Register of the said companies. Since the assessee was of that name, the deemed dividends were assessed in its hand. Accordingly, the assessments in the instant case were computed under Section 23(3) of the 1922 Act on the total income of Rs. 3,33,227 and Rs. 6,71,109/ -. The figures of deemed dividend included in the assessment years are as follows : - - Assessment years : Name of the Company 1953 -54 1954 -55. (a) Dhanlakshmi Trading Corporation Private Ltd. Rs. 37,705 / - Rs. nil - - (b) Bhagat Land Development Company Private Ltd. Rs. 30,373/ - nil (c) Shree Gouri Shankar Jute Mills Private Ltd. Rs. 65,586/ - Rs. 30,378/ - Rs. 68.080/ - Rs. 95,964/ - (Gross) (Gross) Tax Credit ..... Rs. 17,872/ - Rs. 16,238/ -
(2.) IN the appeals before the Appellate Assistant Commissioner grounds were taken for the first time challenging the legality of the inclusion of deemed dividend in the hands of the assessee. As no objection was raised before the Income -tax Officer the Appellate Assistant Commissioner did not permit the assessee to agitate the said point inasmuch as as according to him it was too late to urge for the said point. The Appellate Assistant Commissioner however upheld the inclusion of the deemed dividends. It may, however, be noted here that the Appellate Assistant Commissioner however wrongly mentioned Dhanlakshmi Trading Co. Ltd. in the place of Shri Gouri Shankar Jute Mills in his order in respect of the assessment year 1954 -55. Against the said order of the Appellate Assistant Commissioner the assessee preferred a second appeal before the Income -tax Appellate Tribunal. Before the Tribunal the assessee contended that the inclusion of the deemed dividends in the assessment of the firm which was not a person in the eye of law was not in order. It was further contended the assessee was a firm and, therefore, could of them held the name of Bansidhar Durgadutt. On behalf of the assessee reliance was placed on some of the provisions of different courts.
(3.) THERE was however a difference of opinion between the Judicial Member and the Accountant Member of the Tribunal over the issue. The Judicial Member was of the opinion that the addition made in the hands of the assessee of the deemed dividend were amply justified. He, therefore, upheld the addition of the deemed dividend in the assessment of the assessee. It was observed by the Judicial Member as follows : - 'Income -tax Act, being generally concerned with the beneficial ownership of income, we must, therefore, look to the beneficial ownership and not to the real ownership. Even if the shares be in the name of some one else, but if the benefit is derived wholly by the assessee, it is the assessee to whose income the benefit must be added. In such view of the matter we are of the view that even if the shareholders, as registered in the companys register, be not the assessee itself since it has had the benefits of the usufruct from those shares such benefit must be assessed in the hands of the beneficiary. We are, therefore, of the view that the additions made of the deemed dividend income are amply justified.' On the other hand the Accountant Member found ample force in the assessees contentions and referring to the decision of the Calcutta High Court in Hindustan Investment Corporation Ltd. vs . Comm. of Income -tax : [1955]27ITR202(Cal) deleted the addition of the deemed dividend income from the assessment in the hands of the assessee The Accountant Member observed : 'I am therefore, unable to agree with the learned Judicial Member that although the appellant firm could not be a shareholder in the companies concerned, it could still be assessed in respect of the deemed dividends declared under Section 23 -A because the firm had been a beneficial owner of the shares. Since the firm could not have been the lawful owner of the shares in question the notional dividends under Section 23 -A cannot be assesses in the hands of the firm in view of the clear decision of the Supreme Court cited above, and as such the addition of the deemed dividends amounting to Rs. 68,082 and Rs. 1,13,048 in the assessments for 1953 -54 and 1954 -55 cannot be sustained in law.';