Banerjee, J. - (1.) Nine members of the Memani family constituted the Assessee firm Jewanram Gangaram. During the relevant assessment year 1957 -58 (corresponding to the previous year 2013 R.N., covering the period April 19, 1956 to April 9, 1957), they used to carry on business in cloth and money lending. Prior to the year 1951, the Assessee firm used to hold certain shares in a private limited company called Messrs. Sankershan (Private) Limited. Out of 2,000 issued shares of the private company, as many as one thousand shares were held by the Memanis of the Assessee firm. Out of these shares again, 997 shares stood registered in the name of the Assessee firm and three shares were held by three of the partners of the firm, namely, Kanhaiyalal Memani, Surajmal Memani and Mulchand Memani. On January 15, 1951, the Assessee firm transferred the 997 shares held by it to five of the partners of the firm. These transfers were duly registered in the register of shareholders of the private company above -named. Subsequently, on December 28, 1951, 956 of these shares were again transferred by the then registered shareholders to their sons and daughters -in -law. These subsequent transfers were also registered in the register of shareholders of the private company above -named. The Assessee firm did not retain a single share to itself.
(2.) The Assessee firm says that it owed considerable amount of money to the private company abovenamed and the debt stood at Rs. 1,40,000 at the beginning of the year 2013 R.N. This fact is relevant, in the present context, because it is the case of the Assessee firm that it undertook to pay to the shareholders the dividend declared by the private company, on the 1,000 shares, mentioned above, out of the money it owed to the private company.
(3.) It is not disputed that Messrs. Sankershan Private Limited declared the following amounts of dividends on the aforesaid 1,000 shares: ;