CHAKRAVARTTI, C.J. - (1.) BY a single reference, the Tribunal has referred to this Court two questions of law, said to be common to applications for refund made by eight different persons with respect to two consecutive years. It was conceded on behalf of the assessees that while a consolidated reference concerning the assessment of the same assessee for different years could be made, if the question of law arising out of the Tribunal's order passed in regard to them was common, no such consolidated reference was permissible in respect of assessments of or applications by different assessees. In the present case, there is a further irregularity. On the one hand, the cases of eight different assessees have been combined in a single reference. On the other hand all the necessary papers regarding even one of them have not been included in the paper book. Apparently, the Tribunal intended that the case of Tarunendra Nath Tagore should be taken as typical of the whole group, but while purporting to include in the paper book the respondent's reply to his application under s. 66(1) of the Act, as the index would show, they have in fact included the respondent's reply to the application of another assessee, namely, Projen Ganguly. In the circumstances above stated, it will appear that if we are to entertain the reference at all, we must, in any event, overlook some irregularity. It was suggested by the learned counsel for the assessees that we might answer the questions with reference to the case of Tarunendra Nath Tagore, though even as regards his case the paper book was defective and that we might direct the Tribunal to make proper references in respect of the cases of the other assessees. We accede to that suggestion.
(2.) THE facts as found are as follows. In 1950 the bulk of the shares of a company called Austin Distributors Ltd. was owned by two groups of non-residents who have been compendiously described as the Thomson group and the Wilson Group. Of the 40,000 shares of the face value of Rs. 10 each into which the share capital of the company was divided the Thomsons held 20,749 shares and the Wilsons 18,750 shares. Only 501 shares were thus held by other persons. On the 25th March, 1950, all the 39,499 shares held by the Thomsons and the Wilsons were sold by separate transactions to eight different persons, of whom some purchased 3,500 shares each and some a slightly smaller number. THE sales appear to have been cum-dividend, already declared on the shares. After the transaction, the company paid the dividends to the purchasers and the dividend was necessarily paid out of funds on which the company had already paid income-tax at the company rate. On receipt of the dividends, the purchasers, who do not appear to have been otherwise assessable to tax, applied for refund under s. 48 of the IT Act. THE applications of three of them were with respect to three assessment years, namely, 1949- 50, 1950-51 and 1951-52, while those of the rest, including Tarunendra Nath Tagore, related only to the asst. yrs. 1950-51 and 1951-52. THE ITO rejected the applications in the view that the transfers were revocable transfers within the meaning of s. 16(1)(c) of the Act and, therefore, the dividend income was to be deemed to be the income of not the purchasers but the vendors who only would have the right to claim a refund, if they were otherwise entitled thereto. On appeal by the assessee, the ITO's decision was reversed by the AAC. He held that the assessees being registered shareholders of a limited company, the tax deducted by the company and paid to Government before payment of the dividends was paid on their behalf and consequently it would be they would be entitled to claim refund of any excess of tax thus paid on their behalf. Sec. 48(3) of the Act was held to have no application. THE decision of the AAC was, in its turn, reversed by the Tribunal which restored the order of the ITO. THE Tribunal held that during the years in question which were within six years from the date of the transactions, the transfers were revocable under a condition in the transfer deed which was a perfectly valid condition and, therefore, the assessees were not entitled to the refund claimed by them. Thereafter the assessees applied to the Tribunal under s. 66(1) of the Act for a reference to this Court of the questions of law arising out of their order. There had been nineteen applications for refund and nineteen appeals, but for a reference under s. 66(1) of the Act, only sixteen applications were made. The three assessees, who had claimed refund in respect of three assessment years, dropped the year 1949-50 and like the rest of the assessees, made applications only with respect to the years 1950-51 and 1951-52. The Tribunal agreed that questions of law did arise out of their appellate order and they also accepted the form in which the questions were framed by the applicants. In the end, they made a combined reference, as I have already stated, and referred to this Court the following questions of law : "1. Whether the dividend income received by the assessees on the shares of the Austin Distributors Limited held by them arises by virtue of revocable transfers of assets by the transferors within the meaning of s. 16(1)(c) of the Indian IT Act ?" "2. Whether in the circumstances of the case, the assessees are entitled to the refund claimed under s. 48 of the Act ?" The facts relative to the transfers may now be stated in greater detail. It appears that in the case of each of the transfers, there were three separate documents, first an agreement for sale and then a transfer deed and, simultaneously therewith a deed of acknowledgment of loan. By the agreement the price of the shares was fixed at Rs. 30 per share, subject to abatement in certain circumstances to which I shall refer in a moment and it was payable immediately on the completion of the agreement. In fact, however, the price was not immediately paid, but on the other hand, while it remained unpaid, it was not left outstanding as price. The agreement provided that if the price was not paid immediately, it was to be treated as a loan advanced by the seller to the purchaser, carrying interest at 1/4 per cent. per annum and such loan would be repayable on demand, as would be provided for in a deed of acknowledgment to be executed or in such time or times and in such amount or amounts as the purchaser might fix, subject, however, to the condition that full payment would have in any event to be made on or before the 31st Dec., 1951. There can be no doubt that it was well understood between the parties that the price was not going to be paid immediately and that in fact the mode of payment would be the alternative mode. The price would be deemed as a loan and it would be repaid in accordance with certain further terms and conditions which the agreement contained.
(3.) IN the first place, the loan was to be secured. The agreement provided that immediately upon its full execution the seller would deliver to the purchaser a duly executed deed of transfer in respect of the shares transferred, the share certificates and any power of attorney that might be required for registering the purchaser as the holder of the shares. The registration was to be completed within one month of the execution of the agreement. Immediately thereafter, the purchaser, in his turn, was to deposit with the National Bank of INdia Ltd., as agents for the seller and by way of securing the loan, the very same share certificates, together with blank transfer forms and such a power of attorney as might be necessary for registration of the transfer, in case the security fell to be enforced. The documents were to be held by the bank till repayment of the loan. As to the terms of repayment, I have already stated that the loan would be repayable at the option of the seller, either on demand or at such times and in such amounts as he might fix. But the agreement also provided that notwithstanding the stipulation for payment of demand which was to be incorporated in the deed of acknowledgment of loan, the power to demand such payment would be exercised only if the purchaser failed to carry out any of the terms and conditions of the agreement or if he became bankrupt. Otherwise, within the limit of time mentioned, the repayment would be graduated and made in the manner provided for in the agreement. It was provided specifically that although the dividend paid after the date of the transfer would belong to the purchaser and would be paid to him, he in his turn would be bound to cause an equivalent sum to be paid to the seller in repayment of the loan and the interest thereon till the loan was fully repaid. If, however, the purchaser was charged to any personal super-tax with respect to the dividend received by him and applied to the repayment of the loan he would be entitled to abatement of the purchase price to the extent of the amount of the super-tax.;