- (1.) BANERJEE , J. - By an order under Sec. 66(2) of the Indian Income Tax Act, this court called upon the Appellate Tribunal to send a statement of case on the following question of law : "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the amount included as dividend in the total income of the assessee in consequence of an order under Sec. 23A in the case of Messrs. S. K. Sen & Sons Ltd. should be excluded on the ground that the assessee was not the registered shareholder ?"
(2.) THE question of law arises in the circumstances hereinafter stated. There was a firm known as Messrs. Sen and Pundit. The assessee Sudhir Kumar Sen, was, at one time, a partner of the said firm. The firm above named was a shareholder of a limited company known as Messrs. S. K. Sen and Sons Limited. On or about September 26, 1951, the firm known as Messrs. Sen and Pandit was dissolved and its assets and liabilities were taken over by a private limited company named Messrs. Sen and Pandit Private Limited. The transfer of assets to the last named private company included the shares held by Messrs. Sen and Pandit firm in the company know as Messrs. S. K. Sen and Sons Limited. Messrs. Sen and Pandit Private Limited, however, did not take steps to have their names mutated in the books of Messes S. K. Sen and Sons Limited, in respect of the shares which they took over.
(3.) THERE were two orders made by the Income Tax Officer against Messrs. S. K. Sen and Sons Limited, under Sec. 23A, as it stood prior to the amendment of 1955, for the two assessment years in question and two different amounts were deemed to have been distributed as dividends to the shareholders of Messrs. S. K. Sen and Sons Limited. Since Messrs. Sen and Pandit firm, the registered shareholder, stood dissolved at the time when the Income Tax Officer made the order under Sec. 23A, a proportion of the dividend deemed to have been received by Messrs. Sen and Pandit was included in the income of the assessee as a partner of the firm, which was registered shareholder. This was done by a proceeding started under Sec. 34 of the Indian Income Tax Act, because the assessment of the assessee stood completed thereto before. The assessee object to the reassessment and preferred an appeal before the Appellate Assistant Commissioner. The appeal failed. Thereupon, the assessee took second appeal before the Appellate Assistant commissioner with the following observations : "After the decision of the Supreme Court in the case of Commissioner of Income Tax v/s. Shakuntala it has been firmly established that the word "shareholder" in Sec. 23A of the Indian Income Tax Act, 1922, means the shareholder registered in the books of the company and the amount of the dividend deemed to have been distributed to the shareholders of a company, against which an order under Sec. 23A has been made, could be assessed only in the hands of the registered shareholder and nobody else. In the present case, admittedly, the firm styled Messrs. Sen & Pandit was the registered shareholder of the company, Masers. S. K. Sen & sons Ltd. The assessee was not a shareholders of that company. It is no doubt true that a firm is not a legal entity for all purposes and it is doubtful whether a firm could legally be registered as a shareholder of a limited company, but the fact remains that the firm in question had actually been registered in the books of the limited company and it is an assessable entity. It is manifest, therefore, that in the view of the principle laid down by the Supreme Court in the aforesaid case the assessment of the dividend deemed to have been distributed to the shareholders as a result of action under Sec. 23A taken against the limited company, could not have been made in the hands of the assessee who was not the registered shareholder. The amount included as dividend in the total income of the assessee in consequence of order under Sec. 23A shall be excluded.";