SEN, J. - (1.) THE Tribunal has referred the following question of law under S. 256 (1) of the IT Act , 1961 ('the Act') to this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amounts received by the assessee from Phipson and Co. Ltd. and Ruttonjee and Co. Ltd. Were not assessable as dividends within the meaning of S. 2 (22) (d) of the IT Act, 1961?"
(2.) IN this case the assessment year involved is 1973-74 for which the relevant accounting period is the year ended on 31st Mar.1973. The facts as stated by the Tribunal contained in the statement of case are as under: The assessee-company along with Hirjee Ruttonjee Bhesania, Firoze Manchershaw Bhesania and Anselm Ignatius Rodricks held 2,060 shares of Phipson & Co. Ltd. (Phipson) . The assessee- company's shareholding was 350 shares. The above persons formed the minority group (Bhesania group) , which held the share of Phipsons. Certain disputes arose between the Bhesania group and the United Breweries Ltd., which in turn held majority shares in Phipsons. The assessee along with Hirjee R. Bhesania made applications under ss. 397 and 398 of the Companies Act, 1956 in the Hon'ble Calcutta High Court. By consent of parties terms of settlement were reached under which the Bhesania group including the assessee-company were to be paid a sum of Rs. 6,18,000 by the majority group and the said amount was arrived at as follows: (1) Nominal value of shares at Rs. 100 per share amounting to Rs. 2,06,000. (2) For purchase of goodwill at Rs. 200 per share amounting to Rs. 4,12,000. The above sum of Rs. 6,18,000 was to be paid to the solicitors of the Bhesania group in equal instalments on or before 31st March, 1973 and 30th June, 1973, and 30th Oct., 1973. It was ordered by the Hon'ble High Court that on payment of the first instalment on or before 31st March, 1973, the issue of 2,060 shares in the respective names of the petitioners, i,e., Bhesania group and the other respondent A.I. Rodricks will stand cancelled and the Register of Members will be and stand rectified accordingly. It was further laid down in the terms of settlement that in view of purchase of the shares by the company, the paid-up share capital will be consequently reduced. Now the assessee-company held 350 equal shares of Phipsons. In lieu of its share-holding a sum of Rs. 34,000 was received in terms of the said settlement. Out of the said amount, the ITO brought to tax a sum of Rs. 16,661 after deducting legal charges as income from dividend under the provisions of S. 2 (22) (d) of the Act.
(3.) THE assessee along with H.R. Bhesania, Firoze Manchershaw Bhesania, Framroze Ruttonjee Bhesania and Anselm Ignatius Rodricks held 43,200 shares in Ruttonjee & Co, Ltd. ('Ruttonjee') . The shareholding of the assessee-company stood at 7,000 shares. The Phipsons held majority share-holding in Ruttonjee and due to the disputes between the two groups, a Company Petition No.108 of 1972 under the Companies Act was moved in the Hon'ble Calcutta High Court. In accordance with the terms of settlement reached between the two groups, the minority group known as Bhesania group, which included the assessee-company, was to transfer their respective share-holding along with the rights, title, interest, goodwill, etc., in favour of Ruttonjee in consideration of which the Ruttonjee agreed to pay a sum of R.11,66,400 as follows: (a) paid-up value of share at Rs. 6 per share amounting to Rs. 2,59,200; (b) for purchase of goodwill including the above consideration Rs. 9,07,200. The above consideration was to be paid to the Solicitors of the Bhesania group in three equal instalments on or before 31st March, 1973, 30th June, 1973 and 30th Oct. 1973. In view of the purchase of shares by the Ruttonjee, the paid-up share capital was to be consequently reduced. The assessee-company in lieu of the share-holding received as sum of Rs. 62,991. The ITO, after deducting the proportionate value of shares as well as legal expenses, determined the sum of Rs. 36,800, which according to him, was assessable under the provisions of S. 10 (2) of the Act as receipt of the casual or non-recurring nature in excess of Rs. 1,000. Being aggrieved, the assessee carried the matter in appeal before the AAC, who, while upholding the action of the ITO to assess the amount of Rs. 17,400, received from Phipsons as income from dividend disagreed with the view of the ITO that a sum of Rs. 36,800 being the amount received from Ruttonjee was assessed under the provisions of s.. 10 (3) and held that the latter amount was also assessable as dividend within the meaning of S. 2 (22) (d) . He accordingly upheld the decision of the ITO to bring to tax the aforesaid amount.;