NAVNIT LAL C JAVERI Vs. K K SEN APPELLATE ASSISTANT COMMISSIONER OF INCOME TAX BOMBAY

JUDGEMENT

(1.) This appeal arises from a writ petition filed by the appellant Navnit Lal C. Javeri in the Bombay High Court in which he challenged the validity of S.12(1 B) read with S. 2(6A) (e) of the Indian Income-tax Act, 1922 (No. 11 of 1922), (hereinafter called the Act) as it stood in 1955. The High Court has rejected the appellant's contention that the said section is invalid, and the appellant has come to this Court with a certificate granted by the High Court.

(2.) The appellant holds 11 out of 845 shares in a private limited company named the Malegaon Electricity Co. (Private) Ltd. (hereinafter referred to as the company). The value of each share is Rs.100. The business of the company is to supply electricity to the residents of Malegaon. Some time during 1955, the appellant took a loan amounting to over Rs. 4 lakhs from the company. A notice was issued to the appellant by the 8th Income-tax Officer under S. 22(2) of the Act calling upon him to make his return for the assessment year 1956-57. The Income-tax Officer computed his income at Rs. 3,58,460. This amount included a sum of Rs.2,83,126 representing the accumulated profits of the company. The Income-tax Officer took the view that under S. 2(6A)(e) the said amount must be deemed to be dividend received by the appellant, and as such, must be included in the total income of the appellant as income from other sources within the meaning of section 12(lB) of the Act. This order was challenged by the appellant by preferring an appeal before the Appellate Assistant Commissioner. The appeal, however, failed and was dismissed. The appellant then preferred a second appeal before the Income-tax Appellate Tribunal. Whilst this appeal was pending before the said Tribunal, the appellant moved the High Court under Arts. 226 and 227 of the Constitution, and contended that the relevant section under which the department had purported to levy assessment against him on the sum of Rupees 2,83,126 was ultra vines. That is how the only question which the High Court had to decide in the present writ proceedings was whether section 12(1B) read with S. 2(6A) (e) was constitutionally valid.

(3.) In order to deal with this point, it is necessary to read the two relevant provisions of the Act. Section 2(6C) defines "income" as including dividend. S. 2(6A) defines"dividend" in an inclusive manner. Section 2(6A) (e) provides :