Rai Bahadur Mohan Singh Oberoi Vs. Commissioner of Income Tax, West Bengal
been admitted by the assessee in the past before the department that the shares in question standing in the name of the wife and two sons of the assessee belonged to him and were his own investments. Although it is normally for the department to show that the apparent is not the real, in the present case we find that there was ample material to justify the inference that the assessee was the real owner of the shares and they were held by him benami in the names of his wife and two sons.7. It was urged before us during the course of argument that no such admission had been made, but nothing was brought to our notice to show that the above observation made by the Income Tax Officer had been challenged in Appeal. No copy of the memorandum of appeal filed against the order of the Income Tax Officer has been produced. We also find that the above observation containing the admission has been incorporated in the statement of the case and is an integral part of it. The tribunal nowhere observed that the above observation was factually incorrect and that the said admission had not been made by the assessee. It was not even mentioned that the above admission was erroenous. On the contrary, the Tribunal took the view that as the wife and two sons of the assessee were the registered holders of the shares in question, dividend income from those shares should have been assessed as their income and not that of the assessee. The Tribunal in this context relied upon the decision of this Court in Howrah Trading Co. v. Commissioner of Income Tax (1959) 36 ITR 215 = (AIR 1959 SC 775 ). What was held in that case was that a person who purchases shares in a company under blank transfer and in whose name the shares have not been registered in the books of the company is not a "shareholder" in respect of such shares within the meaning of Section 18 (5) of the Indian Income Tax Act, 1922 notwithstanding his equitable right to the dividend on such shares. It was further held that such person was not entitled to have his dividend income grossed up under Section 16 (2) of the Act by the addition of the income tax paid by the company in respect of those shares.8. The decision in Howrah Trading Co. (1959) 36 ITR 215 = (AIR 1959 SC 775 ) (supra) was considered by a larger bench of this Court in Kishanchand Lunidasing Bajaj v. Commissioner of Income Tax (1966) 60 ITR 500 = (AIR 1966 SC 1583 ). It was held in that case that a company for its purpose does not recognise any trust or equitable ownership in shares. It merely recognizes the registered shareholder as the owner and pays dividend to that shareholder. But the shares may, because of a trust or other fiduciary relationship, belong to a person other than the registered shareholder, and the dividend distributed by the company would for the purpose of tax be deemed to accrue or arise to the real owner of the shares. The scheme of "grossing up", it was observed, is not susceptible to the interpretation that the income from dividend is to be regarded as the income only of the registered shareholder and not of the real owner of the shares.In the aforesaid case, shares were acquired with the funds of a Hindu undivided family in the name of the Karta. It was held that the Hindu undivided family could be assessed to tax on the dividend from those shares.9. We thus find that the Tribunal excluded the dividend income on a ground which was not legally tenable.10. The Tribunal also observed that though the shares might have been acquired out of the secreted profits of the appellant, in the absence of any evidence that the shares remained in substance the property of the assessee, the dividend income could not be included in his total income. The approach of the Tribunal in this respect too was erroneous. Once it was found that the assessee was the real owner of the shares and they had been purchased benami in the name of his wife and two sons, it would be presumed that the ownership of the shares continued to remain vested in the assessee, unless it was shown that because of some subsequent event, he had ceased to be the owner of the shares. No such attempt was made by the assessee.11. In view of the admissions referred to in the order of the Income Tax Officer, nothing hinges, in our opinion, upon the fact that the shares referred to in the letter of the assessee to the Income Tax Investigation Commission were mainly of the Associated Hotels of India and not of Northern India Caterers Ltd.12. We may also observe that if the Income Tax Appellate Tribunal records a finding on the point as to whether a purchase was made benami or not, such a finding as observed in Sree Meenakshi Mills Ltd. v. Commr. of Income Tax, (1956) SCR 691 = (AIR 1957 SC 49 ) would be considered to be one of fact. If such finding is based upon some evidence, the same would have to be accepted in proceedings in a reference under Section 66 (1) of the Indian Income Tax Act. This aspect, however, does not help the assessee in the present case because the Tribunal nowhere dealt with the question as to whether the purchase of shares was or was not benami in the name of the wife and sons of the assessee.13. Submission was made by Mr. Desai during the course of arguments for adjournment of the appeal to enable the assessee-appellant to produce the detailed findings of the Income Tax Investigation Commission. We, however, declined to do so as, in our opinion, the appeal had to be disposed of on the basis of the material before us.14
0[ds]8. The decision in Howrah Trading Co. (1959) 36 ITR 215   = (AIR 1959 SC 775  ) (supra) was considered by a larger bench of this Court in Kishanchand Lunidasing Bajaj v. Commissioner of Income Tax (1966) 60 ITR 500   = (AIR 1966 SC 1583  ). It was held in that case that a company for its purpose does not recognise any trust or equitable ownership in shares. It merely recognizes the registered shareholder as the owner and pays dividend to that shareholder. But the shares may, because of a trust or other fiduciary relationship, belong to a person other than the registered shareholder, and the dividend distributed by the company would for the purpose of tax be deemed to accrue or arise to the real owner of the shares. The scheme of "grossing up", it was observed, is not susceptible to the interpretation that the income from dividend is to be regarded as the income only of the registered shareholder and not of the real owner of the shares.In the aforesaid case, shares were acquired with the funds of a Hindu undivided family in the name of the Karta. It was held that the Hindu undivided family could be assessed to tax on the dividend from those shares.9. We thus find that the Tribunal excluded the dividend income on a ground which was not legally tenable.10. The Tribunal also observed that though the shares might have been acquired out of the secreted profits of the appellant, in the absence of any evidence that the shares remained in substance the property of the assessee, the dividend income could not be included in his total income. The approach of the Tribunal in this respect too was erroneous. Once it was found that the assessee was the real owner of the shares and they had been purchased benami in the name of his wife and two sons, it would be presumed that the ownership of the shares continued to remain vested in the assessee, unless it was shown that because of some subsequent event, he had ceased to be the owner of the shares. No such attempt was made by the assessee.11. In view of the admissions referred to in the order of the Income Tax Officer, nothing hinges, in our opinion, upon the fact that the shares referred to in the letter of the assessee to the Income Tax Investigation Commission were mainly of the Associated Hotels of India and not of Northern India Caterers Ltd.12. We may also observe that if the Income Tax Appellate Tribunal records a finding on the point as to whether a purchase was made benami or not, such a finding as observed in Sree Meenakshi Mills Ltd. v. Commr. of Income Tax, (1956) SCR 691 = (AIR 1957 SC 49  ) would be considered to be one of fact. If such finding is based upon some evidence, the same would have to be accepted in proceedings in a reference under Section 66 (1) of the Indian Income Tax Act. This aspect, however, does not help the assessee in the present case because the Tribunal nowhere dealt with the question as to whether the purchase of shares was or was not benami in the name of the wife and sons of the assessee.13. Submission was made by Mr. Desai during the course of arguments for adjournment of the appeal to enable the assessee-appellant to produce the detailed findings of the Income Tax Investigation Commission. We, however, declined to do so as, in our opinion, the appeal had to be disposed of on the basis of the material before us.
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been admitted by the assessee in the past before the department that the shares in question standing in the name of the wife and two sons of the assessee belonged to him and were his own investments. Although it is normally for the department to show that the apparent is not the real, in the present case we find that there was ample material to justify the inference that the assessee was the real owner of the shares and they were held by him benami in the names of his wife and two sons.7. It was urged before us during the course of argument that no such admission had been made, but nothing was brought to our notice to show that the above observation made by the Income Tax Officer had been challenged in Appeal. No copy of the memorandum of appeal filed against the order of the Income Tax Officer has been produced. We also find that the above observation containing the admission has been incorporated in the statement of the case and is an integral part of it. The tribunal nowhere observed that the above observation was factually incorrect and that the said admission had not been made by the assessee. It was not even mentioned that the above admission was erroenous. On the contrary, the Tribunal took the view that as the wife and two sons of the assessee were the registered holders of the shares in question, dividend income from those shares should have been assessed as their income and not that of the assessee. The Tribunal in this context relied upon the decision of this Court in Howrah Trading Co. v. Commissioner of Income Tax (1959) 36 ITR 215 = (AIR 1959 SC 775 ). What was held in that case was that a person who purchases shares in a company under blank transfer and in whose name the shares have not been registered in the books of the company is not a "shareholder" in respect of such shares within the meaning of Section 18 (5) of the Indian Income Tax Act, 1922 notwithstanding his equitable right to the dividend on such shares. It was further held that such person was not entitled to have his dividend income grossed up under Section 16 (2) of the Act by the addition of the income tax paid by the company in respect of those shares.8. The decision in Howrah Trading Co. (1959) 36 ITR 215 = (AIR 1959 SC 775 ) (supra) was considered by a larger bench of this Court in Kishanchand Lunidasing Bajaj v. Commissioner of Income Tax (1966) 60 ITR 500 = (AIR 1966 SC 1583 ). It was held in that case that a company for its purpose does not recognise any trust or equitable ownership in shares. It merely recognizes the registered shareholder as the owner and pays dividend to that shareholder. But the shares may, because of a trust or other fiduciary relationship, belong to a person other than the registered shareholder, and the dividend distributed by the company would for the purpose of tax be deemed to accrue or arise to the real owner of the shares. The scheme of "grossing up", it was observed, is not susceptible to the interpretation that the income from dividend is to be regarded as the income only of the registered shareholder and not of the real owner of the shares.In the aforesaid case, shares were acquired with the funds of a Hindu undivided family in the name of the Karta. It was held that the Hindu undivided family could be assessed to tax on the dividend from those shares.9. We thus find that the Tribunal excluded the dividend income on a ground which was not legally tenable.10. The Tribunal also observed that though the shares might have been acquired out of the secreted profits of the appellant, in the absence of any evidence that the shares remained in substance the property of the assessee, the dividend income could not be included in his total income. The approach of the Tribunal in this respect too was erroneous. Once it was found that the assessee was the real owner of the shares and they had been purchased benami in the name of his wife and two sons, it would be presumed that the ownership of the shares continued to remain vested in the assessee, unless it was shown that because of some subsequent event, he had ceased to be the owner of the shares. No such attempt was made by the assessee.11. In view of the admissions referred to in the order of the Income Tax Officer, nothing hinges, in our opinion, upon the fact that the shares referred to in the letter of the assessee to the Income Tax Investigation Commission were mainly of the Associated Hotels of India and not of Northern India Caterers Ltd.12. We may also observe that if the Income Tax Appellate Tribunal records a finding on the point as to whether a purchase was made benami or not, such a finding as observed in Sree Meenakshi Mills Ltd. v. Commr. of Income Tax, (1956) SCR 691 = (AIR 1957 SC 49 ) would be considered to be one of fact. If such finding is based upon some evidence, the same would have to be accepted in proceedings in a reference under Section 66 (1) of the Indian Income Tax Act. This aspect, however, does not help the assessee in the present case because the Tribunal nowhere dealt with the question as to whether the purchase of shares was or was not benami in the name of the wife and sons of the assessee.13. Submission was made by Mr. Desai during the course of arguments for adjournment of the appeal to enable the assessee-appellant to produce the detailed findings of the Income Tax Investigation Commission. We, however, declined to do so as, in our opinion, the appeal had to be disposed of on the basis of the material before us.14

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8. The decision in Howrah Trading Co. (1959) 36 ITR 215   = (AIR 1959 SC 775  ) (supra) was considered by a larger bench of this Court in Kishanchand Lunidasing Bajaj v. Commissioner of Income Tax (1966) 60 ITR 500   = (AIR 1966 SC 1583  ). It was held in that case that a company for its purpose does not recognise any trust or equitable ownership in shares. It merely recognizes the registered shareholder as the owner and pays dividend to that shareholder. But the shares may, because of a trust or other fiduciary relationship, belong to a person other than the registered shareholder, and the dividend distributed by the company would for the purpose of tax be deemed to accrue or arise to the real owner of the shares. The scheme of "grossing up", it was observed, is not susceptible to the interpretation that the income from dividend is to be regarded as the income only of the registered shareholder and not of the real owner of the shares.In the aforesaid case, shares were acquired with the funds of a Hindu undivided family in the name of the Karta. It was held that the Hindu undivided family could be assessed to tax on the dividend from those shares.9. We thus find that the Tribunal excluded the dividend income on a ground which was not legally tenable.10. The Tribunal also observed that though the shares might have been acquired out of the secreted profits of the appellant, in the absence of any evidence that the shares remained in substance the property of the assessee, the dividend income could not be included in his total income. The approach of the Tribunal in this respect too was erroneous. Once it was found that the assessee was the real owner of the shares and they had been purchased benami in the name of his wife and two sons, it would be presumed that the ownership of the shares continued to remain vested in the assessee, unless it was shown that because of some subsequent event, he had ceased to be the owner of the shares. No such attempt was made by the assessee.11. In view of the admissions referred to in the order of the Income Tax Officer, nothing hinges, in our opinion, upon the fact that the shares referred to in the letter of the assessee to the Income Tax Investigation Commission were mainly of the Associated Hotels of India and not of Northern India Caterers Ltd.12. We may also observe that if the Income Tax Appellate Tribunal records a finding on the point as to whether a purchase was made benami or not, such a finding as observed in Sree Meenakshi Mills Ltd. v. Commr. of Income Tax, (1956) SCR 691 = (AIR 1957 SC 49  ) would be considered to be one of fact. If such finding is based upon some evidence, the same would have to be accepted in proceedings in a reference under Section 66 (1) of the Indian Income Tax Act. This aspect, however, does not help the assessee in the present case because the Tribunal nowhere dealt with the question as to whether the purchase of shares was or was not benami in the name of the wife and sons of the assessee.13. Submission was made by Mr. Desai during the course of arguments for adjournment of the appeal to enable the assessee-appellant to produce the detailed findings of the Income Tax Investigation Commission. We, however, declined to do so as, in our opinion, the appeal had to be disposed of on the basis of the material before us.
