Commissioner Of Income-Tax, Calcutta v. Nalin Behari Lal Singha Etc

Aaa. aTaad, ofeaat sre UL, waarBnaaTAafaatseiet ata Peer amfe (The Commissioner of Income-Tax, West Bengal II, Calcutta Nalin Behari Lall Singha etc.) (25 aang, 1969) (ariard yer cararfaralit Fo to ag, to AtoTIMER WIT To TAo Wat) |fegemm day Gaz, 1922, oer 2 (6q)—eaedtaty ST Iege Tat * ag 1956 % fact afafaaa ater 3 arerdatetF gaa siteaR 1 2—arat—a—1 ate, 1948 at gat oeaTA eral atsaa a ae gsina afaarat at cafes sit—saet aaaTat F;faata—araia & Sq HRT agt ATT AT AEA ||- at 1949-50 & fratem at ardarfily & seafaai & ag arar far fe.areca ater ae faafea feu ag afaqa aratat at at a ae sreg ay aiffaa fafa & a faafea far ag & ag fafr seat aT qsit afaara at, afar + *ara vat| raat afraret & aa catia aT aig fratfarg wera AAA(ada) 3 9g afafratfer finar fe ger faafea at 1€ cea aT CH aT Fafaafwara ar ait saneaa az, 1922 et ser 2 (6c) H AAA ATATT 7eae ara sa ule st & Asie aaareat at faafea fear qar ar veMeat a ge cea ftafeace A atta Hea rae a eae fear, fag getrarer & fader & fratfedt Boer F Gaer fear.: se rarareara Fal a atta at qifest wea gr— —afaftatfca—arc 2( 6a) HeqeeHray H TeEGH ge ag eaveT: afefra-faa feat war % fe 31 ars, 1948B are saya at are asina ofa are saya at are asina ofa saya at are asina ofa at are asina ofa are asina ofa asina ofa ofa sy B are saya at are asina ofa are saya at are asina ofa saya at are asina ofa at are asina ofa are asina ofa asina ofa ofa sy ta Ufa| Ufa|| carsiaMART92MART9292 -AIgaTgeata To qalafaafagrd ara f as 1 cafe [Flo aU Yo 2 To (6u) me] & wets . ta Ufa| Ufa|| carsiaMART92MART9292 -AIgaTgeata To qalafaafagrd ara f as 1 cafe [Flo aU Yo 2 To (6u) me] & wets . at665 ws| ar at ofearer afeafra aa areal cfearst & ate sa ofeara & WaTTHT aT simereat at aaa fart ofeheafeat FH afefae aalaiaTTT aa or ame G1 feg ga srew ag afeftaifea azar afoa & faafroam afefaafafe are arate at ofearar H & gene ae sitar afters oz| fee iter amar gt aver 2 (60) Hat ae afer & agere seat are faaferafar arat (avaisa arerafs ¥ saya aa are golive afratayt a BST)9 FS ager at ret arr are agar fees oz St HW ATTA aT awaT a) fafirs stett afaanfear : 1968 at Xo 736 & 739 a7 913 we 1621 are ferfres arettet to| /.1961 # fo 131 are saa fadat F aaaa seq eqtataa arde2 faarax, 1964 are fata ate adel & frag aa)|aire at atewast ard weg,gto to waa,(Tit vata Fi)|«AIXo Uo TAS se Ato So MAT at site & site & &Aas do ata, Taste ae ate aRaIx(wat sttiaitayiteon searat at site & site & & sara ar fauta arene gear earenfaata Fo ate me A fear, BAHT Hea aaiferafr Z—| 1949-50 & araae & fafa at aad Hea ate eeafaayag arat fear fe sae ute stardter fate ger fafa arate Hl HC A Feat aatfs fara fate a atuia faafea Pear var ar ae erat& afar are mtSartaétttt arate after & ga ada a AMAT Be fear siz yeafgayTT aT Te BT TTT fear | aaraH argaa (atta) & aa’ afefraifcr fearfe arqat arer faafta 2,24,000 Bay aT aa wea HT 1,12,500 at lage,«(1948 ar aT sae ate wea at eeya MA ara ssitera ar ate eaadaatae, 1922 at arer 2 (6U) & waka aaa a HA F area ga wen FHot aie drareat at faafca fear vat at TZ MAH F BE meaary aafrrcerTate FH saat ayaa (ata) F wee at sae feat) ari at Ft fenaTfrat ad # aq at ag fasteara aét at ate afe area aterara 3ATMFH way faafta at TT? aT ag araia at at as ararzay yarz fratiaST aTeHT rera ela sare gh ate ag fe qrer 2 (62) TA ATT ae 666 . Seaaa varare faniaafaat ==[1970] 2.gAo Fao Io apie & art Har ate cega gra afara qsttna afrare H aspF cegrar gare au faqraan ot Tata aet TSaT|a,co efisaa seantan tac Ft are 66 (1) ¥ wet afeae 4 frrfafedsaat waaer & sea eavaraa ay fre fnt Pet7 “eagy aay ® aca ate ofefeafaat & agers 28,215 waa atcan fatter ag 1949-50 a faalfedy at ana oat ote at,afeafadata eha| Sa Tea HT SAT Tare Fear TAT | ATA A SEs eATATAT A TATTTAgia HUH sa aaa Hae TS|, COMMISSIONER OF INCOME-TAX, CALCUTIA NALIN BEHARI LAL SINGHA ETC. B July 25, 1969 [J. C. SHAH, ACTING C.J., V. RAMASWAMI AND A, N. GROVER, JJ] . /11.come-tax Act, 1922, s, 2(6A)-Definition of dividend-If taxable di\•idend is exclusive of component representing capital gains and not accumulated profits. Jn assessment proceedings for the year 1949-50 the respondents claimed that certain dividend -distributed to them by a company was exempt from tax. as the fund. out of· which it was distributed represented capital gains and not "accumulated profit" of the company. The Income-tax Officer rejected the claim, bu.t the Appellate Assistant Commissioner held that a part of the total .amdunt distributed represented capital gains and not being dividend within. the meaning of s. 2(6A) of the Income,tax Act, 1922, D the-share distributed to. the share-holders out of that amount \Vas exempt from income tax. This' order was reversed in appeal by lhe Tribunal but lhe High .. Court,. on_ a reference, held in favour of the asses~ee. On appear to ·this ·Court, . HELD : Dismissingiilhe appeal: The proviso to the ·explanation to s. 2(6A) (a) clearly enacted that capital gains arising after March 31, 1948 E ul:c noi ,licible to· bt! .inclUOed within the expression ''Dividend". .Althou~b the definition of dividend' in. s. 2(6A). is an inclusive definition and a re-ceipt by share-holders which does .not fall within the definition may, in some circumstance.S, ·,tega~ded. as diVidend. within the meaning of the Act, ·it is difficult:on 'that ·~c~.il.UJ}t·to hold that .capital gains excluded from the definition d( dividenif•.b'filjt>tpr~ss enactment still fall within the charge of tax. Acc6rding to the,:aeii))iµon)n$.-2(6A) only the propartionate share of F the member out of th<>.W,l'cum.iltated· profits (exduding capital gains aris-ing in the excepted peri&i). distributed by the company alone will be deem-ed .the taxable compP~etj!; [667 DJ .Althou~b CIVIL APPELLAT~1 739, 913 and 1621 of 1968. 1 [: Civil Appeal ][Nos. ][736. ][to ] Appeal from the judgment and order dated December 2, 1 Ol)4 of the Calcutta 'High Court in Income-tax Reference Nos. 131 of 1961 etc. Jagdish Swarup, .,Solicitor-General, T. A. Ramac/,.,.~!r,;in, R. N. Sachthey and B, D. Sharma, for the appellant (in all the H appeals). , P. Barman, RanjitiJhose and Si1kumar Ghose, for the respon-dents (in all the appeals); ... The Judgment of the Coun was delivered by Sllah, Ag. C.J. In a proceeding for assessment to income. tax for the year 1949-50 the respondents in these appeals claimed that the dividend distributed by the Ukhra Estate Zamindaries Ltd. was exempt from tax, because the fund out of which the dividend was distributed did not form pan of the "accumulated profits" of the Company. The Income-tax Officer rejected the contention and brought the dividend to tax in the hands of the respondents. The Appellate Assistant Commissioner held that Rs. 1, 12 ,500 out of a total amount of Rs. 2,24,000 distributed by the Cimpany, represented capital gains arising to the Company on or after April 1, 1948 and not being dividend within the meaning of s. 2(6A) of the Income Tax Act, 1922, the share distributed to the shareholders out of that amount was exempt from income-tax. The order of the Appellate Assistant Commis-~ioncr wJs reversed in appeal by the Tribunal. In the view of the Tribuna: the definition of 'dividend' in s. 2 ( 6A) in force in the year of assessment was not exhaustive, and if the amount dis II i-buted was "dividend in ordinary parlance it became chargeable under the general charging section", and that clause 2(6A) "was concem~d with deemed dividends, and exclusion of certain capital gains by the proviso had no bearing on the issue raised by the revenue·· The following question referred by the Tribunal to the High Court of Calcutta under s. 66 (I ) of the Indian Income-tax Act : 666 ara ait arain & afeta & ag waa ot Pel amarea HT BETAF sas AT F aq F aHa faafta Ufa 4 8 Fea Hl AAT & AT HTT Stal1geaneqa tac1922 a wre 2 (6a) A aeatace aiaraT aT ead ATTfaaiza a9 1949-50H eet HIT AI—| CSAMeMGTT Alar F—. (#) feet arodt aretafaa. anit ar, ae Galeae@ara,—atg faaea, afe te fare a seat are seat Ft aifeaat aT BTSAT arqay WIT MTeaTaHT BT Feat AATS.| |equelHT—ea GS A wat ‘aifaa ara’ Wet ATA 2 azt TAR WATT:gail ara rat SPT TY 7a ate wt feafar ary’ oe B wai, ga AVE FH ag wewet AL ata 3, 1 wie, 1946 F age ate 21 ay, 1948 H are seyTatt are gotta afweart agt aren 1”|| arodt sre faafta arate aia at ag feeare at saasiaareantaq faaraita atfad fear aang ait saat safe sa rat at safe sat aahaad feat ag ameral Foe wa war 21 gaca ae afafratfeaacat efor atm fe ga aeg & are a fe acy gsitra afaarat A a featyar 2, waarat Fore ae astra afeara ® VTA gi farq aa wees e 4qaaat Fl ATS Tear seg a Shit aatfe farrader a arate st faraz-aegHa 31 ard, 1948 F ae seus BA area Got afwara araiag we fag gz| 4 wo apa & cega Hag eqeaar afafrafaa fear war 2 fe 31 ard,1948 aT aTRT AAara ost afreeaTate” gee meta adl faqA amit ag aaa fe ag cfear cw afenfaa wea areal ofearr’e aiesimerea gre tat orf A oferst F aecia zat aredtJ aewaa: afafrar& gatadta arate art or andl 8 aa ae fe dad a gat wa wae 7 afarg ga awag afufaatica wear afer dat fe afaera ofafaafate areaan at ofcarar a fara Tar qattra afaaia etyare H Beata 2 Para tae al urer 2(6t) F a ag afearar F agar tae al urer 2(6t) F a ag afearar F agar al urer 2(6t) F a ag afearar F agar urer 2(6t) F a ag afearar F agar 2(6t) F a ag afearar F agar F a ag afearar F agar a ag afearar F agar ag afearar F agar afearar F agar F agar agarweal arafaafta dfat ait (arafsa srarafeF aqua ate ater goitta afaary stNS Ht) FA acer ar agra feear A FeaHci ara HTTafaacm gro afweaaa sq naar are arate adt 2 fe arate aTafearar F arate aaa at avert araia a tat 2 1 afe ae afafaatiza faraie fe acafsa ararafir & ataz att ava qsfina ara are 2(6c)& ata| gfearer & catered afar are & art aah 2 ste gat Baier gor fear gearea asin at ofeaer e werta adl oar 2 ate safc ac amt aeadh 2 fox at se ararcay stetara & araia & sata afaa ara ar faraUT are WMT 3A qe aamaat F Te we MTA ATE TT aaa artafasrat Boat ast sat ad ga gare aaa He a AAT FT FTEmre aa fears tar|OSa 8 Para tae al urer 2(6t) F a ag afearar F agar tae al urer 2(6t) F a ag afearar F agar al urer 2(6t) F a ag afearar F agar urer 2(6t) F a ag afearar F agar 2(6t) F a ag afearar F agar F a ag afearar F agar a ag afearar F agar ag afearar F agar afearar F agar F agar agar (gy eq eqrarag at ga ara & agua é fe sina -afwarat ar, frato areal B areal HY ATA set Tar at, waqaifaa feear ara 12% seitHUAT AAMT AT H VTA HC H arfaea & Fe stead TAT AAT ArfaTt hors 0aoa astaFagad 8a ar saer fear fe asia ar ag fecarHT PT Br SA TA GIS F BNC IT Tas adl eas aria Salata waPETAR HT ar aa gs1 feeg tat are ala afaswm a yea saTaTaa aana aét dt ng ote ca fafa ae sea adh vorar var tee AA werTeafape at ea ematea F.amt a a serra arate a a faa oe see. eh ag dt, Paar azar eaitfaa vet at asaater ramet ata a ate ad afer afer at ort 2 we grag atme eh_oe-SO>aBea,attr afer atat ag "Whether on the facts and in the circumstances of the case the amount of Rs. 28, 125 was rfghtly included as di\'idend in the total income of the asscssee for the ass~ssment year 1949-50?" was answered in the negative. The Commissioner has appealed to this Court with certificates granted by the High Court. 'Dividend' in its ordinary connotation means the sum paid to or received by a share-holder proportionate to his share holding in a company out of the total sum distributed. The relevant part of the d~finition contained ins. 2(6A) of the Income-tax Act, 1922, in the year of assessment 1949-50 was as follows : "Dividend" includes- ( a) any distribution by a company of accumulated pr.Jfits whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company; Exp/anaJion.-The words 'accumulated profits' wherever they occur in the clause, shatl not include 'ca:i;tal profit'; A Provided further that the expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April 1946 or after the 31st day of March, 1948." Dividend distributed by a Company being a share of its profits declared as distributable among the shareholders, is not im~ with the character of the profits from which it reaches the hands of the shareholder. It would be therefore difficult to hold that the mere fact that a distribution has been made out of the capital gains, it has the attributes of capital gains in the hands of the shareholders. But that does not assist the case of the Revenue, for the Legislature has expressly excluded from the content of divi-dend, capital gains arising after March 31, 1948. The proviso to the Explanation clearly enacted that capital gains arising after March 31, 1948 are not liable to be included within the expression "dividend''. The definition is, it is true, an linclusive definition and a receipt by a shareholder which does not fall within the definition may possibly be regarded as dividend D within the meaning of th~ Act unless the context negatives that view. But it is difficult on that account to hold that capital gains excluded from the defini~ion of dividend by express enactment still fall within the charge of tax. According to the definition in s. 2(6A) of the Income-tax Act only the proportionate share of the member out of the accumulated profits (excluding capital E gains arising in the excepted period) distributed by the Company, alone will be deemed the taxable component. There is now warrant for the view expressed by the Tribunal that the definition of 'dividend' only includes deemed dividend. To hold that the capital gains within the excepted period are not part of the accumulated profits for the purpose of the definition under s. 2(6A) and a distributive share thereof does not on that account fall within the definitiC\n of 'dividend' and therefore of income chargeable to tax and still to regard them as a part of accumulated profits for thjl purpose of dividend in the popular connotation and to bring the share to tax in the hands of the shareholders is to nullify an express provision of the statute. We do not see any reason why such a strained construction should l/e adopted. · We agree with the High Court that the proportionate share of the capital gains out of which the dividend was distributed to the shareholders of the Company must be deem~:! exempt from liabi-lity to pay tax under s. 12 as dividend income liable to tax. Counsel for the Revenub sought to argue that ' share of_ dividend which is not chargeable to tax by virtue of the exemption clause is still liable to tax as income other than dividend. But no such CO'ltention was raised before the Tribunal or the High Court .. I and no question was raised in that behalf. We will not be justified A in entering upon the question which was not raised or argued be-fore the Tribunal and before the High Court. Tre appeals fail and are dismissed with costs. One hearing fee. B R.K.P.S. Appeals dismissed. R.K.P.S.