Commissioner Of Income Tax, West Bengal v. Kamal Behari Lal Singha Etc

ATAST ATR, afeant ama erat faaret ata faarenfe-of (Commissioner of Income-tax, West Bengal-II_ Kamal Behari Lal Singha etc. etc.) (16 aaa, 1971) (sate Ro Yo ATS MIT To UAo War) gfieaa gen dea daz (wiedta aaat afaftam), 1922, eet 2(6 @) site 4—eisres oft (RAeq Peete) ar gait sree (afaectFete) alg sft rare safer 3 at gait safer &, 4g TA ATA TC faazetm fa sifanat & gra i saat eae Fat Bea TaN % fag saata at faad site gaara ar fra ara Bee Be ae A aay, FEvera ag B— neat at gait oifta Fa, TTT HZ TT at ag THASazareat & gra A q'sit safer Ba fe craves sults Me Sa IT BT walATT HT THAT F| Graffeal garer ete sHlarda fafats (fae at seat eT mat 2) e Racers BR aoa at iat F praer AH ATTA! TWAT : igrat at yfa & ada fae ot Bare gare ate sfsae H BTA BETA mYster gf at ae ag aeadt aren areare F Skea safaa vat a 7S ateeTATy ua faaifedt at gata ar ag ¥ alert 13,000 eqa arate H eT FH farga wan ar gS wrt ahaa soit afaeral Fa (a ara erat aera Wie Blaasta sfaat ® eo F orca fee ay 4) fear wa att FA mite HIT AssPe ar aeaett arer age ist afwara HA faq wy araiT F Ga ATT IT FTfaaifca fear ar awat fi raat sifaaifeat F fratfetl Tz FX faatfca Fzfear faeg sea eararaa A ragufa sae BA ge wa fafreas at saz fear |SMART MZIT STU FST eATATAT A AAT TA ABT FA FATATAT 4 atte at aAqt ATA AIT FT BT, MART AAT Fo wt HAs fagrer ara faat [rato ars] afafaatica—ea aia ar gat aaa & fare fe arg oofea, gait sift 8at Uses wifes, ag art saat aeat g fe orftawalara F vasr caeq Fat 2oa fe ag fe cars graAH saa caer aor Bi gat wealA AE ofa, Gaitorfta g ar usted orfta, ag ara oifawat & era FH ist FB eaeq FA gat wTa aaafea at ard & ait ga ala ar fad dara feat aa, ga saatTEaraeq al size get ar fafavaa seat fa atsfafersz softer, gait orfergaT wUsea sifta, aH afer ser ei vat za oer a arafiaa fagra gearfra@ i oa faarat ar fag ae aeat ae arg wea A gaat sfsareat seas Alaal gama t fafaeas srt ae an ota ama h aeal gz fate sat& (at 4)1 fauifeat ar ga ute F aa ag wera Hora et, wrzarsa fea at1 wa:we ag Ufa Hrqet & tacareal F ata faafea st ag aa Havareat FF reasTQ ot afer FA saa gaz faat fas faa Greer GWA Hag SHAT AT |Rar att at ga ate F faa softer & sare area esa A Gat oft terasat arfag att ga aera fe & ufaai arateate ox faafea a ag af,aftr at wal saia ofeafaa adt att Bi ort ar eaet at & A caerareafan taer ga fe ag are fire arm 8 He He ag at Tat & (Fer 8)1 agafea frog qu74 Algxo elo AITo 749:5 MaKe aged, want ama saa afer fagret aefaat (Commissioner of Income-tax, West BengalVs, Nalin Behari Lall Singha).| 17 eto ato 432 ges 439 :|gedia are fe fart ate Wao Fo aifes (Aa) TTAafaaat ate gatos Weg(Trustees of the Will of|H. K. Brodic(deceased)Vs.Commissioner ofInland Revenue). fafa arcttett aftranfcat: 1968 at do 1667 & 1673 arett fafan ata |: 1964 & sant faaa ao 3,6,7,8,9,10 MCILt HaHa aqaTaTaa H area 30 aed, 1967 ae faata wie mea H frag atta| aaa at AIT Aaft ito Sto WAT(at aatat F) 948 meafaat at site 8at opare ata ae caer ty (ait aatat #) arava at faut earaifaafa Ao wae Bus F fear | Fararfiiafa ans— aq adtal 4 fafseaa & fac saya eta are at fate seq za sare F— (L) ear ga are & geal H sree oe ate ofefeafaat F afernzar+ ag dla afufratiea fear a fe sare gee alerts fafaesaut 31 ara, 1948 % ava yf asta ofraz SS orea al 7e THA ATfraifcet ay fare, aredte araat afaftan,1922 ahere 2(6u) & aateaia fasifeel & gra F arate at sifta g ? (2) aan ga arnaeal B arene az aie ofefeafaal F afewcar«Fag sta afatratfcr frar ef fratfeal arr ga cae at sift atsat wee Titania fafaes F Ae safe Fash araat F fagware AI 31 ATs, 1948 ® qeara aga st al, faatfeat st ara aysitter at atx faaifed)at aca alal & srea AA areal ara F eq AHUTT gt 2?” Section: CONCLUSION A COMMISSIONER OF INCOME TAX, WEST BENGAL. KAMAL BEHARI LAL SINGHA ETC. August 16, 1971 B (K. S. HEGDE AND A. N GROVER.,. Jf} Income Tax-Capital or Revenue-Tests for determining-Divide111/ paid by . company out of accumulated capital ga~n~. received by company in the shape of Salamis and Land Acqws1t1~n C<1m-pensation-Since share holders took a share of the capital asset in which they were beneficially interested, receipt is capital c receipt. During the relevant accounting year the respondents-assessec· received a certain amount as dividend from a company. . A part of the· amount was paid out of the accumulated capital gains received by the company in the shape of Salamis and land acquisition compensa-oon. Such capital gains were taken to the reserve· fund and thereafter D distributed as dividend. On the question of the taxability of that 'hare of the dividend paid out of the capital gains in the hands of the company the Income-tax Officer held the same was taxable as "divi-dend." The Appellate Assistant Commissioner held that the amount coulll not be considered as "dividend" withill the meaning of section· 2(6A) of the Income-tax Act. 1922, but the same was taxable as income· in the hands of the assessee. The Tribunal confirmed the order of the· E Appellate Assistant Commissioner. The High Court on reference· "nswered in favour of the assessee. Dismissing the apix:als, HELD: It is well-settled that in order to find out whether a receipt '' a capital receipt or revenue receipt, it has to be seen what it is in the· F h;:.nds of the receiver and not its nature in the hands of the payer. In other words. the nature of the receipt is determined entirely by its character· m the hands of tt.~ receiver and the source from which the payment· is made has no bearing on the question. [ 417 G] . The assessees who were share-holders in the company were bene-ficially entitled ~o the capital of the company. The amount in question G was not somethmg eamed by the company in the course of its business. Undoubtedly it was a capital receipt in the hands ofthe company but that. by .itself is not sufficient. It has to be seen whether it was a capital' receipt m the hands of the assessee. Since the assessee had a beneficial' interest in the sum when it was in the hands of the company, when that sum was distributed amotrnst the share-holders of the company, each ,,f the share-holders took a share of the capital asset in which they were· II beneficially entitled. That being so, the receipt in the present case· must also be considered as capital receipt. The fact that those sums were distributed as "dividends" does not change the true· nature· of the· r~ceipt. [229 D-G] Commissioner of 'Income-tax, West Bengal v. Nalin Behari Lall A Singha, 74 l.T.R. 749 and Trustees of the will of H.K. Brodie (Deceased) v. Commissioner of Inland Revenue, 17 T.C 432, referred to. CIVIL APPELLATE JuR1smcrioN : Civil Appeals Nos. 1667 to 1673 to 1968. Appeals from the judgment and order dated August 30, 1967 of the Calcutta High Court in Income-tax Refer-ence Nos. 3, 6, 7, 8, 9, IO and 11 of 1964. B. D. Sharma, for the .appellant (in all the appeals). Sukumar <Jhose and Swapna Ghosh, for the appellant -(in all the appeals), The Judgment of the Court was delivered by Hegde, J. Two questions of law which arise for decision in these appeals are: "(!) Whether on the facts and in the circum- stances of the case of Tribunal was right in holding that the distribution to the assessee of the amount attributable to land acquisition compensation re-ceived by the Ukhara Estate Zamindaries Ltd. after 31st March, J 948 was in the hands of the assessee, receipt of dividend within the meaning of Section 2(Al of the Indian Income-tax Act, 1922 ? (2) Whether on the facts and in the circumstances 2. ST Tal Teal Iz ara, miaet afafaam,1922 dea 4 afafaaen& ata cifrafay atx afeawa a faatffaal % faeg fafasaa fear artfare sea earatag a aa sifrafeat & ya A gagna Ve ge slay eA FT GATfraticiaatl & getfearga fafasaa & eafaa stax avant argaa, ofeaatFae FIST aaa A yaa Tr AH ga eMaaT AA ae st1(3. af ct antetd & sete 8 aca ataada wp 8 dF, aa:ene fag ara faa & arse & azat ar aura wrar dt qafeastar1 agHal Tar Ss fe 13 ate, 1950 a anes ata are faut ag 1950-51 F faaaaraesl Aa AF 1356 alo Cte %, FAA fagrat ara fear, (faa gar artfaatftat ser araqr, gare vet qatartty fafats (fa gan oy “aay”HE MAT) BI TH NACILH AT FATT Tar ag F ater faatfedt al saaarg F aaig F VIA 13,000waa. at wis sea gel vad arate19 waza, 1949 at Afes fear qatari ga ~HA FA 8349 way Ht Ufa31 arg, 1948 % qearq weal aren aarat ate yada sfaae a orftadt aewa Area afar Galt afraral te dea at ag atWa Cot ahrart arefizefafa Fwae mee we aaa araia H we A faafea fee ae AaratayeT MTAIT ara we aft aa F afeay FA acafeatwat arsaq atial F faa arain Soa aa at Hugg F araeq FF Tyara & are Sys afaarat HA aa fear var ar) aaaafaaret yy - ga fassy gt cgarfefaaftafear war He Aarate wrady &cog afarat” Fa eea fear war adh arar at aarti wa: ag “arate”BTA aay 2 ate far art az agra aged (adie) & fratfeat aag xefta ediare nz oft fe afafeae ay arer 2 (6-2) % aatada 8,929 eatat sift arate Fale oe aa arat ar aadi fag gaa ag afafaatfza fearfe ag fasifcel & grat ar aigeg H wera 2| afenc F aarae aa(atta) & aieg at gfe ax FI 4. na az yeaifca 2 fe ca ara art gar ama & fac fe eeoifta,qari stftr@ ar uses sifty, wz ara aati tet 2 fe otftaeal & gra F gaarraeq aa ga fe ag fe car FR gia FH gant caeq sar 2) at meth H, siftal wafa siftraat & sia ay yak exe & A qat er a agarfza a oat 2Wit va ala sr, fase sary fear ware, za wea H arg aqcacg adi 21watarg tay aaa Fatal & ot, wet an fe Ba are wr aeacg 3, qal wT a arwing: TTHA aaa Bi Te gate ortawal sa ma BR ate ae grea Hrarévetsiftanal & gra a ay arqar srfta swig 81 aa: az aea fe ca otalWHC ATMs WT at aga wey srqdt F sq F gat afvara at, weargana ofticata agtei ah Shara taal 2 az aad fa azfauifefaal ®aa Faq at) ga seq ar fafeeaq sear fe tg fafase orfta, got mifter@utwuseq gifta, us afeaata3,cafe ga ssa a arafiea fagragearfta gi sa fageadt at faa aq aeal az a wea A gaax afearzaiseargidt 21 fafavaasret zeae sci ara F aeal ox fade etarZ| 5. at an f& aaa ga ata Tae ae HT atary g, ag mIaHT AIRafsam ama aaa afaa fagiti aia faa (7?) at ara A sa eqrtagfafaaaa aaa feat ar ger21 se area Aoatfaatfat garegetesHtarag fafacs ar wR Fay qs Al| VaR ATA Mega oeafaal B aaaa feat vt sarc fara wat arfag ga ata d fafavaa & fac saya garGaHTy we ae ar ie sar aay al siftaai wet oftadl Hat FenfearzHC UEAID Ala HT aaa J| Sa AIATA Ga eTBTqaHTUTEHASat feat ar)Sa eaTaTaAT A Sa Gea ae TT HRA A genre He fear ar fHTAT AZ ATAIT F HT WTA AAT GT awa ZlGA thaHl aul wea gu zaeqraragy 4 az wa eaqaq fRar at fe— cuaea % erga X ag aeta Ba et gaeq fear fe arate ar agGAH BZ Sy Tei Als FH ATI IL HLgaia ae e, ga vt arate (‘) 74 argo Ze HIXe 749, ea aa Rate at HTH afaeareata BtPaeq afaawy ar gqagama Hane Val rs aeiia sat si as at ate ga fafaa HE sawt agt sarat mar ar| Ua wet IT aT Afra Ale gee FATATAT Faay Boat Arar st wie faa ae aea a al TE st, sa eararag Ffaare azar earatfaa wat stat 1” 6. at adel H ae sa ara Fst fafafeaa agt fear war ar gaafafasaa awaT FI 7. Ba o9a IT ga: Faas Hea oe fH sa gare F mal FFI sazaaa &,Gait mifta ate user oifta F ala fea sax fafa eq a qeazmtat afer, geater are fe fat ae Cao Ho afss (Aa) aA HfasAT ATGga-eog Weq (1) att ara FH cararfafa fae are eam faq aT aa ¥ofa fade far ara & faara att ate agat ara adl Vt aad}— of the case the Tribunal was right in holding that the receipt by the assessee of the amount attributable to selamis realised by the Ukhara Estate Zamindaries Ltd., for grant of long-term leases after 31st March, 1948 was a receipt of income of the assessee and tax-able as the income of the assessee from other sources?"' On both these questions the decision of the authorities under the Indian Income-tax Act, 1922 (in brief the Act) as well as that of the Tribunal was against the assessees. But disagreeing with the view taken by these authorities the High Court answered both these questions in favour of the assessees. The Commissioner of Income-tax, West Bengal aggrieved by this decisions has brought these appeals .to this Court on the strength of the certificates given by .the High Court. A As facts in each of these appeals are more or less similar,. it is sufficient if we set out the facts in the case of Kamal Behari Lal Singha, for th~ assessment year 1950-51, the corresponding accounting year being 1356 B. S. ending on April 13, 1950. It is said that Kamal Behari Lal Singha, who will hereinafter be referred to as the assessee was a B shareholder in the Ukhara Estate Zamindaries Ltd. (to be hereinafter referred to as the "company"). During the relevant accounting year, the asses see received a sum of Rs. 13,200 as dividend from the said company. The said dividend was declared on October 19, 1949. Out of that c amount a sum of Rs. 8,829 was paid out of the accumu-lated capital gains, received by the company in the shape of Selamis and land acquisition compensation receipts after March 31, 1948. Such capital gains were taken to the reserve fund and thereafter distributed as dividends. The remainder of the dividends was paid out of the balance of D the profit and loss account. In these appeals the dispute centres round the taxability of that share of the dividend which has been paid out of the capital gains in the hands of the company. The Income-tax Officer came to the conclusion that no dividend distributed can be considered as having been paid out of the "capital gains" of the com• E pany, therefore the same is taxable as "dividend". In appeal the Appellate Assistant Commissioner accepted the contention of the assessee that the receipt of Rs. 8,829 cannot be considered as dividend within the meaning of s.2 (6A) of the Act but he held that the same is taxable as · income in the hands of the assessee. The Tribunal con-· F firmed the order of the Appellate Assistant Commissioner It is now well settled that in order to find out whether a receipt is a capital receipt or a Revenue receipt one has to see what it is in the hands of the receiver and not its nature in the hands of the payer. In other words, the nature of G receipt is determined entirely by its character in the hands of the receiver and the source from which the payment is made has no bearing on the question. Where an amount is paid which, so far as the payer is concerned, is paid wholly or partly out of the capital, and the receiver receives it as income on his part, the entire receipt is taxable in the H hands of the receiver. Therefore the fact that the amount sought to be taxed in these appeals was capital gains irt the hands of the company is not a relevant circumstance. What 228 ‘farg au faar<gfa yer ara age: dfs sea ae & fe aaragufa aa sega meat ge at, gafac ga ara ot faare Bearata fe ag ata ala-at ar faae aq sea ge at ate a aladtaffeafaat ft far Fag srea gg atafe gst, ute sea BTA Teauf at dt—afe ag a haa ma A afew gat A AT waar aA aTBHT AT at Hu fasts fe wa dara fac me a, ga TT GH FAaaa F ale ge Arar arat afar wie Bes Tar arar sear fg aataa A ale afrare & fag gstfaedt aa eats ate, aa,afe gitYa dara faa wa F ate a a ws A faa oa gs fH & fearfearfeatHag A age aa was Tt Has sila sare fe a gragat aa & an ay adl fee se ica wea aiet antag at ara aal gafen fat ara cafsa h era Hara gait & 1” eardt ua Ft sax ora feu ae aaa fafa ag wg A eqee alalzg 8. Ha eT ea aaa Hgeal ae fast Hwa Fifaathedt, sea FMarae YF Hegay HY TH A Haar aay F snare Jea aMlatFH fraHHS gare araegse az arqdt FH afaat al aaa ate Hea at yfaate asa h far sfeat & ae oe Heal st sea gestag tal aly wTvat ot faa sect F aor Hare F aqaa FH oafsa fear ars faces agBradt & arg A gst sfc at faeq gaa at aay ara A gata adtFI gaaqearq ga ag @aar é fa zat ag fratfedt F ara A gat softs dtsarqe qatar aT gar @, fratfedt ar sa ufs A aq ag grail F ata a,Bazine fea ari wa: wa ag Ue ara) B Rawal e Aa faafer a ng aa Fawartal F Agata A gat afer A a saat tax far fas faqBaal TA BT AR SHAT aT Var ga at at aaa A fata siftr & gazaraeq {vagat fa amr arat aife ate ga cea a fe a ofeataraT F AT qx faafia at ag aft, cifta at aaa safe ofeafad vet atat-é|sift ar eaeq adl 2 sit saat aieafan caer’ a fe ag ara fra ara a Feet ag at oral SI| 9. afeuraeaeg a ada wane ddlF att ae afar aries wt aayfi ww gaa at Hla faa_ aha afer ac aang Ho /fro 228 we have to see is what it was in the hands of the assessee" .\ The question whether a particular receipt is a capital receipt or a revenue receipt is a somewhat difficult question ,10 decide though the principles bearing on the question arc well settled. The application of those principles to a given set of facts often creates difficulties. The decision by and B large depends upon the facts of each case. So far as the first question set out earlier is concerned the same is settled by the decision of this Court in Commis-sioner of 111come·tax, West Bengal v. Na/in Behari Lall Singha ([1]). The assessec therein was also one of the share-holders of Ukhara Estate Zamindaries Ltd. His case was no different from that of the respondents herein. But the only point that arose for decision in that appeal was whether the receipts similar to those we arc considering here can be considered as 'dividends'? This court answered that question in the negative. This Court refused togo in to the question whether the same could be considered as income -other than dividend. Dealing with that contention this ·Court observed : ''Counsel for tile revenue sought to argue that the 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 contention was raised before the Tribunal or the High Court and no question was raised in that behalf. We will not be justified in entering upon the question which was not raised or argued before the Tribunal and before the High Court." J.o' rn these appeals we have to decide what was left un-decided in that casl:. · Coming back to the question how exactly to draw the .line between a capital receipt and a revenue receipt in .cases of the type tlrnt are before us, one can-do no better than refer to the observations of Finlay J. in Trustel!s of the Will of H. K. Brodie (deceased) v. Commissioner Inland ..Re1'e1u1e (2). "But, I think, the governing consideration is this: the question be ing, was the sum received as income, one has to consider what was the source from which A it was received and what were the circumstances in which it was received. lf the capital belonged to the person receiving the sums--if he or she was benefi-cially entitled not only to the income but to the rapital then I should think that, when the. payments were made, they ought to be regarded, and would be regarded, as payments out of capital, but where there is a right to the income, but the capital belongs to somebody else, then, if payments out of capital are made and made in such a form that they come into the hands of the beneficiaries as income, it seems to me c that they are income and not the less income, not of the person receiving them, but in the hands of some-body else-capital.'' The above observations, inJ.our opinion, correctly set out the law. D Let us now turn to the facts of this case. The assessees this case. The assessees D Let us now turn to the facts of this case. The assessees this case. The assessees were shareholders in the company. They were beneficially entitled to the capital of the company. The amount with which we are concerned in these appeals was received by the company as Salamis and as compensation for the acquisi-tion of the lands of the company. It was not something earned by the company in the course of its business. Un-doubtedly it was a capital receipt in the hands of the com-pany but that by itself is not sufficient. We have next to >ee whether it was a capital receipt in the hands of the assessee. As mentioned earlier, the asscssce had a bene-ficial interest in that sum when it was in the hands of the F company. Therefore when that sum was distributed amongst the shareholders of the company, each of the share-holders took a share of the capital set in which they were beneficially entitled. That being so the receipt with which we are concerned in these appeals must also be considered as capital receipt. The fact that G those sums were distributed as 'dividends' does not change the true nature of the receipt. A receipt is what it is <.1nd not what it is called. In the result these appeals fail and they are dismissed with costs-hearing fee one set. H K.B.N.