1985 (8) TMI 66 - HC - Income Tax

Summary

Issues:
Validity of a gift of shares and income by way of dividends to a trust under the Income-tax Act, 1961. Reference application for questions arising from Tribunal orders. Consideration of a decision of the Supreme Court without being cited by parties before the Tribunal.

Validity of Gift of Shares:
The case involved a gift of 25,000 shares of a company and income from dividends to a trust, which was challenged during assessment proceedings. The Income-tax Appellate Tribunal held the gift void ab initio, stating that the transfer violated the provisions of the Indian Trusts Act, 1882. The Tribunal concluded that the shares remained the property of the trust, making the income assessable in the hands of the assessee. An application for rectification was partly allowed by the Tribunal, leading to a reference application for certain questions to be referred to the High Court.

Reference Application:
The Tribunal referred four questions to the High Court, and two more questions were directed to be referred separately. The assessee contended that a decision of the Supreme Court, not cited during arguments before the Tribunal, was considered during the rectification application. The Tribunal rejected the application for reference, stating that the ultimate conclusion remained unaltered despite rectification. The assessee argued that the decision of the Supreme Court should not have been considered without being cited by the parties, alleging a violation of natural justice and procedural rules.

Consideration of Supreme Court Decision:
The High Court dismissed the argument that considering the Supreme Court decision without it being cited by the parties violated natural justice or procedural rules. It was held that the Tribunal could refer to relevant Supreme Court decisions, even if not cited by the parties, as long as it was pertinent to the subject matter. The Court found no prejudice to the assessee and deemed the Tribunal's procedure lawful. No other points were argued before the Court.

Conclusion:
The High Court concluded that no question of law requiring reference arose from the Tribunal's order. The application for reference was dismissed without costs.