1963 (7) TMI 99 - HC - Income Tax

Summary

Issues Involved:
1. Whether the dividend income from shares standing in the name of Kishanchand Lunidasingh Bajaj and acquired with the funds of the Hindu undivided family was assessable in the hands of the assessee family.

Detailed Analysis:

Issue 1: Assessability of Dividend Income from Shares
The primary issue was whether the dividend income from shares standing in the name of Kishanchand Lunidasingh Bajaj, acquired with the funds of the Hindu undivided family, was assessable in the hands of the assessee family.

Facts and Background:
- Three Hindu undivided families (HUFs) were involved, including the assessee family of Seth Kishanchand Lunidasingh Bajaj.
- The kartas of these families formed a partnership in the name of Messrs. Mangoomal Lunidasingh and Sons, which was dissolved on May 1, 1956.
- The assessee family started a new business on May 16, 1956, using assets obtained from the dissolved firm.
- Shares and securities standing in the name of Kishanchand Lunidasingh Bajaj, the karta, were incorporated into the new business books.
- Two sons of the karta, Shamsudar and Giridharlal, released themselves from the joint family in consideration of Rs. 2 lakhs each and formed a partnership with the karta.

Contentions and Findings:
- The Income-tax Officer held that the shares and securities were never the property of the firm and that the assessee family was the real and legal owner.
- The Appellate Assistant Commissioner pointed out that the dividend income from the shares was included in the return for the assessment year 1958-59, filed on June 29, 1957, indicating that the shares were the property of the family.
- The Tribunal upheld the view that the assessee family was the legal owner of the shares, as the shares were not transferred in any manner known to law.

Legal Principles and Interpretations:
- The Supreme Court's decision in Howrah Trading Co. Ltd. v. Commissioner of Income-tax was cited, which held that a person who has purchased shares under a blank transfer, but whose name is not registered in the company's books, is not a "shareholder" for the purposes of section 18(5) of the Indian Income-tax Act, 1922.
- The Tribunal emphasized that under Indian law, there is no distinction between equitable and legal estate, and the legal owner is recognized except for certain trust obligations.
- The Supreme Court's decisions in Commissioner of Income-tax v. Kalu Babu Lal Chand and Charandas Hari-das v. Commissioner of Income-tax were referenced, highlighting that income earned with the help of joint family assets is assessable in the hands of the Hindu undivided family.

Conclusion:
- The court concluded that for income-tax purposes, the relevant factor is the real income and not the nominal income.
- The provisions of section 18(5) read with section 16(2) of the Act, which introduced some inconsistencies, did not impair this principle.
- The court held that on the facts and circumstances of the case, the dividend income from the shares standing in the name of Kishanchand Lunidasingh Bajaj, acquired from the funds of the Hindu undivided family, was assessable in the hands of the assessee family.

Final Judgment:
- The dividend income from the shares was assessable in the hands of the assessee family, as the shares were acquired with the funds of the Hindu undivided family, and Kishanchand Lunidasingh Bajaj was the karta.