1961 (9) TMI 98 - HC - Income Tax

Summary

Issues Involved:
1. Validity of assessment made on Mr. James Anderson, administrator to the estate of Mr. Henry Gannon.
2. Assessability of deemed dividends under section 23A of the Indian Income-tax Act in the hands of the applicant.

Detailed Analysis:

1. Validity of Assessment:
The primary issue was whether the assessment made on Mr. James Anderson, as the administrator to the estate of Mr. Henry Gannon, was valid in law. The court examined the applicability of section 24B of the Indian Income-tax Act, which deals with the liability of an executor, administrator, or other legal representatives to pay tax on the income of a deceased person. The court distinguished between the income of the deceased and the income of the estate of the deceased accruing after death. The liability of the administrator to pay tax on the deceased's income arises under section 24B, whereas the liability to pay tax on the estate's income arises under the general provisions of the Income-tax Act. The court noted that the deemed dividend income could only be considered the income of the deceased, Mr. Gannon, and not the administrator. Therefore, the notice issued under section 34(1)(b) for reassessment of the administrator's income, including the deemed dividend income, was deemed invalid.

2. Assessability of Deemed Dividends:
The second issue was whether the deemed dividends of Rs. 61,051 and Rs. 3,73,099, deemed to have been distributed under section 23A of the Indian Income-tax Act, were assessable in the hands of the applicant. The court referred to the Supreme Court's decision in CIT v. Shakuntala, which held that the expression "shareholder" in section 23A refers to the registered shareholder in the company's books and not the beneficial owner. The court concluded that the deemed dividend income could only be considered received by the registered shareholder, Mr. Gannon, and not by the administrator. Therefore, the deemed dividend income could not be added to the administrator's income for the assessment year 1948-49.

Conclusion:
The court answered the first question in the negative, holding that the assessment made on Mr. James Anderson, as the administrator to the estate of Mr. Henry Gannon, was invalid. Consequently, the second question regarding the assessability of deemed dividends did not survive. The assessee was entitled to costs, and no order was made on the notice of motion.