1980 (11) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Double taxation of dividend income.
2. Overriding charge on dividend income in favor of Bharat Insurance Company (BIC).

Summary:

First Issue: Double Taxation of Dividend Income
The Tribunal addressed whether the amount of Rs. 3,12,500, already assessed in the assessment year 1959-60, could be reassessed in the year 1960-61. The ITO and AAC argued that it was properly assessable in 1960-61 based on the Supreme Court's decision in J. Dalmia v. CIT [1964] 53 ITR 83, which held that dividend becomes the income of the assessee when declared by the company. The Tribunal, however, upheld the principle against double taxation, stating that taxing the same income twice in the hands of the same person is not allowed in law. The Tribunal's decision was affirmed, and the first question was answered in the affirmative.

Second Issue: Overriding Charge on Dividend Income
The Tribunal examined the nature of the transaction between the assessee and BIC. The assessee had pledged 2,50,000 shares of Jaipur Udyog Ltd. as security for a debt to BIC. Due to default in payment, the shares were transferred to BIC on September 1, 1957. The Tribunal found that the dividend income received after this transfer was not the income of the assessee but of BIC, as the shares no longer remained the property of the assessee. The Tribunal concluded that the amount of Rs. 3,12,500 was rightly excluded from the assessment for the year 1960-61. The second question was also answered in the affirmative.

Conclusion:
The High Court upheld the Tribunal's findings on both issues, affirming that there can be no double taxation and that the dividend income after the transfer of shares to BIC was not the income of the assessee. The parties were left to bear their own costs.