1969 (8) TMI 5 - SC - Income Tax

Whether the Tribunal was right in holding that the distribution to the assessee of the amount attributable to land acquisition compensation received by the U Ltd., was in the hands of the assessee, receipt of dividend within the meaning of s. 2(6A) of the IT Act, 1922. - Order passed by the High Court is, therefore, set aside and the case is remanded to the High Court

Summary

Issues:
1. Taxability of dividend received by the assessee from a company.
2. Determination of whether certain amounts declared as dividend were taxable as income or not.
3. Interpretation of the Income-tax Act regarding the taxability of amounts received from capital gains by the assessee.
4. Referral of questions under section 66(1) of the Indian Income-tax Act, 1922 to the High Court of Calcutta.
5. High Court's ruling on the taxability of amounts received by the assessee from the company.
6. Analysis of previous judgments and their impact on the present case.
7. Setting aside the High Court's order and remanding the case for further consideration.

Analysis:
The case involved the taxability of dividends received by the assessee from a company, Ukhara Estates Zamindaries Ltd. The assessee claimed that certain amounts declared as dividends were not taxable as they were derived from the company's capital gains, specifically from salami received for long-term leases and compensation for land acquisition. The Income-tax Officer initially taxed the entire dividend amount for each year. The Appellate Assistant Commissioner held that only a portion of the amount constituted taxable dividend income. The Appellate Tribunal determined that the portion related to salami received for leases was not taxable as dividend but as income from other sources.

The Tribunal referred three questions to the High Court of Calcutta regarding the taxability of amounts received by the assessee. The High Court, following its previous judgments, answered all questions in the negative, indicating that the amounts were not taxable as dividends. However, the High Court's decision was subject to the final outcome of appeals in related cases pending before the court.

The Supreme Court found fault with the High Court's decision, noting that final answers with reasons were required, and the decision should not be influenced by other judgments. The Court highlighted the need to assess whether the amounts received were capital gains or income, considering the nature of the receipts. Additionally, the Court referred to previous judgments that exempted dividends from capital gains from tax liability under specific conditions.

Consequently, the Supreme Court set aside the High Court's order and remanded the case for further consideration in accordance with the law. The Court did not award costs for the appeal but stated that costs in the High Court would apply to the references.