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TMI Blog1962 (8) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... e held 2125 shares in a company called Avra Ltd. which has its registered office in Colombo. During the accounting year relevant to the assessment year 1954-55, the assessee received as dividend a sum of ₹ 10 per share and this amount of ₹ 21,250 so received by him was remitted to the taxable territory. The Income-tax Officer brought this amount to tax. Before him this amount was claimed to be exempt on the ground that it was paid out of the capital profits of the company. But the Income-tax Officer held that no materials had been placed before him as to the nature of the capital profits nor the period during which such profits had been made by the company. He accordingly proceeded to apply section 2(6A)(a) of the Indian Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee under section 66(1) of the Act, the following questions were referred for the determination of this court: T.C. Nos. 107 and 114 of 1960: Whether the sum of ₹ 21,250 received by the assessee was assessable as dividend under the Indian Income-tax Act? T.C. No. 112 of 1960: Whether the sum of ₹ 27,450 received by the assessee was assessable as dividend under the Indian Income-tax Act? Before us it has been stated that during the period 1st July, 1949, to 30th June, 1953, the Avra Co. sold a mill and certain other properties in Ceylon. A net profit of ₹ 1,28,324-15 nP. was derived from the sale of these items. At a meeting of the directors of the company, it was resolved to declare a ten per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend to include items of distribution by a company of amounts which may not be strictly comprehended in the expression dividend . The fact that the company received any capital profits is immaterial in so far as any distribution by way of dividend by that company to the shareholders is concerned. The shareholder gets a declared dividend of ₹ 10 per share. No authority has been cited before us to show that the distribution of such capital profits is opposed to the law of the land where the company is situate and by which law that company is constituted. It is true that a certain proceeding from the chartered accountants of the company has been filed to show that the sums out of which the dividend was distributed was treated as capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e remembered that no company which is registered or incorporated in a foreign country can bring over its law and be for all purposes a company over here. By the comity of nations we do recognise the incorporation of other legal entities in other countries, but a company registered in a foreign country is of course a foreign company. It is only by that comity that we accept the conditions which are imposed by foreign law, and to take a simple illustration of that,.....you may have a body to which recognition is given in the English Courts by reason of the status which it has reached in the foreign courts. You may, on the other hand, have some indicia from a foreign country which are not recognised over here, because they are merely matters o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. Basing himself on analogy, learned counsel suggests that even if the foreign company is not a company within the meaning of the Indian Income-tax Act, the shareholders of that company might be regarded for the purpose of the Indian Income-tax Act as constituting an association of persons and the profits distributed to them by the company as income from other sources taxable in the hands of the shareholders. It is not necessary for us to decide the question on the basis of any analogy. The question that was before the Tribunal was clearly whether the receipt of the amount from the foreign company, in whatsoever manner the foreign company might have acquired that income, was or was not income which was taxable under section 12 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection with the company from which he received it and whatever might be the nature of the receipt in the hands of the company itself. Whether or not it was income taxable in the hands of the assessee was the point principally decided by the Tribunal and it seems to us therefore that the reference to the amount as dividend in the question as framed by the Tribunal is not at all significant. The real question at issue and one that properly arises from the order of the Tribunal is whether the sum received by the assessee from a foreign company is assessable as profits under the Act. For the reasons that we have already set out, we answer the question in the affirmative and against the assessee. The department will be entitled to its costs. Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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