9911796707
TMI Blog1985 (9) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... me was exigible to tax because, according to him, shareholders and the company were different entities. Annexures A1, A2 and A3, respectively, in I.T.R. Cases Nos. 13 to 15 of 1980 are the assessment orders for the assessment years 1971-72, 1972-73 and 1973-74. Annexures Al, A2 and A3 in I.T.R. Cases Nos. 169 to 171 of 1982, respectively, are the orders of assessment for the years 1972-73 and 1973-74 in respect of the two assessees therein. Annexure B in ITR Cases Nos. 13 to 15 of 1980 is the combined order of the Appellate Assistant Commissioner who allowed the appeal holding that the portion of the dividends which represented the surplus obtained on the sale of agricultural land/acquisition by the Government was not accumulated profits and, therefore, not liable to be taxed. In I.T.R. Cases Nos. 169 to 171 of 1982, the Appellate Assistant Commissioner confirmed the assessments. On further appeal by the Revenue in I.T.R. Cases Nos. 13 to 15 of 1980 and by the assessees in I.T.R. Cases Nos. 169 to 171 of 1982, the Tribunal confirmed the findings of the Income-tax Officer. Annexure C in I.T.R. Cases Nos. 13 to 15 of 1980 is the order of the Tribunal in I.T.R. Cases Nos. 169 to 171 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed." In CIT v. Kamal Behari Lal Singha [1971] 82 ITR 460, the Supreme Court after having referred to the dictum laid down by the Supreme Court in Nalin Behari Lall Singha's case [1969] 74 ITR 849, observed as follows (at p. 463 of 82 ITR): " In these appeals, we have to decide what was left undecided in that case. Coming back to the question how exactly to draw the line between a capital receipt and a revenue receipt in cases of the type that are before us, one can do no better than refer to the observations of Finlay J. in Trustees of the Will of H. K. Brodie (deceased) v. Commissioners of Inland Revenue [1933] 17 TC 432, 439 (KB): ' But, I think, the governing consideration is this: the question being, was the sum received as income, one has to consider what was the source from which it was received and what were the circumstances in which it was received. If the capital belonged to the person receiving the sums if he or she was beneficially entitled not only to the income but to the capital then I should think that, when the payments were made, they ought to be regarded, and would be regarded as payments out of capital, but where there is a right to the income, but the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinguished by the Tribunal on the ground that they were cases involving companies in liquidation and CIT v. Nalin Behari Lall Singha [1969] 74 ITR 849 (SC) and CIT v. Kamal Behari Lal Singha [1971] 82 ITR 460 (SC) on the ground that the provisions of section 2(22) of the Act which corresponds to section 2(6A) of the 1922 Act, had undergone substantial changes. We have gone through the decisions of the Supreme Court in depth. In our view, the decisions in CIT v. Nalin Behari Lall Singha [1969] 74 ITR 849 (SC) and CIT v. Kamal Behari Lal Singha [1971] 82 ITR 460 (SC) did not give importance to the fact that the companies were in liquidation. The counsel for the Revenue cited the decisions of the Supreme Court in Dhandhania Kedia Co. v. CIT [1959] 35 ITR 400 and Kantilal Manilal v. CIT [1961] 41 ITR 275 (SC) and also the decision of the Bombay High Court in Girdhardas Co. Ltd. v. CIT [1957] 31 ITR 82 (Bom), in support of the arguments that what a company in liquidation distributes is its assets, not dividend; and, therefore, the decisions of the Supreme Court in Short Brothers' case [1966] 60 ITR 83 and Tea Estate India's case [1976] 103 ITR 785 could have no application to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the value of capital assets is included in the capital gains, distribution by the liquidator of the rise in the capital value will not be deemed dividend for the purpose of the Income-tax Act. Counsel for the Department contended, relying upon Mrs. Bacha F. Guzdar v. CIT [1955] 27 ITR I (SC), that since dividend received by shareholder of a company out of the profits earned from agricultural income is not exempt from liability to tax under section 4(3)(viii), dividend distributed from profits earned out of sale of capital assets inclusive of land from which the income derived is agricultural income, is also not exempt from income-tax. But the company does not claim exemption from liability to tax under section 4(3)(viii) : it claims exemption because the receipt is not income which is chargeable to tax under section 12 under the head ' Dividend '. The case of Mrs. Bacha F. Guzdar v. CIT [1955] 27 ITR 1 (SC) has, therefore, no application to this case. " Capital gain, in fact, is made taxable by section 45 of the Income-tax Act, 1961, as such a special deeming provision was felt necessary because capital gains would not otherwise come within the ordinary commercial concept of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend ". The Annexure to this judgment would clearly bring out the fallacy in this assumption. We have to bear in mind that the Income-tax Act did not contain any exhaustive or restrictive definition of dividend; it contained only an inclusive definition. The change in the definition of " income " from time to time to correct an anomaly or to do away with the redundancy would not affect the decision on the question whether what has been specifically excluded from the definition of " accumulated profits " could be included in the " total income " for the purpose of taxation. The question before us, in other words, is whether the receipt in the hands of the shareholders with respect to that portion of the compensation/sale price of the land acquired/sold, was to be treated as dividend in view of the express exclusion of " agricultural land " from the definition of " capital asset " in section 2(14) of the Act. There is no question before us as to whether the receipt was income other than dividend, and, therefore, exigible to tax, arising from the order of the Tribunal. The English decisions relied on by the Tribunal, in our opinion, are not relevant for our purpose. Those decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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