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TMI Blog2023 (8) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... 121/2017 WITH CIVIL APPLICATION NO. 247/2017 IN TAX APPEAL NO. 121/2017 WITH TAX APPEAL NO. 123/2017 WITH CIVIL APPLICATION NO. 249/2017 IN TAX APPEAL NO. 123/2017 WITH TAX APPEAL NO. 122/2017 WITH CIVIL APPLICATION NO. 248/2017 IN TAX APPEAL NO. 122/2017 WITH TAX APPEAL NO. 120/2017 WITH CIVIL APPLICATION NO. 246/2017 IN TAX APPEAL NO. 120/2017 WITH TAX APPEAL NO.79/2017 WITH CIVIL APPLICATION NO. 194/2017 IN TAX APPEAL NO.79/2017 WITH TAX APPEAL NO.86/2017 WITH CIVIL APPLICATION NO. 204/2017 IN TAX APPEAL NO.86/2017 WITH TAX APPEAL NO.80/2017 WITH CIVIL APPLICATION NO. 197/2017 IN TAX APPEAL NO.80/2017 WITH TAX APPEAL NO.87/2017 WITH CIVIL APPLICATION NO. 206/2017 IN TAX APPEAL NO.87/2017 WITH TAX APPEAL NO.78/2017 WITH CIVIL APPLICATION NO. 192/2017 IN TAX APPEAL NO.78/2017 TAX APPEAL NO.67/2017 WITH CIVIL APPLICATION NO. 179/2017 IN TAX APPEAL NO.67/2017 WITH TAX APPEAL NO.63/2017 WITH CIVIL APPLICATION NO. 173/2017 IN TAX APPEAL NO.63/2017 WITH TAX APPEAL NO.66/2017 WITH CIVIL APPLICATION NO. 178/2017 IN TAX APPEAL NO.66/2017 WITH TAX APPEAL NO.64/2017 WITH CIVIL APPLICATION NO. 174/2017 IN TAX APPEAL NO.64/2017 WITH TAX APPEAL NO.65/2017 WITH CIVIL APPLICATION NO. 175/2017 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company ? B. Whether by virtue of marriage of the spouses under the Law of Communion of Assets (Communion De Bens) applicable in the State of Goa to which the Appellant and his spouse are subject to, each of the Appellant and his spouse acquire 50% ownership rights and/or beneficial interests in respect of all movable and immovable properties forming a part of the estate of Communion De Bens irrespective of the spouse in whose name such assets are acquired and in pursuance thereof the Appellant and his spouse acquired equal rights and beneficial interests i.e. to the tune of 50% in the shares of KCPL, KCRPL and KIPL held in the name of either spouses ? C. Whether in view of the correct interpretation of the relevant Articles of the Portuguese Civil Code, it can be inferred that spouse in whose name the movable property (shares in the instant case) of the Communion De Bens is registered in the Members' register of each Company, cannot be said to be exclusive beneficial owner of the entire such shares and if at all his beneficial interest is restricted to only 50% of number of such shares and need to be accordingly recognized to decide his beneficial interest in the impugned comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2017, 80 of 2017, 81of 2017, 63 of 2017, 69 of 2017, 123 of 2017, 89 of 2017, 60 of 2017, 53 of 2017, 79 of 2017, 67 of 2017, 59 of 2017, 86 of 2017, 82 of 2017, 84 of 2017, 88 of 2017, 120 of 2017, 54 of 2017, 56 of 2017, 87 of 2017, 122 of 2017, 66 of 2017, 78 of 2017, 77 of 2017, 64 of 2017, 55 of 2017, 85 of 2017, 65 of 2017, 58 of 2017, 70 of 2017, 76 of 2017, 83 of 2017, 68 of 2017 and 93 of 2017. Since submissions were common in all appeals, and since issues that arose for a decision on the substantial questions of law raised by the parties were common, during the final hearing of the matter, submissions were made in Tax Appeal No. 51 of 2017, which relates to the Assessment Year 2011-2012 in respect of 29 appeals filed on behalf of individuals and in addition to these 29 appeals, 5 appeals, being Tax Appeal Nos. 119 to 123 of 2017, respectively, for the Assessment Year 2006-07, 2007-08, 2009-10, 2010-11 and 2011-12 respectively, numbered as Tax Appeals Nos. 121, 122, 123, 119, and 120 of 2017, all filed at the behest of a Private Limited Company, namely Kamat Construction Private Limited (KCPL) in which the same substantial questions of law arise are taken up along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 in terms of Section 139(1) of the Act, the income, comprising income from "salaries", income from the business, income from capital gains and from other sources; the return of income was processed under Section 143(1) of the Act on 27.09.2012, and thereafter, there was no further scrutiny proceedings initiated against any of these individual assessees. D. A search was conducted on 31.01.2012, in the office premises of KCPL and at the residential premises of its Directors, in terms of Section 132 of the Act. Consequent to the search, a notice under Section 153C of the Act came to be issued on 30.07.2012 to the individual Assessees, calling upon them to file their return of income for the Assessment Years 2006-07, 2007-08, 2009-10 to 2011-12. E. In response to these notices, the appellants/assessees submitted their return of income on 29.08.2012 maintaining that the return of income filed on 29.09.2011 declaring total income of Rs. 26,18,704/- should be treated as the Return in response to the notice under Section 153C. Subsequently, notices were issued by the Revenue under Sections 142(1) and 143(2) of the Act calling for further information, which was given by these Assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice issued under Section 153C of the Act, pursuant to the search. The contentions raised by the Assessees were that the assessment order in terms of Section 153C read with Section 143(3) of the Act was without jurisdiction since the material which the AO has termed as "incriminating material" did not actually come to light during the search and seizure proceedings, but was all throughout disclosed to the AO in all earlier assessment proceedings and shareholding pattern was also a matter of record in all earlier proceedings before the AO. H. By a common order dated 28.01.2015, CIT (Appeals), allowed the appeals of the Assessees and arrived at the following findings:- i. That there was no cause for making additions in the income of the Assessees on account of deemed dividend under Section 2(22)(e) since no monetary benefits have arisen to the individual shareholders of the various companies. ii. The proceedings under Section 153C of the Act were validly initiated by the AO and the assessment carried out by the AO under Section 153C read with Section 143(3) of the Act was correctly initiated, being based on facts that were collated on the basis of the statement recorded an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the course of the business as borne out from agreement and documents produced before the officer and were incurred in the course of business, thus could not be construed as a loan or advance in terms of Section 2(22)(e) of the Act. v. That, since the assessees, were governed by the provisions of the Portuguese Civil Code applicable to their marriage, beneficial ownership of the shares held by one spouse (husband) as registered shareholders of these companies, the amount in the hands of these parties was required to be taxed on the basis of 50% to each spouse, in terms of Section 5A of the Act. vi. That, since under the provisions of Section 5A of the Act, the appellants are governed by the Portuguese Civil Code, the income of the appellants jointly belongs to the appellant and his wife, on such division, the percentage of the beneficial shareholding falls below the limits as required under Section 2(22)(e) of the Act; thus, such addition is made without any basis; CIT (Appeals), while dealing with this contention also accepted the assessees contention that since the wealth tax returns filed by the appellant for earlier years, had divided the investment into shares equally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivil Code, can be said to be the beneficial owner of half of the 33% of shares and the balance 16.5% is held by his wife as beneficial owner or would he be the beneficial holder of the entire 33% (this issue would arise in all the Assessment Years 2007-08, 2009-10 to 2012-13). Issue No. 2 :- Which covers Substantial Question of Law (D), on which these appeals are admitted would be, if the answer to Issue No. 1 is held in the negative, whether transactions recorded in the books of the group companies and the shareholding pattern being available in the public domain, be considered as incriminating material for the purpose of Section 153C of the Act (this issue arises in all appeals except for the Assessment Year 2012-13). Issue No. 3 :- Which would cover Substantial Questions (E) and (F) being if Issue No. 2 is answered in the negative, whether the inter- company transactions in the nature of commercial/business transaction can fall within the phrase "loans or advances" for the purpose of Section 2(22)(e) of the Act. (This issue would arise in all Assessment Years 2007-08, 2009-10 to 2012-13). (b) That, admittedly, the parties are governed by the provisions of the Portuguese Civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coutinho v. Maria Luiza Valentina Pereira & Anr. (2019) 20 Supreme Court Cases 85; iii. CIT v. Purushotam Gangadhar Bhende, (1977) 106 ITR 932; iv. Commissioner of Wealth Tax v. Vasudeva V. Dempo [1981] 131 ITR 291 (Bom); v. Commissioner of Wealth-tax v. Vasudeo V. Dempo [1992] 196 ITR 216 (SC); vi. CIT v. Ms. Maria Sylvia D'souza (2013) 261 CTR (Bom) 282. (e) That, Circular No.684 dated 10.06.1994, issued by the Central Board of Direct Taxes has accepted this position, explaining the reason for insertion of Section 5A in the Act; the same Circular also recognizes the law laid down by this High Court in various decisions, wherein income of communion of the property was assessed in the individual assessment of the spouses equally. All six assessees have in their individual wealth tax returns filed for Assessment Year 1993-94 shown equal ownership of shares in the referred Private Limited Companies, and this position has been accepted by the Revenue. (f) That, the dictionary meaning of "beneficial owner", according to Mitra's Legal and Commercial Dictionary, (6th Edition) is "beneficiary's interest in trust property; a corporate shareholder's power to buy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable, at the most, under these provisions, it would only result in imposition of a fine, to be paid by the spouse, but would not result in the spouse ceasing to be beneficial owner of the shares. He submitted that Section 89 of the Companies Act, 2013, which corresponds to Section 187C of the erstwhile Companies Act, 1956, provides that no right in relation to any share in respect of which a declaration is not made by the beneficial owner, shall be enforceable by him. That, even by applying the provisions of new Section 89 of the Companies Act, 2013, to the present case, at the most, the wife would not be able to exercise voting power to the extent of 16.5.% of her share through her husband for non-compliance of this provision. Reliance was placed on the judgment of Delhi High Court in the case of C.I.T. ..V/s.. Ankitech (P) Ltd. [(2012) 340 ITR 14 (Delhi). It was submitted that the decision of the Delhi High Court has been approved by the Hon'ble Supreme Court in C.I.T. .V/s.. Madhur Housing & Development Co.(2018) 401 ITR 152. (h) The next submission of Mr Jitendra Jain learned Counsel was to contend, that in the event this Court concludes that the spouses of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (Nhava Sheva) Ltd., reported in [2015] 58 Taxmann.com 78 (Bombay); e) PCIT ..V/s.. Jignesh P. Shah, reported in [2018] 99 Taxmann.com 111 (Bombay); f) Underwater Services Company Ltd. ..V/s.. ACIT, reported in [2022] 448 ITR 691 (Bombay), g) Mani Square Ltd. ..V/s.. ACIT, reported in [2020] 83 ITR (T) 241 (Kolkata Tribunal). (i) The next submission made by Shri Jitendra Jain, learned Counsel for the appellants covers Substantial Questions of Law (E) and (F), which its contents could be summarized as Issue No. 3, dealing with various transactions showing the flow of funds from one company to another. The transactions are summarized below : Transaction No. 1 :- The first transaction is between Kamat Inns Pvt. Ltd. (KIPL) advancing money to Kamat Constructions Pvt. Ltd. (KCPL), wherein individual brothers are common shareholders to the extent of 30 - 33% each in both these companies. He submits that Kamat Holiday Homes, a resort owned by KCPL but managed by KIPL was required to pay 15% of its sales as a management fees to KCPL; during the year, KIPL advanced Rs.1.06 crores to KCPL. The AO gave relief of the management fees payable by KIPL to KCPL amounting to Rs.0.59 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts towards acquisition of premises. In relation to the transactions for Assessment Year 2010-11, the Tribunal has not considered that the nature of transaction was for enabling KCRPL to meet its interest/repayment liability, which was a transaction akin to an entity financing its own venture, this more so when, KCPL was a guarantor to the credit facility. It was submitted that such transactions would not constitute loans or advances for the purpose of Section 2(22)(e) of the Act, in terms of CBDT Circular No. 19 of 2017, for which purpose the matter would require a remand to the Tribunal for fresh adjudication. Transaction No. 3 :- The third transaction is between Kamat Inns Pvt. Ltd. (KIPL) and KCRPL is for the AY 2007-08, on the basis of which the Tribunal has confirmed addition made by the AO to the income of the assessees in the amount of Rs. 22,50,000/-, on the ground that the asseessees have produced no evidence towards the transaction. It was submitted that these transactions were in the nature of advance made for the acquisition of shares of KCRPL, as this company needed an infusion of share capital since it was in the process of setting up a Five Star Hotel in Panjim C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kta), which had advanced various sums in all the assessment years under consideration, and such sums had been given as advance towards a project known as La Campala Project; that such advance does not constitute a loan under Section 2(22)(e) of the Act, since the fact that the said Prajakta was 100% subsidiary of KCPL as recorded in the annual report and accounts of KCPL, the fact being known to the Revenue, cannot constitute incriminating material for the purpose of Section 153A of the Act. (ii) Alternately, it was submitted that the transaction between holding company and the subsidiary company being on account of business expediency, cannot be termed as a loan for the purpose of Section 2(22)(e) as held by the Hon'ble Supreme Court in S. A. Builders Ltd., reported in 288 ITR page 1. Based upon these submissions, the appellants claimed that the appeals should be allowed after answering all the Substantial Questions of Law framed by this Court in their favour, and in the alternate, the matters be remanded back to the ITAT for fresh consideration. 7. Per contra, Ms Susan Linhares, learned Counsel for the appellant/Revenue in Tax Appeal No. 93 of 2017 and for all the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies, in terms of provisions of Portuguese Civil Code applicable to the State of Goa; that in any event, the provisions of the Civil Code dealing with the communion of assets between spouses could not extend to the ownership of shares in a company since it is only the person whose name is found in the Register of Shareholders of the Company, who has the voting right based upon the shares held by him, which voting right/power cannot be divided between the two spouses. c) It was further submitted that the appellants are foreclosed from taking an argument that there was no incriminating material to reopen assessment and make additions in terms of Section 153C of the Act, since they have given up this ground in earlier appeals. That this Court would lack the jurisdiction to re-assess the factual finding arrived at by the AO and by the ITAT; as the findings of fact arrived at by the Courts below were upon evaluation of the material on record, and these being findings of fact could not constitute material for framing a substantial question of law. The learned Counsel for Revenue has placed reliance upon the following judgments to support of her submissions : 1. C.I.T. ..V/s.. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movable assets of the matrimonial estate- The husband may freely dispose the movable assets of the matrimonial estate of the couple; but in case he alienates them or binds them by gratuitous contracts, without the consent of the wife, the value of the assets so alienated shall be on account of his moiety. Article 1119- Alienation of the immovable assets of the matrimonial estate- The immovable assets, whether common or exclusive of either spouse, shall not be alienated or charged in any manner without the consent and agreement of both spouses. Sole paragraph- In case of dissent or unfounded opposition, the consent of the dissenting spouse may be made good by the order of the Court. Article 1191- Powers of the husband over immovable properties- It shall not be lawful for the husband to alienate immovable assets nor to be in litigation on questions of property or possession of immovable assets, without the written consent of the wife. Para 1- Such consent may be made good judicially when the wife refuses to give it without just cause, or when she is unable to give it. Para 2- However, the alienation the exclusive assets made by the husband in violation of the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir estate, both to the immovable and movable assets. b) Their estate is not divisible between them except in the event of dissolution of the marriage by divorce or on the death of one of the spouses. In the event of divorce, the assets would have to be partitioned between the spouses in equal shares by value. In the event of the death of a spouse, the half share of the deceased spouse in the matrimonial estate would devolve on direct lineal descendants or ascendants or co-laterals, in that order. The surviving spouse shall continue to hold the balance undivided half share in the matrimonial estate by virtue of his/her moiety right. 11. The concept of "Moiety" has been explained in Black's Law Dictionary (10th Edition) to mean: "Half of something, such an estate, also termed mediety." Applying the concept to the provisions of the Portuguese Code, it would refer to the half-undivided and indivisible right that each spouse enjoys in the common matrimonial estate as a result of the registration of their marriage. Further applying the legal principle of the right to Moiety to the movable assets of the estate of the spouses, the conceptual ownership of every movable asset, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in force therein until amended or repealed by a competent Legislature or other competent authority. (2) For the purpose of facilitating the application of any such law in relation to the administration of Goa, Daman and Diu as a Union territory and for the purpose of bringing the provisions of any such law into accord with the provisions of the Constitution, the Central Government may, within two years from the appointed day, by order, make such adaptations and modifications, whether by way of repeal or amendment, as may be necessary or expedient and thereupon, every such law shall have effect subject to the adaptations and modifications so made." As a consequence of the provisions of Section 5 of the Administration Act, the Portuguese Civil Code 1867 continued to apply to the newly acquired territory of Goa, Daman and Diu and continued to govern the personal rights of the citizens domiciled within these territories. 15. The Goa, Daman and Diu (Laws) Regulation No. 12 of 1962 (GDD Laws Regulation 1) was promulgated by the President of India on 28.11.1962. By this Resolution, the Acts referred to in its Schedule, which till then were in force in the remaining territories of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply only with such exceptions and modifications or adaptations as may be specified in the notification, to - (a) any existing company in the Union territory of Goa, Daman and Diu; (b) any company registered in the said Union territory under this Act on or after the 26th January, 1963." 17. For completeness of the reference to the provisions of law existing under the Portuguese regime in the territory of Goa, we make reference to certain provisions of the Commercial Code, 1901 which regulated the functioning of companies ("Sociedades Comerciais"). Article 105 of the Commercial Code as translated from Portuguese to English reads as under : "Article 105.- Commercial societies shall be one of the following types : 1. Societies with a collective name; 2. Anonymous societies, 3. Partnerships. Para 1 - Society in collective name is characterized by joint, several and unlimited liability of all its members. Para 2 - Anonymous Society is one in which the liability of members is restricted to the value of shares which they subscribe towards the capital. Para 3 - A partnership arises when one or more of the members hold themselves liable as if the society was in collectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty has any income under the head "Salaries", such income shall be included in the total income of the spouse who has actually earned it." The other two provisions of the Act which are brought into play to consider the submissions of the parties before us are Section 2(22)(e) and Section 2(32), which read as under : "Section 2(22) "dividend" includes- (a) any distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company; (b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits, whether capitalised or not; (c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not; (d) any distribution to its shareholders by a compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company). Explanation 1.-The expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956. Explanation 2.-The expression "accumulated profits" in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place. Explanation 2A.--In the case of an amalgamated company, the accumulated profits, whether capitalised or not, or loss, as the case may be, shall be increased by the accumu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unity of assets would apply. In order to examine the propositions and arguments put forth by the appellants, we would be required to examine certain provisions of the Companies Act, 1956. 21. On registration of the Memorandum of a Company, the effect of such memorandum and articles are specified in Section 36 of the Companies Act, which is reproduced hereunder: "Section 36. Effect of Memorandum and Articles (1) Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles. (2) All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company." A "Member" in relation to a company is defined under Section 41 of the Companies Act, which reads as under : "Section 41. Definition of "Member" (1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears comprised in the six years ending with the expiry of the financial year aforesaid. Explanation. - For the purposes of this clause, dividend shall be deemed to be due on preference shares in respect of any period, whether a dividend has been declared by the company on such shares for such period or not, - (a) on the last day specified for the payment of such dividend for such period, in the articles or other instrument executed by the company in that behalf ; or (b) in case no day is so specified, on the day immediately following such period ; (c) Where the holder of any preference share has a right to vote on any resolution in accordance with the provisions of this sub- section, his voting right on a poll, as the holder of such share, shall, subject to the provisions of section 89 and sub-section (2) of section 92, be in the same proportion as the capital paid-up in respect of the preference share bears to the total paid-up equity capital of the company." 23. Part-VI of the Companies Act, 1956 deals with the Management and Administration of companies. Chapter-I of this part contains the general provision dealing with the management of the companies, while Chapter-II t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter, in the register of members of a company as the holder of a share in that company but who does not hold the beneficial interest in such share, shall, within such time and in such form as may be prescribed, make a declaration to the company specifying the name and other particulars of the person who holds the beneficial interest in such share. (2) Notwithstanding anything contained elsewhere in this Act, a person who holds a beneficial interest in a share or a class of shares of a company shall, within thirty days from the commencement of the Companies (Amendment) Act, 1974, or within thirty days after his becoming such beneficial owner, whichever is later, make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company and such other particulars as may be prescribed. (3) Whenever there is a change in the beneficial interest in such shares the beneficial owner shall, within thirty days from the date of such change, make a declaration to the company in such form and containing such particulars as may be prescribed. (4) Notwithstanding anything contained in sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any relationship with the company in terms of its Memorandum of Articles of Association unless such person who is entered into the register of beneficial owners and declaration to that effect has been given by the holder of the beneficial interest, in the prescribed form under Section 187C. d) Any charge or agreement created in relation to any share of the company by the ostensible owner of the shares, shall not be enforceable by the beneficial owner in the absence of the necessary declaration to be made and registered, in terms of Section 187C(i). e) It is only a member of a company, limited by shares who shall have a voting right in respect of such capital, on every resolution of that company, which voting right shall be in proportion to his share in the capital of the company; no third person who may claim to hold a beneficial interest in the shares of the company would have a right to vote, unless such third person has his name registered in the members of the company as having a beneficial interest, in terms of Section 187C of the Act. 26. We shall now deal with the three primary submissions made by Mr Jitendra Jain, learned Counsel for the appellants, covering Substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Income Tax Act, recognising and giving effect to the provisions of the Portuguese Civil Code to persons domiciled in the State of Goa. After considering the import of Articles 1108, 1117, 1118 and the provisions of Article 10 of the Portuguese Commercial Code, this Court has held in Purushottam Gangadhar Bhende (supra) as under : "I must next proceed to consider the relevant articles of the Portuguese Civil Code, translations of which have been tendered and marked exhibits "A" and "B" before us, as already stated above. Article 373 lays down that "things" are either immovable or movable; Article 375 then sets out what are "immovables" by virtue of law; Article 376 enacts that all material things which are not immovable properties are "movable" and clause "one" of Article 377 lays down that by the words "movable things or movable estates" must be understood only material objects which by their nature are movable. These Articles, in my opinion, show that money is not included within the term "movables" as used in the Portuguese Civil Code. Article 1096 which occurs under the heading "general provisions" permits consorts to stipulate before the celebration of marriage and wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article, however, provides, that the wife may manage the estate of the couple by consent of the husband, or during his absence or his suffering from some impediment. The word "dominion" has its derivation from the term "dominium" which is a term of Roman law often retained in legal use and means "lordship" or "ownership". The Shorter Oxford English Dictionary, 3rd edition, therefore, gives at page 551, the meaning of the word "dominion" in law (third meaning) as being "ownership; property; right of possession, and that is the sense in which the word "dominion" is used in Article 1117. Article 1118 empowers the husband to freely dispose of the movable properties of the couple, but in case he alienates or binds under a gratuitous contract any such property without the consent of the wife, the value of the properties so alienated is to be "taken into account" towards the husband's half share. The use of the words "dispose", "alienates" and "contracts", as well as the definition of the term "movable things" or "movable assets" in Articles 373 to 377 referred to above, in my opinion, show that Article 1118 does not apply to money and cannot, therefore, apply to the income from comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay the same out of his own estate, except in the case of a debt not imputable to him. This Article further provides that the husband is not to enjoy a similar right of claim against the personal estate of the wife, presumably because it is he who has been in management of the communion property and is, therefore, responsible for the situation contemplated by Article 1124. Article 1189 states that the management of all the properties of the conjugal society belongs to the husband, but in the case of his absence or his suffering from any impediment, the wife may manage the same. Articles 1191 and 1193, however, impose restrictions on the rights of management of the husband or the wife, as the case may be; Article 1191 provides that the husband cannot, in the course of his management, alienate immovable properties or move the Court in respect of any dispute relating to the same, without the consent of the wife. Article 1203 lays down that the conjugal society can be interrupted either with regard to person or property of the consorts, or only with regard to property. Article 1204 states that it is permissible to the spouses to obtain the separation of persons and assets on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the husband, which are to be made through his half share in the common assets, can be prayed for before the dissolution of the marriage or separation; and the wife must be summoned so that, if she so desires, she may apply for judicial separation of the assets within the period provided in that Article. In my opinion, the only Articles that need consideration in support of Mr. Joshi's contention that the shares of the husband and wife in communion property are not definite and ascertainable within the terms of Section 26 of the Income Tax Act, 1961, are Articles 1104, 1216 and 1220. In my opinion, however, none of the said three Articles really help Mr. Joshi. Article 1104 applies only to the particular case of an ante-nuptial agreement in a marriage under Articles 1096 and 1097, and can have no application to the present case which is not a case of such an agreement that is one of a marriage according to the custom of Goa. In the case of a separation of estate, Article 1220 provides for the reciprocal divesting of properties brought in at the time of the marriage, but with regard to properties acquired during the marriage, it adopts the only practical course of a recip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach of the consorts throughout the different Articles dealing with various situations (vide Articles 1112 to 1114 of the Portuguese Civil Code, and Article 10 of the Commercial Code dealing with the incidence of debts, and Portuguese Civil Code Article 1118, dealing with the disposal of the movable property as well as articles 1120, 1123, 1220, 1463, and 1471). The final conclusions in the judgment are as under : In the result, I hold that under the Portuguese Civil Code read with Article 10 of the Commercial Code, in the case of a husband and wife married according to the custom of Goa, each of them has a definite and ascertainable share in the corpus as well as in the income, the management alone being with the husband. As Mr. Mehta has rightly contended, restrictions on the enjoyment or management of the property which are to be found in the Portuguese Civil Code do not contravene any requirement of Section 26 of the Income Tax Act, 1961. The Tribunal was, therefore, right in the view which it took that Section 26 applied, and the question referred to us must be answered against the Commissioner. We answer the question referred to this Court as follows: On the facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed that the husband and wife, governed by the system of community of property in force in Goa, Daman and Diu, would constitute an association of persons. Now, when these three statutory provisions of the I.T. Act are properly scrutinised, it is found that far from supporting the submission of Mr. Joshi, the Legislature has given indication that the husband and the wife governed by the system of community of property in Goa would not be an association of persons but only a body of individuals for which special provision was required to be made in the three Sections above noted. On this aspect of the matter, it may be apposite to refer to an earlier decision of this Court in CIT v. Purushottam Gangadhar Bhende [1977] 106 ITR 932, where the provisions of the Portuguese Civil Code as well as Article 10 of the Commercial Code were considered. However, in that decision, the Division Bench, to which one of us, namely, myself, was a party, was not required to give its conclusion as to whether the husband and the wife who constituted the communion by reason of the provisions of the Portuguese Civil Code could be regarded as an association of persons or not. The short question which fell fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, 1220 and 1226). What is most important in this connection is that it is an admitted position that on the death of one of the spouses, communion property does not devolve by survivorship, but the half share of the deceased spouse goes by succession to his or her own heirs or legatees by virtue of Articles 1122 and 1123. There is a consistent reference to the half share of each of the consorts throughout the different Articles dealing with various situations (vide Articles 1112 to 1114 of the Portuguese Civil Code, and Article 10 of the Commercial Code dealing with the incidence of debts, and Portuguese Civil Code Article 1118, dealing with the disposal of the movable property as well as Articles 1120, 1123, 1220, 1463 and 1471)." 14. It is true that joint rights in the properties of the spouses come into being as a result of the marriage under the provisions of the Portuguese Civil Code in the absence of an ante-nuptial agreement providing for their separate holding of respective property. From this it does not follow that the prospective husband and wife are associating (or getting married) with the purpose, object or motive of constituting themselves as joint holders of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that the circulars issued by the Department are normally meant to be followed and accepted by the authorities. We do not find any justification for the officers not following it nor was the Department justified in pursuing the matter further in this Court." 31. Thus, we see that what was held in Vasudeva V. Dempo (supra), was that persons married under the system of communion of estate, in terms of the Portuguese Civil Code, were a body of individuals and not an association of persons for the purpose of the Wealth Tax Act. The judgment reiterates the position held in Bhende's case, but still does not answer the questions which we are called upon to decide in this case. In our view, all the judgments referred above do not advance the argument of the appellants on their first proposition set out in Para 26(a) above. 32. In Commissioner of Income Tax ..V/s. Govind B. C. Ghanekar, this Court was dealing with a reference under the Income Tax Act, 1961 as to whether gifts made by the husband to his wife were "revocable transfers" within the meaning of Section 61 of the Income Tax Act. Whilst dealing with this issue and examining the provisions of Article 1181 of the Portuguese Civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s completely inapplicable to the facts of the present case, as the question of law formulated therein was whether gifts between spouses made under the Civil Code could be considered as revocable transfers within the meaning of Section 31 of the Income Tax Act, 1961. 33. Timblo Irmaos Ltd. (supra), cited by the appellants, was a judgment of the Single Judge of this Court called upon to decide whether objections raised as to maintainability of a Plaint signed by the Principal Officer of a company created under the Portuguese Commercial Code on 11.04.1901, could be instituted, after the extension of the Companies Act, 1956, to the newly acquired territory of Goa. Whilst dealing with the decision, the learned Single Judge holds thus : "5. It cannot be disputed and indeed not disputed that under the Portuguese Commercial Code read with law of 11th April 1901 Sociedade por Cotas which is akin to private limited company was to be incorporated and as I see it, there is a dispute that appellants had been so constituted. After the event of Liberation of Goa the Companies Act 1956 was brought into force with effect from 26th January 1963. Needless to say that after the extension of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the pleadings were not signed and verified as required by the provisions of the Code of Civil Procedure, which are required to satisfy the provisions of the Companies Act to have either the principal officer or the Secretary or the Director to verify pleadings for assuming responsibility. If under the Portuguese Commercial Code the Attorney could represent the Sociedade por Cotas for all purposes it must be held that the suit had been properly instituted." What may be culled out from this judgment is, that companies created under the Portuguese Commercial Code, 1901, would continue to be in existence, notwithstanding, the fact that the Companies Act, 1956, had been extended to the territory of Goa since 26.01.1963. Consequently, plaints at the behest of companies under the Commercial Code could be maintained. In the present case, none of the companies in which the appellants are shareholders were created under the Portuguese Commercial Code but were all brought into existence under the Companies Act 1956, much after the liberation of Goa. Timblo Irmaos Ltd. (supra) in no way supports the argument of the appellants that the provisions of the Companies Act, 1956, insofar as it de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect. The Court, therefore, held that wealth-tax exemption under Section 5 of the Wealth Tax Act is admissible to each one of the spouses as individuals. 7. We make it clear that in the present reference, we are not concerned with business income arising to the communion and hence we are not concerned with the judgment of the Division Bench of Dr. Saraf and U. T. Shah, JJ. dated 22nd/23rd April, 1993 in Income-tax Reference No. 124 of 1980 in so far it deals with business income. This judgment does not make any reference or decide the issue as to what would be the effect, qua the Companies Act, in relation to the rights of the spouses inter-se and of each in relation to the company in which the individuals spouses held shares. That, in fact, would be the question which we are dealing with and shall presently address. 35. We now refer to a judgment of the Division Bench of this Court in CIT ..V/s.. Modu Timblo (individual) (and vice versa) reported in (1994) 206 ITR 647. In this matter, three questions of law were referred to the High Court, which we reproduce below : "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the facts of each case." The ITAT also held that remuneration from the Private Limited Company in which Mr Modu Timblo was a Director, including the perquisites earned by him, would be assessed fully in his hands, individually and not in the hands of the spouses, applying the principle laid down in Purushottam Gangadhar Bhende (supra). 36. In this judgment, one of the contentions raised by the assessee, which was recorded at para 13 thereof, was that on a correct reading of the rights of the husband and wife under the Portuguese Civil Code and the decisions of this Court (in the case of Purushottam Bhende (supra) and Additional CIT ..V/s.. Valentino F. Pinto, (1984) 150 ITR 408), even the salary income earned by any of the members of the communion i.e. husband or wife, would accrue or arise in equal shares to each of them in as much as salary is also property. A further submission was made therein by the assessee that even assuming that the entire amount of income from any source arises either to the husband or the wife, by virtue of the Code, a half share of such income will get diverted by overriding title or a charge by operation of law to the other spouse and, as such, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "28. However, while concluding, the court used somewhat guarded language when it observed (at page 410) : "This ratio would seem to apply to all types of income and cannot be restricted to house property. If that be so, the two questions referred to us can be answered without further elaborate discussion, either factual or legal." The circumstances under which the court had to decide this case are evident from the factual situation set out above. It is evident that the court's attention was not drawn to the distinction in the matter of treatment of income under the head "House property" and income under other heads which had been created by the Legislature it self by virtue of specific provision contained in Section 26 of the Act. It was not brought to the notice of this court that the decision of this court in Purushotam Gangadhar Bhende's case [1977] 106 ITR 932 had been rendered on application of Section 26 of the Act which applied only to house property income and to no other income. Under the circumstances, the same ratio cannot apply to income falling under heads other than "income from house property". The said decision, therefore, is a decision per incuriam, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because income of every kind which is not to be excluded from the total income under the Act shall be chargeable to income-tax under this head if it is not chargeable to income-tax under any other head specified in Section 14. In the instant case, we are called upon to decide the assessability of income from "interest" and "dividend" which was received from investment of funds which belonged in equal shares to both the husband and wife. There was no question of management or effort in deriving the above income. It is not a case where the income was derived from money-lending business or in the course of dealing in shares where different considerations may apply. In the instant case, we do not find anything to hold that the income from these two sources was derived by the two co- owners as "a body of individuals". The fact that it was received by one of them for and on behalf of both is not determinative. This income therefore, has to be assessed in equal shares separately in the hands of both the husband and wife in the status of individuals. This conclusion of ours gets full support from the decision of the Supreme Court in G. Murugesan and Bros. v. CIT [1973] 88 ITR 432. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an employer or a former employer to an assessee in the previous year, whether paid or not; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him; (c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year." 44. For the removal of doubts, in the Explanation, it has been declared that where any salary paid in advance is included in the total income of any person for any previous year, it shall not be included again in the total income of the person when the salary becomes due. 45. The above definition clearly goes to show that what is assessed under the head "Salaries" is the salary due to the assessee from an employer or a former employer. In the instant case, the husband was the employee. It was he who was employed. The salary accrued to him and it was payable to him by the employer. The employer, while doing so, was not concerned with the customary laws of his employee. It is impossible to comprehend that the income from salary can be said to arise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based upon the principle that customary law or specific law of Goa would have no relevance in matters of this sought, especially where the remuneration was received by the husband by virtue of his relationship with the company as its Director. The judgment would further hold that by virtue of the application of customary law or specific law of Goa to the spouses, the wife could not claim to be an employee of the company and claim half the remuneration paid to her husband by virtue of being a Director of a Company. The judgment holds that the remuneration of the Director of a Company could not confer on the other spouse the right to half the share in the remuneration, but in the case of income from "house property" or from "other sources" or from "profits and gains of business or profession", whilst relying upon the ratio laid down in the case of Purushottam Bhende (supra), it holds that the right of communion between spouses would also apply to the income under these three heads, since such income will be assessible in the hands of the communion. 40. Post the insertion of Section 5A in the Income Tax Act, 1961, which provision was introduced by way of an amendment under the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . All are receiving salary equally and their salaries and service conditions are equal and similar. All the salaried people are entitled to compute their income under the provisions of the Income-tax Act. It is difficult or it is not practical for Parliament to discriminate that salaried persons again on the basis of their origin or historical background for the purpose of assessment of income-tax. Parliament or the Legislature will have to take into account the reality or practicality of the circumstance subsisting in imposing taxation. The Supreme Court has observed in Kerala Hotel and Restaurant Association v. State of Kerala, thereof as follows (page 259 of 77 STC) : "We are here concerned with the constitutional validity of a legislative provision which has the effect of making the cooked food sold in the posh eating houses alone exigible to sales-tax while exempting from that levy the cooked food sold in the moderate eating houses. Reasonableness of the classification has to be decided with reference to the realities of life and not in the abstract. A discernible dissimilarity between those grouped together and those excluded is a pragmatic test, if there be a rational nexu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation ..v/s.. Union of India (supra), lays down that though Section 14 of the Income Tax Act, sets out the manner of computing the income, which may be from the five heads specified therein, the new provision of Section 5A, applicable to Goans, whose marriage was governed by the Civil Code has also prescribed another manner of computation of income as regards spouses of Goan origin governed under the system of communion of assets. The ratio laid down in this judgment, therefore, does not advance the arguments raised by the appellants in any manner. 42. In the case of Smt. Antoneta Cicilia Fernandes .V/s. Smt. Rita Maria Fernandes and others reported in 1996 (3) Bom. C.R. p.10, relied upon by the appellants, this Court was dealing with a question as to whether the wife could object to the execution of a decree against the assets of her husband, who was one of the partners in the partnership firm, judgment debtor in the matter, on the basis that she was not a partner of the firm, so had no liability towards the debt or could be held liable by virtue of her marriage under the regime of communion of assets. Whilst rejecting the contention of the wife, who had objected to the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire properties are liable. Hence the attachment and sale of the common assets cannot be faulted with in view of the presumption arising out of Article 15 of the Commercial Code which presumption was not at all rebutted by the appellant inspite of the opportunity made available to her." 43. We then refer to CIT ..V/s.. Maria Sylvia D'Souza, reported in (2013) 261 CTR (Bom.) 282, cited by the appellants in support of their contention that the spouse (wife of appellant) would by law own 50% of the assets belonging to the communion, which according to them, would include 50% ownership of the shares in the concerned company. In that matter, the question of law before this Court was, whether the ITAT was justified in holding the 50% of the share of the deceased husband would go to the legal heirs and 50% to the assessee wife, by overlooking the fact that all the fixed deposits received were standing in the name of the wife assessee. This judgment was rendered post amendment of the Income Tax Act, after insertion of Section 5A, which came into force on 01.04.1994, and holds thus : 14. The CIT(A) as well as the Tribunal have held that in terms of Section 5A of the Act which was brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, that would be decided by the succession law applicable to the spouses. The judgment, does not however, throw any light on the question before us, which is whether the wife would have a voting right in the company, in which her husband, the appellant, is the sole registered shareholder and member of such companies. The ratio of the above judgment is certainly not applicable to the facts of the present case, nor would it advance the submission sought to be made by the appellants. 44. Zelia M. Xavier Fernandes E. Gonsalves ..Vs/.. Joana Rodrigues and others, reported in (2012) 3 SCC 188, cited by the appellants decides the question as to whether a member of a Panchayat under Goa Panchayat Raj Act, 1994, who was married under the Civil Code, is disqualified from membership of that Panchayat. The ratio of this judgment is founded upon the fact that the husband of such member was awarded a contract by the Panchayat. By operation of law (Portuguese Civil Code), the member became entitled to a share in the profits of the contract awarded to the member's husband. The question was, whether by operation of law, that member was disqualified under the Panchayat Raj Act, since she had a mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest" but it has been said also to mean any right in the nature of property, but less than title. The word is sometimes employed synonymous with estate, or property. 'Interest means concern, advantage, good; share, portion, part, or participation. A person interested is one having an interest; i.e. a right of property, or in the nature of property, less than title. The word `interest' is the broadest term applicable to claims in or upon real estate, in its ordinary signification among men of all classes. It is broad enough to include any right, title, or estate in or lien upon real estate. One who holds a mortgage upon a piece of land for half its value is commonly and truly said to be interested in it." The word "interest" has a basic meaning of participation in advantage, profit and responsibility. "Interest" is a right, title or share in a thing. 18. Section 10(f) speaks of monetary interest. The general rule that the wife's interest is not necessarily the husband's interest has no application where the husband and the wife are governed by the system "community of property" because under that system, on marriage, each spouse is entitled to a one-half incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract". It was in this context that the Hon'ble Supreme Court has interpreted that even where the spouse, a member of Panchayat, participates in the profits of the contract awarded to her husband, such profit of the contract would constitute "indirect monetary interest" for the purpose of disqualifying a member, in terms of Section 10(f) of the Panchayat Raj Act. We are therefore of the view, that the ratio of the judgment is distinguishable and not directly applicable in context of the question before us, which essentially is, whether, for the purpose of Section 2(22)(e) of the Act, the husband could be considered to be holding 50% of the shares in the concerned companies for the benefit of the wife, notwithstanding the fact that the shares were exclusively allotted to and standing in the name of the husband in the register of the company. 46. We then deal with the judgment of the Hon'ble Supreme Court in Jose Paulo Coutinho ..V/s.. Maria Luiza Valentina Pereira and another, reported in (2019) 20 SCC 85, cited by the appellants to contend that the Portuguese Civil Code being a Special Act, applicable only to a person domiciled in Goa, the appellants, and their spouses, by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We answer question number one accordingly." Whilst answering the question set out in issue No.II, the Hon'ble Supreme Court makes reference to Article 24 and to Article 1737 of the Code and then decides, whether it would be the Civil Code or the Indian Succession Act, that would apply to succession of properties belonging to the estate of deceased Goan outside the territory of Goa, in the following manner : "24. It is interesting to note that whereas the Founders of the Constitution in Article 44 in Part IV dealing with the Directive Principles of State Policy had hoped and expected that the State shall endeavour to secure for the citizens a Uniform Civil Code throughout the territories of India, till date no action has been taken in this regard. Though Hindu laws were codified in the year 1956, there has been no attempt to frame a Uniform Civil Code applicable to all citizens of the country despite exhortations of this Court in the case of Mohd. Ahmed Khan v. Shah Bano Begum and Sarla Mudgal v. Union of India. 25. However, Goa is a shining example of an Indian State which has a Uniform Civil Code applicable to all, regardless of religion except while protecting certain lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of imagination and he cannot be said to be living in a foreign country. Indian citizens living in India cannot, by any stretch of imagination, be said to be living in a foreign country. This person is only a Goan domicile living outside Goa in India, which is his country. Therefore, Article 24, in our opinion, has no applicability. 28. This brings us to the issue as to what will be the law which would be applicable. The parties are ad idem that the Code applies....... 29. Article 1766 provides that a married person shall not on the penalty of nullity dispose of certain and specific properties of the couple except if the said properties have been allotted to the said person. The Article reads as follows: "1766. Prohibition of disposition of the assets of spouses.- Those married as per the custom of the country shall not, under penalty of nullity, dispose of certain and specific properties of the couple, except if the said properties have been allotted to them in partition, or are not included in the communion, or if the disposition has been made by one of the spouses in favour of the other, or if the other spouse has given consent by authentic form." The basis of this articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Civil Code would apply but for the properties outside the territory of Goa, the Hindu Succession Act will apply. Similarly, for Muslims within the State of Goa, Civil Code would apply and outside Goa, the Muslim Personal Law (Shariat) Application Act, 1937 would apply. This would lead to many uncalled for disputes and total uncertainty with regard to succession. 32. There must be unity in succession. The Portuguese law is based on the Roman law concept of hereditas i.e. inheritance to the entire legal position of a deceased man. This concept of universal succession is described in the Comparative Analysis of Civil Law Succession,7 as under: "18. In "Comparative Analysis of Civil Law Succession", Villanova Law Review Vol. 11 Issue 2, the concept of 'universal succession' and 'hereditas' has been described as "...... succession by an individual to the entirety of the estate, which includes all the rights and duties of the decedent (de cujus), known collectively as the hereditas under Roman law. The succession to the whole of the estate could be by one heir (heres) or several (heredes), they taking jointly regardless of whether the succession was testate or intestate. The e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Oriental Insurance Co. Ltd. 36. As far as Goa is concerned, there is a specific judgment in this regard i.e. Justiniano Audusto De Piedade Barreto v. Antonio Vicente Da Fonseca, though relating to the interpretation of Section 29 of the Limitation Act, 1963, which deals with local and special laws. Dealing with the issue of the Portuguese Civil Code, the Court held that it could not escape from reaching the conclusion that the Portuguese Civil Code is a local law within the ambit of Section 29(2) of the Limitation Act, 1963. A special law is a law relating to a particular subject while a local law is a law confined to a particular area or territory. In our considered view, the Portuguese Civil Code, in matters of succession, is both a special law and a local law. It is special and local because it deals with laws of succession for the domiciles of Goa only. In para 14 of this judgment, the Court held as follows: "14. We, therefore, arrive at the conclusion that the body of provisions in the Portuguese Civil Code dealing with the subject of Limitation of suits etc. and in force in the Union Territory of Goa, Daman and Diu only is "local law" within the meaning of Section 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares actually held in such company, one would have to ascertain the voting power attached to such shares. 50. The appellants have relied upon the dictionary meaning of the word "beneficial owner", which as per Mitra's Legal and Commercial Dictionary, 6th Edition, means "A beneficiary's interest in trust property; a corporate shareholder's power to buy or sell the shares, though the shareholder is not registered on the corporations books as the owner. The expression means such right to enjoyment of property as exist, where the legal title is in one person and the right of such beneficial use or interest is in another and where such right is recognized by law and can be enforced by the Courts at the suit of such owner or someone on his behalf." As per Advanced Law Lexicon, 6th Edition by P. Ramanath Aiyar, beneficial owner means "One who, though not having apparent title, is in equity entitled to enjoy the advantage of ownership". 51. The appellants also rely upon the meaning of the term "Moiety" in the Black's Law Dictionary, which is "A half of something (such as an estate), Also termed mediety. A portion less than half; a small segment. In federal custom's law a payment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to analyse these submissions in the subsequent paragraphs. 53. The provisions of the Portuguese Civil Code, 1867, continued to be in force after the annexation of the territory of Goa into the Indian Union by virtue of the provisions of Section 5 of the Goa, Daman and Diu (Administration) Act, 1962. Further, by virtue of the Goa, Daman and Diu (Laws) Regulation No. 12 of 1962 (GDD Laws Regulation 1) promulgated on 28.11.1962, the Companies Act, 1956 was extended to the territory of Goa and by virtue of amendment to the Companies Act, 1956, Section 2A was incorporated therein extending the Companies Act to the territory of Goa. 54. If we accept the argument of the appellants, that the provisions of Section 187C of the Companies Act would not be applicable to a person, who is governed by the Portuguese Civil Code, in view of the fact that half the ownership of any shares held by one spouse would vest in the other spouse, in terms of the provisions of the Code, we would be faced with a situation that wherever the provisions of the Companies Act may be in conflict with those of the Portuguese Civil Code, conflicting provisions of the Companies Act would be inapplicable to citizen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned under Section 41 of the Companies Act, and shall be a person, who subscribes to the Memorandum of a Company or a person, who agrees in writing to become a member of a company and whose name is entered in its register of members or a person holding equity share capital of company and whose name is entered as beneficial owner in the records of the company shall be deemed to be a member. Here again, the Companies Act does not admit any person other than the above three categories of persons, as members of a company, who shall take membership of a company either by virtue of having subscribed to its Memorandum or who has agreed in writing to become a member of the company and entered his name in the register of members or who holds shares of the company and whose name is registered as a beneficial owner in the register of the company. A person whose name is not registered as one holding beneficial interest in any share of the company is therefore clearly excluded, in terms of Section 41(3) of the Act, from claiming to hold any beneficial interest in any share of the company or to have a claim of being a beneficial owner of such a share. Clearly, therefore, the wife of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficial interest held by him in such shares. 59. In our opinion, a reading of the aforequoted provisions of the Companies Act would result in the following conclusions : a) It is only a person who agrees, in writing, to subscribe his name to the Memorandum of Articles of a Company or a person who holds equity share capital in such company and whose name is entered in its record as beneficial owner of such shares, who can claim to be a member of such company. b) A Memorandum of Articles of the Company binds the company to its members in terms of the covenants contained therein, which in effect, is a contract that binds only those persons who have been admitted as members of the company. c) No third person who may claim to be beneficial ownership of a share can have any relationship with the company in terms of its Memorandum of Articles of Association, unless such person who is entered into the register of beneficial orders and declaration to that effect has been given by the holder of the beneficial interest, in the prescribed form under Section 187C. d) Any charge or agreement created in relation to any share of the company by the ostensible owner of the shares, shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 23A, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder or any payment by any such company on behalf or for the individual benefit of a shareholder, to the extent to which the company in either case possesses accumulated profits; but "dividend" does not include- (i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets; (ii) any advance or loan made to a shareholder by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the company; (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of clause (e), to the extent to which it is so set off; Explanation.-The expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re known as blank transfers. In such blank transfers, the name of the transferor is entered, and the transfer deed signed by the transferor is handed over with the share scrip to the transferee, who, if he so chooses, completes the transfer by entering his name and then applying to the company to register his name in place of the previous holder of the share. The company recognises no person except one whose name is on the register of members, upon whom alone calls for unpaid capital can be made and to whom only the dividend declared by the company is legally payable. Of course, between the transferor and the transferee, certain equities arise even on the execution and handing over of 'a blank transfer', and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee. These equities, however, do not touch the company, and no claim by the transferee whose name is not in the register of members can be made against the company, if the tranferor retains the money in his own hands and fails to pay it to him. A glance at the scheme of the Indian Companies Act, 1913, shows t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded as a "shareholder" for the purpose of Section 18(5) of the Act. That benefit can only go to the person who, both in law and in equity, is to be regarded as the owner of the shares and between whom and the company exists the bond of membership and ownership of a share in the share capital of the company. In view of this, we are satisfied that the answer given by the Calcutta High Court on the question posed by the Tribunal was correct." 63. Thus, we see that in Howrah Trading Company Ltd. (supra), the Supreme Court has held that the words "member", "shareholder" and "holder of a share" have been used interchangeably in the Companies Act even though they may carry the same meaning. The judgment further holds that the word "shareholder" contained in Section 18(5) of the Income Tax Act, 1922, would be given the very same meaning as those words as assigned to them in the Companies Act. The judgment further lays down the principle that a person can be considered to be the owner of a "share" of a company, in law and in equity, and the benefit of the dividend of such share can go only to a person with whom there exists a bond of membership and ownership of such a share in the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of certain shares in a company in which the public were not substantially interested held those shares in the names of different members of the family. The Income Tax Officer applied the provisions of Section 23A of the Act (before its amendment in 1955) and passed an order that undistributed portion of the distributable income of the company shall be deemed to be distributed, and the amount appropriate to the shares of the family were sought to be concluded in the income of the family. In that case again this Court ruled that the word "shareholder" in Section 23A meant the shareholder registered in books of the company and the amount appropriate to the shares had to be included in the incomes of the members of the family, in whose names the shares stood in the register of the company; and as the Hindu undivided family was not a registered shareholder of the company, that amount could not be considered as the income of the family under Section 23A. 12. From the above decisions it is clear that when the Act speaks of the "shareholder" it refers to the registered shareholder. 13. Mr. Sen contended that the above two decisions cannot be considered to have laid down the law corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone being a shareholder. 66. In C.I.T. ..V/s. Universal Medicare (Pvt. Ltd.), reported in (2010) 190 Taxmann 144, this Court was considering Clause (e) of Section 2(22) of the Income Tax Act, 1961, and whether the deeming fiction in that provision would apply to a transaction of a loan other than a "shareholder". Whilst examining these provisions, it has laid down the following ratio : "8. Clause (e) of Section 2(22) is not artistically worded. For facility of exposition, the contents can be broken down for analysis: (i) Clause (e) applies to any payment by a company not being a company in which the public is substantially interested of any sum, whether as representing a part of the assets of the company or otherwise made after the 31 May 1987; (ii) Clause (e) covers a payment made by way of a loan or advance to (a) a shareholder, being a beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power; or (b) any concern in which such shareholder is a member or a partner and in which he has a substantial interest; (iii) Clause (e) also inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or to any concern to which such shareholder is a member or partner, subject to the fulfillment of the requirements which are spelt out in the provision. Similarly, a payment made by a company on behalf, of for the individual benefit, of any such shareholder is treated by Clause (e) to be included in the expression 'dividend'. Consequently, the effect of Clause (e) of Section 2(22) is to broaden the ambit of the expression 'dividend' by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition does not alter the legal position that dividend has to be taxed in the hands of the shareholder. Consequently in the present case the payment, even assuming that it was a dividend, would have to be taxed not in the hands of the assessee but in the hands of the shareholder. The Tribunal was, in the circumstances, justified in coming to the conclusion that, in any event, the payment could not be taxed in the hands of the assessee. We may in concluding note that the basis on which the assessee is sought to be taxed in the present case in respect of the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his decision was that the assessment made by the Revenue Authorities was set aside in so far as it included the loans advanced by the company to the three business concerns of the assessee as deemed dividend and taxed it in the hands of the assessee. 4. The revenue, being aggrieved by the decision of the High Court, preferred an appeal after obtaining special leave of this Court. Now it seems that through some inadvertence which is difficult to understand, the revenue attacked only that part of the order of the High Court which held that the "deemed dividend" could be assessed to tax only in the hands of S. M. Saharia, the registered shareholder and not in the hands of the assessee which was merely the beneficial owner cf the shares. Neither in the statement of case filed on its behalf nor in the course of the arguments the revenue assailed the correctness of the view taken by the High Court that since the assessee was not a registered shaleholder, loans advanced to the assessee could not be regarded as "deemed dividend" under Section 2(6A)(e). The result was that the only question that came to be considered by this Court was whether the "deemed dividend under Section 2(6A)(e) co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o far as this aspect is concerned. In view of this answer to the first question, it is not necessary to consider the other two questions decided by the High Court on remand. The learned counsel appearing on behalf of the assesses, in fact, did not press them." 69. Thus, Rameshwar Lal Sanwarmal (supra) clearly takes a view that the word "shareholder" in Section 2(6A)(e) should mean a registered shareholder whose name is recorded in the register of the company as the holder of the share; the advances and loans made to persons, who are not registered shareholders, could not be regarded as "deemed dividend" within the meaning of that provision, and thus, could not be taxed as dividend income. This judgment further holds that the loans advanced to a beneficial owner of shares, whose name was not registered as such in the registers of the company, could not be treated as deemed dividend and consequently could not be regarded as a loan advanced to "shareholder" of the company within Section 2(6A) (e) of the 1922 Act. 70. We make further reference to the judgment of the Supreme Court rendered in CIT ..V/s. Shakuntala and others reported in AIR 1966 SC 719, which was referred to by the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Shri Shakti Mills Ltd. v. Commissioner of Income-tax, Bombay City, 1948-16 ITR 187: (AIR 1948 Bom 394) and other decisions bearing on the subject. Similarly, we see no reason why the expression 'shareholder' in Section 23A should not have the same meaning, namely, a shareholder registered in the books of the company. It would be anomalous if the expression "shareholder' has one meaning in Section 18(5) and a different meaning in Section 23-A of the Act; for that would mean that a Hindu undivided family treated as a shareholder for the purpose of Section 23-A would not be entitled to the benefit of Section 18(5) of the Act. 7. We do not think that either of the two points urged by the appellant is really decisive of the question. The question is really one of interpretation of Section 23A, and we must interpret Section 23A with reference to its own terms. The section in express terms says that "the proportionate share of each shareholder shall be included in the total income of the shareholder for the purpose of assessing his total income". The section does not talk of the beneficial owner of the share. It talks of the shareholder only. Section 18(5) of the Act deals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... likes with the management of the company, its affairs and its profit within the limits of the Companies Act. It is for this group to determine whether the profits made by the company should be distributed as dividends or not. The declaration of dividend is entirely within the discretion of this group. When the legislature realized that though money was reasonably available with the company in the form of profits, those in charge of the company deliberately refused to distribute it as dividends to the shareholders, but adopted the device of advancing the said accumulated profits by way of loan or advance to one of its shareholders, it was plain that the object of such a loan or advance was to evade the payment of tax on accumulated profits under Section 23A. It will be remembered that an advance or loan which falls within the mischief of the 'impugned section is advance or loan made company which does not normally deal in money- lending is made with full knowledge of the provisions contained impugned Section. The object of keeping accumulated without distributing them obviously is to take the benefit lower rate of super-tax prescribed for companies. This was defeated by Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be to a shareholder being a person who is the beneficial owner of shares and who has a substantial interest in the company viz., shareholding which carries not less than twenty per cent of the voting power, was introduced. By the 1987 amendment with effect from 1st April, 1988, the condition that payment should be to a shareholder who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power was substituted. Thus, the Percentage of voting power was reduced from twenty per cent to ten per cent. By the very same amendment, a new category of payment was also considered as dividend viz., payment to any concern in which such shareholder is a member or a partner and in which he has a substantial interest. Substantial interest has been defined to mean holding of shares carrying 20 per cent of voting power. 13. The Special Bench held that the intention behind this provision is to tax dividend in the hands of the shareholders. 22. Insofar as the provisions of Section 2(22)(e) are concerned, we have already extracted this provision and taken no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dend which is enlarged. Legal fiction does not extend to 'shareholder'. When we keep in mind this aspect, the conclusion would be obvious, viz., loan or advance given under the conditions specified under Section 2(22)(e) of the Act would also be treated as dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. It is a common case that any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to non-members. The second category specified under Section 2(22)(e) of the Act, viz., a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of 'deeming shareholder', then the Legislature would have inserted deeming provision in respect of shareholder as well, that has not happened. Most of the arguments of the learned counsels for the Revenue would stand answere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits of the firm. 5) This provision came up for consideration before a Bench of this Court in CIT v. C. P. Sarathy Mudaliar, (1972) 4 SCC 531. In the context of the assessee being a Hindu Undivided Family, the question of law set out in the aforesaid judgment is as follows: "Whether, on the facts and in the circumstances of the case, the amounts of Rs.5790 and Rs.39,085 could be deemed to be the dividend income of the Hindu Undivided Family in the respective assessment years?" After setting out the aforesaid Section, this Court held: "6. Before a payment can be considered as dividend under Section 2(6-A)(e), the following conditions will have to be satisfied: 1. It must be a payment by a company not being a company in which the public are substantially interested within the meaning of Section 23A of any sum whether as representing a part of the assets of the company or otherwise by way of advance or loan. 2. (a) It must be an advance or loan to a shareholder, or (b) a payment by the company on behalf or for the individual benefit of the shareholder, and 3. To the extent to which the company in either case possesses accumulated profits." 6. After stating that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. 9. When the Income Tax Act, 1961 came into force and repealed the 1922 Act, the definition of "dividend" contained in Section 2(22)(e) was as follows: "Section 2. Definition - In this Act, unless the context otherwise requires- (22) "dividend" includes- (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder, being a person who has a substantial interest in the company or any payment by any such company on behalf, or for the individual benefits, of any such shareholder, to the extent to which the company in either case possesses accumulated profits;" 9) A cursory look at the aforesaid definition would go to show that the shareholder referred to in the aforesaid provision would continue to be a shareholder who is on the register of members of the Company with one additional feature, namely, that such shareholder should be a person who has a substantial interest in the Company. Admittedly, the aforesaid additional feature would make no difference to the position of law laid down in the aforesaid two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the newly inserted definition clause which is to get over the two judgments of this Court referred to hereinabove. This is why "shareholder" now, post amendment, has only to be a person who is the beneficial owner of shares. One cannot be a registered owner and beneficial owner in the sense of a beneficiary of a trust or otherwise at the same time. It is clear therefore that the moment there is a shareholder, who need not necessarily be a member of the company on its register, who is the beneficial owner of shares, the Section gets attracted without more. To state, therefore, that two conditions have to be satisfied, namely, that the shareholder must first be a registered shareholder and thereafter, also be a beneficial owner is not only mutually contradictory but is plainly incorrect. Also, what is important is the addition, by way of amendment, of such beneficial owner holding not less than 10% of voting power. This is another indicator that the amendment speaks only of a beneficial shareholder who can compel the registered owner to vote in a particular way, as has been held in a catena of decisions starting from R. Mathalone v. Bombay Life Assurance Co. Ltd., [1954] SCR 117. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation of these words in the provisions of Clause (e) of Section 2(22) of the Income Tax Act, 1961, we are of the considered opinion that for the purpose of this provision, the "beneficial owner of shares", "shareholder" and "member" in the company referred therein, shall only be the registered shareholder or registered beneficial owner of a share whose name is found in the register of members/shareholders of the company under Section 150 or register of beneficial owner under Section 152A of the Companies Act, 1956. We are of the further considered opinion that in the absence of any declaration in terms of Section 187-C (2) of the Companies Act, 1956, by the wife of the appellant, claiming to be the holder of the beneficial interest in 50% of the shares held by and registered in the name of the appellant-husband as its holder in the Register of Members, it would be the husband appellant who is the exclusive holder of the entire 33% of the shares along with the full voting right/power attached to such shares. We hold that the wife would have no voting powers under the scheme of the Companies Act attached to any of the shares, which have been exclusively registered in the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l value forms the spouses moiety. However, the wife, in this case would never have the actual right or ownership of the share. 79. We can also view this question from a slightly different angle. Under the Civil Code, the contract of marriage between the spouses stands dissolved either by the death of one of the spouses or by decree of divorce. In the event of the death of the shareholder spouse, the shares held by that spouse would devolve to the children of the deceased shareholder or be allotted in Inventory Proceeding to decide rights of succession on the spouse, subject to the company in which such shares are held, accepting the allottee of such shares, in terms of Section 109 read with Section 111 of the Companies Act, 1956. In the event of the surviving spouse not being allotted the shares, 50% of the value of such shares would belong in the totality of the value of the estate to that surviving spouse as moiety right. In the event of dissolution of marriage by divorce, the same principle as enunciated above, would apply, in that the divorced spouses would be required to partition their entire matrimonial estate in equal halves by value, in an Inventory Proceeding or by a Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ostly of shares of limited companies and deposits in banks; thus, the concept which formed the basis of calculation of the wealth was its "value" and not based upon the beneficial right to specific shares in a company. These judgments, therefore, are of no assistance to the arguments raised by the appellants. 80. Thus, in our opinion, under no circumstances would the provisions of the Civil Code confer or create an ownership right in the shares, of a company or give the right of voting, in proportion to the share in the capital of the company, to the other spouse. The provisions of Clause (e) of Section 2(22) of the Income Tax Act, 1961, in the present case would, therefore, fully apply to the husband appellant, who would be the owner of the entire 33% share in each of the concerned companies with the entire voting power (which is more than 20% in such company, to the exclusion of the wife). Consequently, we reject the submission that the wife of the spouse, married under the provisions of Portuguese Civil Code, by operation of law, would be entitled to the beneficial ownership of the shares of the husband/spouse. For reasons stated above, we further reject the submission that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of making additions by the income on the basis of treating the loans/advances from companies as deemed dividend under Section 2(22)(e) of the Act. The ITAT, by its order of 13.08.2015, remanded the case to the CIT (Appeals) for re-adjudication on the limited issue with regard to addition of deemed dividends under Section 2(22)(e) of the Act. The para 8 of the order of remand of the ITAT, the following words recorded : "8. At the outset, it was submitted by the learned A. R. (Assessees Representative) that in the cross objections for the AYs 2007-08, 2009-10 to 1011-12, the assessees have raised in ground No. 2 of the cross objections, a challenge against the validity of the proceedings and the order passed under Section 153C of the Act. It was the submission that he did not wish to press the said ground. Consequently, ground No. 2 in the cross objections filed by the assessees for the AYs 2007-08, 2009-10 to 1011-12 stands dismissed as not pressed." 84. We further note that Ground II (2) raised in the cross objections dated 24.07.2015 filed by the assessee, has been raised in the following terms : "II. Validity of proceedings and order passed under Section 153C of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, upholding the jurisdiction of the AO to proceed in terms of the provisions of Section 153C of the Act. Taking advantage of this finding, which our opinion was redundant as the order of remand was clearly restricted to the applicability of Section 2(22) of the Act, the appellants have raised this as a ground of appeal, claiming that the AO lacked the jurisdiction in terms of Section 143(3) read with Section 153C of the Act, that question has been concurrently answered on facts by the CIT (Appeals) and the ITAT in the first round between the parties. Here again, the ITAT has answered this question for a second time at para 59.3 of its judgment after considering the various transactions which came to light in the search conducted by the Revenue, which were earlier considered on the first round, after which that ground was specifically given up and not pressed for by the appellants. In these circumstances, we are of the opinion that substantial question of law (D) does not arise for our determination as the same was never the subject matter of remand and decision before the CIT (Appeals) or before the ITAT. 87. The appellants have contended that notwithstanding the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) PCIT ..V/s.. Jignesh P. Shah, reported in [2018] 99 Taxmann.com 111 (Bombay); b) Underwater Services Company Ltd. ..V/s.. ACIT, reported in [2022] 448 ITR 691 (Bombay), 89. In Principal Commissioner of Income Tax ..V/s.. Abhisar Buildwell P. Ltd (supra), the Hon'ble Supreme Court was concerned with the conflict of decisions rendered by various High Courts on the scope of Section 153A of the Act and whether, whilst re-assessing, the AO may consider only the incriminating material found during the search and is precluded from considering any other material derived from any other source. Whilst deciding this question, the Hon'ble Supreme Court recorded its agreement with a view taken by Delhi High Court in Kabul Chawla (supra) and by the Gujrat High Court in Somya Construction (supra) that no addition can be made in respect of a completed assessment in the absence of incriminating material. The conclusions in this judgment are the following : "14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under Section 153A; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Act as well as the loss computed under the assessment dated 29.12.2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income Tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act." Thus, Murli Agro Products Ltd (supra), was based upon the finding of the ITAT that no material at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Murli Agro (supra) with which we respectfully agree. These are the conclusions which can be reached and upon reading of the legal provisions in question." A reading of this judgment leaves no doubt that the only question decided therein was that the assessment under Section 153A of the Act could only be on the basis of incriminating material found during the search; however, the judgment does not deal with the question of what constitutes "incriminating material". 92. The appellants have cited before us a judgment of the ITAT, Kolkata, in Mani Square Ltd. ..V/s.. ACIT, reported in [2020] 83 ITR (T) 241 (Kolkata Tribunal), which in turn has referred Kabul Chawla (supra) and, as claimed by the appellants, has decided the issue before us. A reading of the judgment would reveal that the real question before the Tribunal was quoted at paras 12 and 13 thereof which read as under : "12. After giving thoughtful consideration to the facts of the present case and the grounds raised in appeal by both parties and taking their consent, we frame the following issues/questions for our adjudication. (A) Whether in absence of any incriminating material found in the course of search at the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act were not sustainable because no incriminating material concerning such additions were found during the course of a search. In that case the ITAT concluded that the additions made were not based on any incriminating material found during the search operations and directed deletion of the same referring to the judgment of this Court in Continental Warehousing (supra), the Delhi High Court has summarized the legal position thus : "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required is that the assessment under Section 153A has to have some relevance to the incriminating material. 95. We then consider the submission of Shri Jain for the appellants, notwithstanding the fact that the appellants had given up the cross objections raised before the ITAT on the first round on the question of the AO assuming jurisdiction under Section 153A or that the discovery of the shareholding pattern during search could not constitute the incriminating material for that purpose, the appellants were not estopped at law to raise this question in the present appeal since the same was a jurisdictional issue. In support of the submissions, the appellants have cited a judgment of this Court in PCIT ..V/s.. Jignesh P. Shah, reported in [2018] 99 Taxmann.com 111 (Bombay); whilst dismissing the appeals at the threshold holding no substantial questions of law arose, this Court has observed thus : "6. The aggrieved assessee approached the Tribunal. After considering the rival submissions, the Tribunal answered the legal issue in favour of the assessee. While answering it, in para 8, the scheme of the law was discussed. Then, the principle which was enunciated by the judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial on the basis of which the notice was issued. Since there was no reference made to any material found to be incriminating in the notice under Section 153A, the notice was quashed with a direction that the Assessment Officer could issue a fresh notice under Section 153A to word it suitably to include the details of the incriminating material. We quote below the relevant paragraphs of this judgment : 4, 5 and 6. "4. We have no quarrel with the proposition submitted by Mr. Chhotaray. Section 153A is couched in mandatory language once there is a search, the assessing officer has no option but to call upon the assessee to file the returns of the income for the earlier six assessment years. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the assessing officer which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section 153A only on the basis of seized material. 5. Issuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (Appeals), in its order dated 20.01.2015 passed in the first round of litigation, had come to a categorical finding of fact on page 73 of its order that it was for the first time during the search in the seizure that intragroup transactions and the fact that individual assessees were the beneficiaries of such transactions came to the knowledge of the year and had no opportunity to examine these transactions during regular assessment since these were not made known prior to the search operations. The CIT (Appeals) has also noted in this order that it was during the course of the search that the facts were collated and statements were recorded, thus coming to a factual finding that the shareholding pattern of the individual assessees of this company was for the first time discovered during the search. Thus, the CIT (Appeals) had clearly arrived at a factual finding in the first order itself that the discovery of the shareholding pattern during the search found the incriminating material for assuming jurisdiction for issuance of notice under Section 153A of the Act. This factual finding was challenged before the ITAT in the first round of litigation, and such ground of challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Authorities have considered such additional financial advances for computing deemed dividend under Section 2(22)(e), read with Section 2(32) of the IT Act. Accordingly, this factual assessment is not vitiated because of perversity or unreasonableness. 100. We have also taken note of the fact that the principles of the CBDT Circular no. 19/2017, dated 12th June 2017, have neither been ignored nor breached, though such a circular may not have existed when the ITAT heard the matter. The Assessing Authorities, including the Tribunal, have also considered such principles. Therefore, no case is made to interfere with the findings, which are primarily factual and based on the material on record. Accordingly, no purpose would be served in remanding the matter based upon the CBDT Circular dated 12th June 2017 since the principles in the said circular have been followed and applied by the Assessing Authorities qua the transaction in question. 101. The second transaction is between KCPL and Kamat Construction and Resorts Pvt. Ltd. (KCRPL). Again, a partial relief is granted to the assessee upon evaluating the material on record. The assessee had contended that the advances were towards a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questions (E) and (F) favouring the assessee and against the Revenue. Though such questions were framed, on closer scrutiny and evaluation of the material on the record, We find that these are questions of fact giving rise to no substantial question of law. In any case, the substantial questions of law, as framed, must be answered against the assessee and favouring the Revenue because there is no error in the findings that the transaction in question or, in any case, the transactions above particular financial limits were not made in the ordinary course of business and, therefore, did not qualify loans or advances to apply the provisions of Section 2(22)(e) of the Income Tax Act. 105. Having held substantial questions of law (A) to (F) against the appellants in 29 Tax Appeal bearing Nos. 51 of 2017, 121 of 2017, 80 of 2017, 81of 2017, 63 of 2017, 69 of 2017, 123 of 2017, 89 of 2017, 60 of 2017, 53 of 2017, 79 of 2017, 67 of 2017, 59 of 2017, 86 of 2017, 82 of 2017, 84 of 2017, 88 of 2017, 120 of 2017, 54 of 2017, 56 of 2017, 87 of 2017, 122 of 2017, 66 of 2017, 78 of 2017, 77 of 2017, 64 of 2017, 55 of 2017, 85 of 2017, 65 of 2017, 58 of 2017, 70 of 2017, 76 of 2017, 83 of 2017, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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