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TMI Blog1965 (11) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... reference made to it under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act.) The question referred to by the Appellate Tribunal was : " Whether, in the case of the assessee, an investment company, its dividend income is part of its profits and gains chargeable to tax under section 10 of the Indian Income-tax Act, 1922 ? " In the statement of the case, dated December 3, 1953, the Appellate Tribunal gave the following facts : The appellant, Bengal and Assam Investors Ltd., hereinafter referred to as the assessee, was incorporated on January 30, 1947, and commenced business on March 19, 1947. According to its memorandum of association, the company's objects are : " 3. The objects for which the company is established are (and it is expressly declared that the several sub-clauses of this clause and all the powers thereof are to be cumulative and in no case is the generality of any one sub-clause to be narrowed or restricted by any particularity of any other sub-cause, nor is any general expression in any sub-clause to be narrowed or restricted by any particularity of expression in the same sub-clause or by the application of any rule of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing with June 30, 1949, of Rs. 66,395. The Income-tax Officer in his order dated August 1, 1951, held that as the sum of Rs. 66,395 was profit from dividends, business losses of 1948-49 and 1949-50 could not be set off. The assessee filed two appeals against the assessments made for 1949-50 and 1950-51, and the Appellate Assistant Commissioner, by his order dated December 18, 1951, disposed of them by a common order. He held that the dividend income was not business income and was assessable under section 12 of the Act. Accordingly, for the assessment year 1949-50 he determined the loss from other sources at Rs. 73,324 and he held that it could not be carried forward as it was a loss from other sources under section 12. The assessee filed two appeals before the Income-tax Appellate Tribunal, which by its order dated January 12, 1953, dismissed the appeals on two alternative grounds ; firstly, it held that the dividend income was assessable only under section 12 of the Act, as the assessee was an investment company. In the alternative, the Appellate Tribunal held that even if the company were to be a dealer in shares, even then in its opinion the dividend received as registered shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Assistant Commissioner's order, what the revision was, particularly whether any amount was left in the assessment as unabsorbed business loss after the transfer of an amount to loss under other sources, directed by the Appellate Assistant Commissioner, had been carried out. " The Appellate Tribunal submitted a supplementary statement of the case, dated February 18, 1957. It was observed in the statement of the case that " the Appellate Tribunal read the orders of the Appellate Assistant Commissioner to mean that the assessee-company was an investment company and was not a company which dealt in shares. The quantum of the loss in the assessment year 1949-50 as suggested in the Appellate Assistant Commissioner's order was not adverted to by the Appellate Tribunal at the time of the hearing of the appeal as no arguments were addressed to them on that point." The supplementary statement mostly contained an interpretation of the orders of the Appellate Assistant Commissioner and the Appellate Tribunal ; the only fresh fact included was the information that the Income-tax Officer in conformity with the order of the Appellate Assistant Commissioner revised the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputed under section 10 or section 12 of the Act. Mr. Desai contends that if you look at the objects of the company it is apparent that the com pany is carrying on business. He further relies on Commissioner of Income tax v. Cocanada Radhaswami Bank Ltd. and says that at any rate if the dividend income is computed under section 12, it still is business income for the purpose of section 24(2). He then draws our attention to Commissioner of Income-tax v. Chugandas and Co. where this court held that " there is no reason to restrict the condition of the applicability of the exemption under section 25(3) only to income on which the tax was payable under the head 'profits and gains of business, profession or vocation.' The exemption under section 25(3) is general. " But these two cases have no bearing on the question whether the dividend income has to be computed under section 10 or section 12 of the Act. They may have reference to the question sought to be raised before us by way of modification and which we have declined to modify. The main argument of Mr. Desai is that when a company is formed for the purpose of acquiring shares and making investments and generally undertaking financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mean that the term would not include a mere holding of investments, and made a special provision to rope in limited companies or incorporated societies which were holding investments or property within the definition of the word " business ". Before the amendment of section 12 by section 9 of the Finance Act, 1955, it had been held by the Bombay High Court in Commissioner of Income-tax v. Ahmuty Co. Ltd. that where a company was a dealer in shares which constituted its stock-in-trade the dividend income received by the assessee in respect of its shares was income from business chargeable under section 10 and the income-tax authorities could not compel the assessee to show the income under section 12. But there is no case where it had been held that even if the shares are not stock-in-trade of the assessee-company, the dividend can be assessed under section 10. It seems that in practice an investment company was being assessed under section 12 in respect of dividend income received by it. (See, for example, Eastern Investments Ltd. v. Commissioner of Income-tax, which is a case which came up to the Supreme Court). It seems to us that on principle before dividends on shares ..... X X X X Extracts X X X X X X X X Extracts X X X X
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