COMMISSIONER OF INCOME-TAX, CALCUTTA vs. SHAILA BEHARI LAL SINGHA

CIVIL APPEAL No. 2276/1968Supreme Court[1970] 2 S.C.R. 3221 August 1969Bench: 3 JudgesAuthor: J.C. SHAH, V. RAMASWAMI, A.N. GROVER OF INCOME4 pages
AI SummaryRemanded

What were the facts?

The assessee, Shaila Behari Lal Singha, a shareholder of Ukhara Estates Zamindaries Ltd., received dividends for assessment years 1951-52, 1952-53, and 1953-54. The assessee contended that only a portion of these dividends, amounting to Rs. 8,669, Rs. 20,469, and Rs. 21,822 respectively, were taxable as dividend. The remaining amounts, claimed to be derived from capital gains (salami from leases and land acquisition compensation), were not taxable as dividend. The Income-tax Officer taxed the entire amount. The Appellate Assistant Commissioner held the entire amount as income but only a part as taxable dividend. The Income-tax Appellate Tribunal held that amounts attributable to salami were taxable as income from 'other sources', not as dividend. The Tribunal referred three questions to the High Court, which answered them in the negative, subject to pending Supreme Court decisions. The Commissioner appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the High Court erred in the manner it disposed of the reference. Even with the consent of parties, the High Court must record its answers and reasons, and these answers are final for the High Court. The High Court failed to decide on the facts of each case whether salami was capital gain and whether any part of the land acquisition compensation was capital gain. The Court noted that while interest on compensation is income, compensation for compulsory acquisition of land forming part of fixed assets is prima facie capital in nature. The Court also observed that the question of whether receipts from capital gains were taxable as income from 'other sources' (not being dividend) under Section 12 was expressly referred in this case, unlike in previous related appeals. Therefore, the High Court's order was set aside, and the case was remanded to the High Court for disposal according to law.

What were the issues?

1. Whether, on the facts and in the circumstances, the Tribunal was right in holding that the distribution to the assessee of the amount attributable to land acquisition compensation received by the company after March 31, 1948, was, in the hands of the assessee, a receipt of 'dividend' within the meaning of Section 2(6A) of the Indian Income-tax Act, 1922? (Assessee's contention: Yes, it was not dividend. Revenue's contention: No, it was dividend). 2. Whether, on the facts and in the circumstances, the Tribunal was right in holding that the receipt by the assessee of the amount attributable to salami realized by the company for grant of long-term leases after March 31, 1948, was a receipt of income in the hands of the assessee and taxable as income from 'other sources'? (Assessee's contention: Yes, it was income from other sources. Revenue's contention: No, it was not income from other sources). 3. Whether, on the facts and in the circumstances, the distribution to the assessee of the amount attributable to salamis realized by the company for grant of long-term leases after March 31, 1948, was not in the hands of the assessee a receipt of 'dividend' within the meaning of Section 2(6A) of the Indian Income-tax Act, 1922? (Assessee's contention: Yes, it was not dividend. Revenue's contention: No, it was dividend).

Which sections of the Income-tax Act were involved?

Section 2(6A),Section 12,Section 16(2),Section 66(1)

AI-generated summary — verify with the full judgment below

COMMISSIONER OF INCOME-TAX, CALCUTTA A v. SHAILA BEHARI LAL SINGHA August 21, 1969 [J. C. SHAH, ACTING C.J., V. RAMASWAMI AND A. N. GROVER, JJ.l Practice & Procedure-High Court disposing of reference under ln- co1ne .. fax Act-Manner of disposal.

The assessee was a share-bolder of a company.

The Income-tax Appellate Tribunal referred three questions to the High Court namely, (i) whether the amount distributed to the assessee out of the amount nttributable to land acquisition compensation l'eceived by the company wu, in the hands of the anessee, receipt of 'dividend' within the meanln11 ot 1. 2(6A) of the Income-tax Act, 1922; (ii) whether the amount dis- tributed to the assessee out of the amount attributable to salamis realised by the company for grant of long-term leases was a receipt in the hands of the assessee taxable as income from 'other sources'; and (iii) whether the amount referred to in question (ii) was not, in the hands of the a8$Cliee, a receipt of 'dividend' within the meaning of s. 2 ( 6A) of the Act.

The High Court, following its earlier judgment, answered the questions in the negative and observed that it was agreed between the parties t

The order continues below.

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