COMMR OF INCOME TAX PUNJAB JAMMU AND KASHMIR AND HIMACHAL PRADESH PATIALS Vs. S RAGHBIR SINGH IN ALL THE APPEALS

JUDGEMENT

(1.) On April 10, 1953 the estate of the joint Hindu family of which the respondent was a member was partitioned, and the respondent was allotted, besides other properties, 400 shares of the Simbhaoli Sugar Mills Private Ltd., and was made liable to pay a business debt amounting to Rs. 3,91,875 due by the family to R. B. Seth Jessa Ram Fetch Chand of Delhi. On April 14, 1953 the respondent executed a deed of trust in respect of 300 out of the shares of the Simbhaoli Sugar Mills which fell to his share. The following are the material provisions of the deed of trust:

(2.) The respondent claimed before the Income-tax Officer, E-Ward, Amritsar that the dividend received by the trustee in respect of 300 shares of the Simbhaoli Sugar Mills was the income of the Trust and that he had no concern with that income as he has "divested himself irrevocably of the ownership of the shares and that in any event of Rs.19,856 being the amount due as interest to R. B. Seth Jessa Ram Fateh Chaud should be allowed as a permissible deduction in computing the net income from dividend of the shares. The Income-tax Officer rejected the contentions of the respondent holding that the Trust was a 'fictitious transaction'. The Appellate Assistant Commissioner held that the respondent had not "irrevocably transferred the 300 shares of the Simbhmoli Sugar Mills" and therefore by virtue of S. 16(1)(c) proviso one the respondent could not escape liability to pay tax on the dividend from the share.

(3.) The respondent appealed to the Income-tax Appellate Tribunal, but without success. At the instance of the respondent the Tribunal drew up a statement of the case and referred the following questions to the High Court at Chandigarh: