COMMISSIONER OF INCOME TAX Vs. DALMIA R

JUDGEMENT

(1.) THIS is a IT Ref. under S. 66(1) of the Indian IT Act, 1922 (the Act), by the CIT.

(2.) THE assessee, Shri R. Dalmia, was holding 2,50,000 shares of Jaipur Udyog Ltd. in the name of his nominee, Shri S. N. Dudani, since 1955. He was the real owner of these shares. By an agreement dated May 21, 1955, the assessee agreed to purchase certain properties of the value of Rs. 49,25,000 from Bharat Insurance Company Ltd. (BIC). As a security for the purchase price he deposited with BIC blank transfer deeds with share certificates. The agreement was that he will make the payment of the purchase price in instalments together with interest. Clause (6) of the agreement provided that so long as the instalments of the purchase price and interest and other moneys payable by the assessee to BIC under the agreement are duly and regularly paid and the assessee otherwise observes and performs all other terms and conditions of the agreement to be observed and performed on his part, the dividends on the said securities shall belong to and be paid to the nominee of the assessee, namely, Dudani.

(3.) YOU will appreciate that as there was an overriding charge on the dividend income even before it accrued, the said dividend cannot be considered as my income at all. In fact, this was the income of M/s Bharat Insurance Company Ltd. and they must have been taxed on the said income. In the circumstances, the question of dividend warrants does not arise." The ITO included a sum of Rs. 6,25,000 as the dividend income of the assessee in the asst. yr. 1960 -61, with which we are concerned in this reference. The assessee had already disclosed a sum of Rs. 3,12,500 in the previous asst. year 1959 -60, and had paid tax thereon. The ITO took the view that the amount of Rs. 3,12,500 ought to have been assessed properly in the year 1960 -61 and, therefore, this amount also be included in the asst. year 1960 -61. As regards the balance of Rs. 3,12,500 he took the view that this was the income of the assessee and ought to have been disclosed in the income -tax return.