COMMISSIONER OF INCOME TAX Vs. BANSI DHAR L

JUDGEMENT

(1.) THE payments mentioned in sub-cls. (1) and (2) hereof shall be a first charge on the said dividends and may be made direct by this company out of the said dividends."

(2.) L. Murlidhar, father of L. Bansi Dhar, assessee, died in an air crash in 1949, leaving behind two sons L. Shri Dhar and L. Bansi Dhar, along with two daughters, Smt. Sushila and Smt. Gayatri. The company, it seems, in terms of Art. 7(e) paid the proportionate dividends to Smt. Sushila and Smt. Gayatri direct. The ITO considered this payment to be a voluntary application of income on the part of the assessee and, therefore, liable to be taxed and not open to exclusion from the income of the assessee. This was confirmed by the AAC on appeal. The Tribunal, however, disagreeing with the view of the AAC and of the ITO, came to the conclusion that the rule laid down by the Privy Council in Raja Bejoy Singh Dudhuria vs. CIT (1933) 1 ITR 135 PC was applicable to the case and, therefore, payment of the dividends to the two ladies being a case of diversion by overriding title, this amount was liable to be excluded from the total income of L. Bansi Dhar.