CHECHAMMA THOMAS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee in I.T.R. Cases Nos. 13 to 15 of 1980 holds 5,200 equity shares of Rs. 10 each in a limited company, Periyar and Pareekanni Rubbers Ltd., and the assessees in I.T.R. Cases Nos. 169 to 171 of 1982 hold 14,900 shares in that company. For the assessment years 1971-72, 1972-73 and 1973-74, the company had declared certain interim dividends. According to the assessees, only a portion thereof was exigible to tax in the first year and that no portion was exigible to tax in the remaining two assessment years. THE contention of the assessees is that dividends for the respective years, to the extent to which exemption was claimed, was not taxable inasmuch as such portion of the dividends represented the surplus obtained on the sale of agricultural lands or compensation received by the company on acquisition by the Government. THE Income-tax Officer, however, held that the entire income was exigible to tax because, according to him, shareholders and the company were different entities. Annexures A1, A2 and A3, respectively, in I.T.R. Cases Nos. 13 to 15 of 1980 are the assessment orders for the assessment years 1971-72, 1972-73 and 1973-74. Annexures A1, A2 and A3 in I.T.R. Cases Nos. 169 to 171 of 1982, respectively, are the orders of assessment for the years 1972-73 and 1973-74 in respect of the two assessees therein. Annexure B in ITR Cases Nos. 13 to 15 of 1980 is the combined order of the Appellate Assistant Commissioner who allowed the appeal holding that the portion of the dividends which represented the surplus obtained on the sale of agricultural land/acquisition by the Government was not accumulated profits and, therefore, not liable to be taxed. In I.T.R. Cases Nos. 169 to 171 of 1982, the Appellate Assistant Commissioner confirmed the assessments. On further appeal by the Revenue in I.T.R. Cases Nos. 13 to 15 of 1980 and by the assessees in I.T.R. Cases Nos. 169 to 171 of 1982, the Tribunal confirmed the findings of the Income-tax Officer. Annexure C in I.T.R. Cases Nos. 13to 15 of 1980 is the order of the Tribunal in I.T.R. Cases Nos. 169 to 171 of 1982. Annexures C1 and C2 are the orders of the Tribunal in respect of the two assessees therein.

(2.) THE question of law common to both the references referred to this court for decision is as follows :

(3.) IN CIT v. Kamal Behari Lal Singha [1971] 82 ITR 460, the Supreme Court after having referred to the dictum laid down by the Supreme Court in Nalin Behari Lall Singha's case [1969] 74 ITR 849, observed as follows (at p. 463 of 82 ITR) :