T MANICKAVASAGAM CHETTIAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal has referred for our opinion the following question :- "whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the matter fell within the exceptions contemplated in S. 150 (1) of the IT Act, 1961. " *

(2.) ONE Visalakshi Achi held shares in Maragathavalli (P)Ltd. , a company in which the public were not substantially interested. On 30th august, 1945 she borrowed from it a sum of Rs. 70, 000. She died in April, 1947 and these shares were inherited by her son Manickvasagam Chettiar, the assessee herein. He undertook to discharge the liability to the company. The sum of Rs. 70, 000 alongwith the interest due appeared in the name of Visalakshi Achi till her death in the company's books. During the year ended 31st March 1948 the sum due in her account was transferred to the account of Manickvasagam Chettiar, the assessee herein, and interest was being paid by him. As on 31st March, 1955, the amount due by him in this account was Rs. 49, 994.

(3.) THE High Court went into this question and observed at p. 292 as follows :- "the ITO has proceeded on the basis that the relevant date to ascertain the accumulated profits of the company would be the commencement of the previous year relating to the asst. yr. 1955-56. This however is not the correct view of the matter. It is the date of payment by the company to the shareholder of the loan or advance that should be taken into account for the purpose of ascertaining the extent of its taxability in relation to the accumulated profits of the company. . . . . . . . . . THE question that has now to be determined is whether the date of payment in these cases should be taken as the date when Visalakshi Achi first obtained the loan from the two companies (the company relevant to the assessee herein and the company relevant to the assessee's brother) or the date when the assessee themselves undertook to discharge that debt to the company after here demise. This question is not free from difficulty. . . . . . . . . . We would therefore hold on the special features of this case that the relevant date, the date of payment, to be taken into account for the purpose of ascertaining the accumulation of the profits of the companies is the date on which each of the assessees made himself personally liable to the companies. " * After the reference was answered, the matter went back to the Tribunal for passing orders under S. 66 (5) of the Act. THE Tribunal passed such an order on 31st August, 1962 on the following terms :- "as required under S. 66 (5) of the Indian IT Act and in confirmity with the judgment of the High Court of Judicature at Madras dt. 2nd March, 1962 in T. C. Nos. 185 and 186 of 1959, we direct that in this case, the relevant date of payment of the loan or advance by the Company to the shareholder to be taken into account for the purpose of ascertaining the accumulated profits of the Company shall be the date on which the assessee made himself personally liable to the company. We further direct that the amount of loan due by the assessee to the Company on the date when he undertook to discharge that loan to the extent of accumulated profits of the company on that date shall be treated as Dividend within the meaning of S. 2 (6a) (e) r/w S. 12 (b)of the IT Act. THE assessment shall be modified accordingly. " *