SHRI RAM JHA Vs. COMMR OF INCOME-TAX

JUDGEMENT

(1.) These two references arise out of proceedings for assessment of income-tax of Pt Shri Ram Jha, who was assessed in the status of a Hindu undivided family. Pt. Shri Ram Jha died during the pendency of these references in this Court and is now represented by Dr. Krishna Ram Jha, who succeeded as Karta of the family. The proceedings relate to the two assessment years 1946-47 and 1947-48. The Hindu undivided family included within it the three brothers Pt. Shri Rani Jha, Dr. Krishna Ram Jha and Mr. Hari Ram Jha. Their father had purchased certain shares out of which 100 shares of the Burakar Goal Company of the face value of Rs. 51 each were inherited by these three brothers in the year 1914, on the death of their father. The Hindu undivided family also purchased 100 further shares of the same Company on the 21st September 1921. During the previous year corresponding -to the assessment year 1947-48, the 200 shares of Burakar Coal Company were sold at the rate of Rs. 62-12 each. These 200 shares consisted of the 100 shares which had been inherited by the three brothers from their father and the other 100 shares which had been purchased in 1921. It was also admitted that, during the relevant previous year, the Hindu undivided family was carrying on the business of dealing in shares. In the circumstances, it was held by the Tribunal that the profits which accrued to the Hindu undivided family as a result of the sale of the 100 shares, which had been inherited by the three brothers from their father, were revenue income of the family liable to income-tax. This is one of the decisions challenged in these references.

(2.) The second point that arose was that Dr. Krishna Ram Jha had insured his life for a sum of Rs. 10,000, through his brother Mr. Hari Ram Jha, as an insurance agent. Mr. Hari Ram Jha was not carrying on the profession of an insurance agent, but in view of the suggestion that he would be able to earn the commission on the insurance policy of his brother, he took a licence as an insurance agent. The result was that he received a sum of Rs. 518 from the insurance company during the previous year relating to the assessment year 1947-48. This was, also treated as income of the Hindu undivided family by the Tribunal and included in its assessment. This-is another decision that has been challenged by the assessee in these references.

(3.) The third point that arose was related to the proceedings for assessment of the Hindu undivided family for the assessment year 1946-47. In the previous year relevant to the assessment year, the family received certain bonus shares from different companies by virtue of shares which were held by the family as stock-in-trade. They were issued free of cost on the capitalisation by the Companies of their reserves and did not involve the release of all or any of the assets of the Companies to the share-holders. These bonus shares were sold for a sum of Rs. 40,226. The assessee's contention that the bonus shares represented the capital receipt in the hands of the assessee so that the sale, proceeds were not taxable was accepted by the Tribunal. This decision of the Tribunal has been challenged by the Department and is the subject-matter of case No. 18 of 1950, whereas the former two points are the subject-matters of case No. 17 of 1950. The three questions that have been framed by the Tribunal are as follows:-