COMMISSIONER OF INCOME TAX Vs. RAMDAS LALLUBHAI

JUDGEMENT

(1.) THE question referred in this reference is identical to the question which we have just dealt with in Reference No. 48 of 1971 (CIT vs. D. G. Goenka (1981) 129 ITR 260 (Bom). The question is as follows :

(2.) THE assessee is a partner of a partnership firm, M/s Lallubhai Nagardas of Bombay. The firm consists of three partners who are brothers. The firm carried on business of purchase and sale of shares in the asst. year 1966 67, and it has earned dividend income in that year of Rs. 71,706. The question before the ITO was whether the share of dividend income received by the assessee should be treated as business income and earned income of the assessee on the ground that these shares represented the stock in trade.

(3.) ON behalf of the assessee, it was contended by Mr. Dastur that though the definition of "earned income" in S. 2(7)(iii)(c) of the Finance (No. 2) Act, 1962 (hereinafter referred to as "the Finance Act"), requires that the source or the right which gives rise to the income in question has to be determined in so far as dividend income is concerned, the business activity of the assessee which consists of purchasing and selling of shares was also the activity which gives rise to dividend income. The learned counsel contended that receipt of dividend is an integral part of the business activity. We may point out that when we heard IT Ref. No. 48 of 1971 (CIT vs. D. G. Goenka (supra) we found that a similar point was involved in the present reference in which Mr. Dastur appears, and he was also heard on the contention which is noticed above. We have already rejected the contention that the business activity consisting of purchasing and selling of shares gives rise to dividend income and we have already held in our judgment in IT Ref. No. 48 of 1971 that the dividend income cannot be said to be immediately derived from personal exertion because it is immediately derived from the ownership of the shares. The first contention of Mr. Dastur must, therefore, be rejected.