COMMISSIONER OF INCOME TAX Vs. BIRLA M P

JUDGEMENT

(1.) THIS is a reference under S. 256(1) of the IT Act, 1961 (referred to hereinafter as "the said Act"). The questions referred to us for our determination in this reference are as follows : Asst. year 1968 69 :

(2.) THE present respondent is the executor of the will of R. D. Birla the original respondent, who was the assessee. We propose to refer to the said R. D. Birla as "the assessee". Some time prior to 1945, the assessee had transferred 400 shares of Birla Brothers P. Ltd. to his wife, Shardadevi. In the course of the accounting period ending March 31, 1967, relevant to the asst. year 1967 68, Shardadevi received 160 shares of Birla Brothers P. Ltd., as bonus shares on account of the said holding of the said 400 shares. In respect of these bonus shares dividend was received during the two accounting periods relevant to the assessment years in question, namely, asst. yrs. 1968 69 and 1969 70, respectively. As in the past, the assessee included in his declared income 2/3rds of the dividends on the said 400 shares of Birla Brothers P. Ltd., transferred by him to Shardadevi, under S. 64 of the said Act. As the assessee had not declared in his return the dividend income in respect of the bonus shares, he was called upon to explain why the same should not be taxed in his hands under S. 64 of the said Act. The ITO, in the assessment proceedings for the said two assessment years, took the view that the original holding of 400 shares of the said company which had been transferred by the assessee to Shardadevi had increased to 560 shares as a result of the issue of bonus shares with the result that the entire 560 shares should be regarded as the assets transferred by the assessee to his wife and the dividend income thereon should be included in the income of the assessee. On appeals preferred by the assessee, the AAC reversed the decision of the ITO and held that the dividend income of the said bonus shares was not liable to be included in the income of the assessee under the provisions of S. 64(iii) of the said Act, as they stood at the relevant time. The decision of the AAC was upheld by the Tribunal in appeals preferred by the Revenue to the Tribunal. It is from the consolidated decision of the Tribunal in the said appeals that the present reference arises and the aforesaid questions have been referred to us.

(3.) IT is common ground that the case does not fall within cl. (i) of S. 27 of the said Act.