(1.) THE question that has been referred to this Court for determination in this reference made by the Appellate Tribunal under S. 256(1) of the IT Act, 1961, runs thus:
(2.) THE assessee is an individual and the asst. year is 1962 63, the corresponding previous year being the financial year which ended on 31st March, 1962. The assessee's husband owned a number of shares in Oxychloride Flooring Products Ltd. and out of his said shareholding he had got 1,000 shares converted into share warrants as permitted by the relevant articles of association of the company. The assessee inherited the said share warrants. In the previous year relevant to asst. year 1962 63, the assessee received a net dividend of Rs. 3,150 after deduction of tax of Rs. 1,350 from the company in respect of the said share warrants. In making the assessment on the assessee, the ITO refused to give any credit for the tax deducted at source and he striaghtaway taxed the net dividend of Rs. 3,150. According to him, the assessee was not entitled to the credit for the tax deducted at source because she was not registered in the books of the company as the owner of those shares and hence she could not be treated as the shareholder for the purpose of getting credit for the tax deducted at source under S. 199 of the Act. He relied upon the decision of the Supreme Court in Howrah Trading Co. Ltd. vs. CIT (1959) 36 ITR 215 (SC) : TC5R.508. The assessee preferred an appeal to the AAC, who did not accept the view of the ITO. The AAC took the view that the ratio of the Supreme Court decision in Howrah Trading Co.'s case (supra) was not applicable, inasmuch as, in the instant case before him, there was no question of any dual ownership of shares in question, there was no conflict between the legal ownership and the equitable ownership of the shares and in fact it was the assessee who was both legal as well as beneficial owner of the shares specified in the share warrants. After referring to ss. 114 and 115 of Companies Act and after considering the relevant articles of association of the company, namely, arts. 52 to 55, he took the view that the assessee owned the shares specified in the share warrants and the company paid her dividends on those shares as the only owner thereof known to it, and since as such, while making the payment of dividend, the company had made a deduction of tax at source, the assessee was entitled to get credit for the tax so deducted at source under S. 199 of the IT Act. Accordingly, the AAC allowed the appeal. Aggrieved by the order passed by the AAC the Department carried the matter in further appeal to the Tribunal. Several contentions were raised on behalf of the Department before the Tribunal. In the first place, it was contended that the tax deduction certificate given by the company did not comply with the form prescribed under r. 31(4) of the IT Rules, 1962. It was next contended that the assessee who held merely the share warrants should not be considered as a shareholder within the meaning of ss. 194 and 199 of the IT Act and in support of this latter contention strong reliance was placed upon the decision of the Supreme Court in Howrah Trading Co. Ltd.'s case (supra) and a couple of other decisions. In reply, it was urged on behalf of the assessee that as regards tax deduction certificate, if there was any mistake therein it was the mistake of the company which had issued the certificate for which the assessee could not be held responsible and on that account she could not be denied the credit for the tax deducted at source. It was further contended that the bearer of share warrant was as much a shareholder within the scope of ss. 194 and 199 as one whose name was entered in the shareholders' register and as such the assessee was entitled to the credit for the tax deducted at source. In any case, it was urged that since the assessee would be entitled to get credit by virtue of S. 237 of the Act, she could not be denied relief in that respect.
(3.) ON the other hand, Mr. Dwarkadas appearing for the assessee contended that if the provisions of ss. 114 and 115 of the Companies Act, particularly Sub S. (5) of S. 115, along with the relevant articles of association, of the company, particularly art. 55, were carefully scrutinised, it will appear clear that for all purposes, except certain matters which have been specifically mentioned in art. 55, the holder or bearer of a share warrant has been regarded by the company as if he is a member of the company and, therefore, there was no reason why the holder of a share warrant should not be entitled to get credit for the tax deducted at source under the provisions of S. 199 of the IT Act. He urged that having regard to the aforesaid provisions the assessee will have to be regarded as a shareholder for the purpose of S. 199 of the Act and as such would be entitled to the credit for the tax deducted at source in respect of dividend income received by the assessee for the shares specified in the share warrants. He contended that the decisions on which reliance has been placed by Mr. Joshi were clearly distinguishable, inasmuch as in each one of those cases the conflict was between the legal ownership of shares and equitable ownership of shares and it was in the context of such a conflict that the Court had taken the view that it was only the registered shareholder whose name is registered in the books or register of members maintained by the company who was entitled to the benefit of the provisions of S. 18(5) r/w S. 16(2) of the old Act and ss. 194 and 199 of the 1961 Act. According to him, in the instant case, there was no conflict at all between the legal ownership of shares in question or the equitable ownership of shares in question and indisputably it was the assessee who was both the legal owner as well as the equitable owner or beneficial owner of shares which were specified in the share warrants of which the assessee was the holder and, therefore, the question which this Court is called upon to decide is whether the holder of the share warrants, who has deposited the share warrants with the company after the annual general body meeting of the company was held and who has received the dividend after her identity had been established before the principal officer of the company, would be entitled to the credit for the tax deducted at source by the principal officer of the company and such a case has not been dealt with by any of the decisions on which reliance has been placed by Mr. Joshi. According to Mr. Dwarkadas, reference to cl. (ii) of the proviso to S. 199 and the question whether the assessee's case falls under the said proviso read with r. 30A is really irrelevant, for, according to him, the assessee is entitled to credit for the tax deducted at source by reason of the main provision contained in S. 199 itself, inasmuch as, according to him, having regard to the provisions of ss. 114 and 115 of the Companies Act read with the relevant articles of association the assessee will have to be regarded as a shareholder within the meaning of S. 199 of the Act and as such should be entitled to get credit for the tax deducted at source. Alternatively, he submitted that even if the assessee could not be regarded as a shareholder within the meaning of s. 199 of the Act, she should be entitled to get similar credit under the provisions of S. 237 of the Act.