(1.) The assessment years involved in this reference are 1967-68, 1968-69 and 1969-70, for which the relevant previous years are the previous financial years. In the proceedings for assessment to tax, the ITO included the profit from the speculation transactions earned in the name of Kumari Shobhana Birla, minor daughter of the assessee, Sri K. K. Birla, in the total income of the assessee. The profits from the speculative transactions amounted to Rs. 8,267 in 1967-68, Rs. 5,375 in 1968-69 and Rs. 8,025 in 1969-70. The reasons were given by the ITO for this inclusion in the assessment order for the assessment year 1968-69. In the supplementary or subsequent assessment order passed for 1967-68 under Section 147(b) of the I.T. Act, the ITO included in the income of the assessee the speculation income which was declared in the personal return of the minor daughter with the following observations :
(2.) Learned advocate for revenue urged that there was no positive evidence that any fund of Sri K. K. Birla was not utilized in carrying on speculation business. It would not be proper to say that it was common ground that no fund of Sri K. K. Birla was utilized in carrying on this speculation business. It might be strictly correct to say that it was not a common ground that no fund of the assessee was utilized in carrying on the speculation business. But, (1) there is no evidence either that any fund of Sri K. K. Birla was involved, (2) indeed it was stressed that in speculative transactions of this nature no fund was necessary or involved, (3) all the transactions involved on this aspect resulted in profit to the minor and there was no loss arising out of the transactions, (4) all the cheques in payment of the profits arising out of the speculation in shares were in the name of the minor, (5) evidence was produced to prove that these cheques were credited to the account of the minor in her savings bank account with the United Commercial Bank, India Exchange Place, Calcutta, and the assessee was authorised to operate the bank account even though she was aged about 14 years at the relevant time, and (6) it is also common ground that the amounts credited to her account were utilised for investment in her name and for her benefit and no part of the amounts received from speculation profits in the shares was enjoyed by her father, the assessee.
(3.) Upon these the Tribunal was of the view that these amounts arising out of the speculation shares could not be treated as the assessee's income. There was another aspect of the matter, namely, the addition of certain sums resulting from the dividends in respect of the shares of Birla Gwalior Pvt. Ltd., which was in the name of the wife. The question was whether these sums should be included in the income of the husband under Section 64(iii) of the I.T. Act, 1961. On this aspect, it appears that the assessee had acquired these shares prior to the years in question. Though, there is no evidence on record to show that these shares were acquired by the assessee, it was stated orally from the Bar that these shares were acquired by the assessee in the year 1959-60. For our present purpose, however, it is not relevant to proceed on that basis. The shares were transferred by the assessee to his wife during the assessment year 1960-61. It is also apparent that the shares were acquired by the assessee at a price of Rs. 4.12 for each share. These were transferred by the assessee during the assessment year 1960-61 at a price of Rs. 4.22 to his wife. It is also material in this connection to refer that the assessee was a director of a number of companies but after the coming into operation of the amendment of the Companies Act with effect from 20th of December, 1960, which put a ceiling upon the directorship of the companies for an individual, the assessee had to resign from the directorship of some of the companies. The assessee, therefore, wanted to unload his shareholding of M/s. Birla Gwalior Pvt. Ltd. of which he was a director. It also appears that under Section 43(a) of the articles of association of Birla Gwalior Pvt. Ltd., there were restrictions on the right of the transfer of the shares. Article 43 of the articles of association as well as Article 50 of the articles of association were as follows: