MUKUNDRAY K SHAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This appeal under Section 260A of the Income-tax Act, 1961 ("the 1961 Act"), has been preferred against the order dated January 28, 2005, passed by the learned Tribunal in the block assessment against the assessee for the period April 1, 1990 to August 24, 2000. The dispute relates to a few entries for the previous year 1999-2000 in relation to the assessee's investment in 9 per cent. RBI Relief Bonds amounting to Rs. 6,93,00,000 out of total investment of Rs. 26,35,00,000 made in the said previous year. The Assessing Officer had treated these investments as deemed dividend in the hands of the assessee within the meaning of Section 2(22)(e) of the 1961 Act.

(2.) In order to appreciate the situation, we may briefly refer to those portions of facts, which are relevant for the present purpose. M/s. M. K. Tea Pvt. Ltd. (MKTPL), in which the assessee is one of the shareholders, paid Rs. 69,00,000 on December 7, 1999, and Rs. 25,00,000 on December 22, 1999 to M/s. M. K. Foundation (MKF), a partnership firm, in which the assessee was one of the partners. M/s. Safari Capitals Pvt. Ltd. (SCPL), in which the assessee was a beneficial owner of shares, paid a sum of Rs. 2,04,00,000 on January 11, 2000, and Rs. 75,00,000 on January 28, 2000 to M/s. M. K. Industries (MKI) in which the assessee is one of the partners. M./s. M. K. Shah Exports Pvt. Ltd. (MKSEPL) paid a sum of Rs. 1,10,00,000 on December 1, 2000, Rs. 1,10,00,000 on December 4, 2000 and Rs. 1,00,00,000 on February 11, 2000 to MKF. Apart from these amounts, various other amounts were also paid by the respective companies to the respective firms out of which the RBI Relief Bonds were purchased by the assessee during the previous year 1999-2000 amounting to Rs. 26,35,00,000. Except the amounts referred to above, the rest payments were held to be disclosed income and were exempted from being taxed under the block assessment. Whereas these seven transactions were held to be deemed dividend received at the hands of the assessee.

(3.) Extreme, erudite and elaborate arguments have been made by both Mr. N. K. Poddar, learned senior counsel appearing on behalf of the assessee, and Mr. D. K. Shome, learned senior counsel appearing for the Department. Our attention was drawn to various facts, materials, laws and decisions. Various intricacies of fine argument were advanced by both learned counsel.