INCOME TAX OFFICER D WARD Vs. CHANDMULL BATIA

JUDGEMENT

(1.) This appeal arises out of a judgment and order dated 31st January, 1973, passed by T. K. Basu J. The facts of the case are as follows :

(2.) One Punam Chand Batia and Padam Chand Banthia held substantial shares in Messrs. Kalinagar Khoreel Tea Co. Ltd., Bullion Tea Co. Ltd., Burdwar Tea Timber Co. Ltd., and Sarugaon Tea Co. Ltd. (hereinafter referred to as the "said companies"). The said Punam Chand Batia and Padam Chand Banthia were at all material times partners of the respondent-firm, Messrs. Chandmull Batia. Although the abovenamed two persons of the respondent-firm were the registered shareholders in the abovementioned tea companies, in the balance-sheet of the respondent-firm the shares, inter alia, in the said companies were shown as stock-in-trade or assets of the said firm and moneys received from the said tea companies were shown as deposits made by the said companies in the books of the firm. The revenue sought to reopen the assessment proceedings of the firm in regard to the assessment years 1955-56, 1957-58 and 1958-59, by three notices dated 15th January, 1968, and the assessment for the year 1959-60, by a notice dated 25th October, 1967, on the ground that these deposits or loans received by the above-mentioned partners who held 50% share each in the said firm shall be deemed to be dividend received by the said firm from the above-mentioned tea companies within the meaning of Section 2(22)(e) of the LT. Act, 1961, corresponding to Section 2(6A)(e) of the I.T. Act, 1922, since repealed. The learned judge followed the decision of the Supreme Court in the case of CIT v. C. P. Sarathy Mudaliar and was pleased to hold that Section 2(6A)(e) of the LT. Act, 1922, or Section 2(22)(e) of the present Act must receive a strict construction and a shareholder mentioned in the sections would refer to a registered shareholder and not a beneficial owner of the shares.

(3.) For the purpose of this appeal, it is necessary for us to reproduce Section 2(22)(e) of the new Act corresponding substantially to Section 2(6A)(e) of the repealed Act.