PROVAT KUMAR MITTER Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) Three questions have been referred in this case and they arise out of the following facts. The assessee, Sri Provat Kumar Mitter, is the registered holder of 500 ordinary shares , of the Calcutta Agency Ltd. By a written instrument, dated the 19th of January, 1953, he settled on his wife, Sm. Ena Mitter, the right, title and interest to all dividends and .sums of money which might be declared or might become due on account or in respect of those shares for the term of her natural life. The material portion of the instrument is short, After reciting that the settlor was desirous of making a provision for his wife, the instrument proceeds as follows ; --

(2.) It will be noticed that the shares themselves remained the property of the settlor and it was only the income which was sought to be settled or assigned.

(3.) During the accounting year ended on the 31st March, 1953, the dividend declared on the shares was Rs. 12,000/-. In assessing the settlor for the assessment year 1953-54, the Income-tax Officer included the dividend in his income under, as he said, the provisions of Sections 16 (1) (c) and 16 (3) of the Indian Income-tax Act. The settlor's contention was that since the settlement was for the lifetime of the beneficiary, the third proviso to Section 16 (1) (c) would apply and the dividend which had come to belong to the beneficiary could not be deemed to be his income. He, accordingly, appealed to the Appellate Assistant Commissioner. Before that authority, the Income-tax Officer put forward a somewhat extraordinary ground to which he adhered even before the Appellate Tribunal in the subsequent proceedings before that body. He contended that while the effect of the third proviso might be what the assesses contended for that proviso was to be ignored altogether, because it virtually superseded the main clause of Section 16 (1) (c). A further contention advanced by him was that since the shares were continuing to stand in the name of the settlor and the dividends, had been declared in his name, the transfer of the dividends to the beneficiary was only an application of the dividend income and, therefore, the settlor could not claim exemption from being taxed on it as a part of his own income. The Appellate Assistant Commissioner gave effect to both of those contentions.