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TMI Blog1977 (2) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... lso certain shares belonging to her late husband. On these shares, dividends were declared on 7th Feb., 1964 which the assessee had not included in the original return. He also states that there were certain shares which belonged to the assessee's late husband and those shares were held by others as benamidars of her late husband. The dividends on all these shares amounting to Rs. 27,405 was brought to tax on the finding that certain shares were held by benamidars of late Shri Srinivasalu Naidu, the husband of the assessee. The ITO also noticed that the dividends declared on those shares on 27th Dec., 1963 were also liable to be included in the assessment which was not originally included and accordingly he brought to tax that sum which amounted to Rs. 3,410. In the original assessment a capital gains to the extent of Rs. 37,500 was assessed. This was on the sale of certain shares of Coimbatore Spinning and Weaving Co. Ltd. In this re-assessment the ITO applied s. 52(2) and held that the shares which were sold for Rs. 1,12,500 had a fair market value of Rs. 1,61,750. In this manner, he brought to tax a further sum of Rs. 49,250. He completed the re-assessment on a total income of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f dividend, and the receipt of the money were not known to her. It cannot, therefore, be said that the assessee withheld any information which she had known. s. 147(a) would, therefore, not clearly apply. He then pointed out with reference to the agreement that the assessee agreed to sell not only the shares standing in her name and in the name of her late husband but also 682 shares of others which she procured for purposes of transferring the same. He then pointed out that in the earlier assessment of late Shri A. V. Srinivasalu Naidu no dividends from these 682 shares were assessed in his hands. There was no finding that these shares were purchased by late Shri A.V. Srinivasalu Naidu in the names of others to be held by them as benamidars. The ITO says that he has found in the assessment order for the year 1965-66 that the 682 shares were held by others as benamidars of late Shri A. V. Srinivasalu Naidu. Referring to that assessment he said that there was no finding. The only finding given was that because the assessee was able to get those shares transferred the ITO presumed that they must be the shares belonging to late Shri A. V. Srinivasalu Naidu held by others as benamidars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... others(1). The assessee was not aware of any dividend declared in Feb, 1964. There were equity between the purchaser and seller. The shares were transferred by means of what is known as blank transfers. He then referred to Kedar Nath Agarwal vs. Jay Engineering Works Ltd., and others (2) to the effect that under the Indian law the property in a share, which a member has, passes to the buyer of the share as soon as the share certificate along with the relevant transfer deed is delivered to the buyer, and that on such a transfer the transferee becomes the sole beneficial owner of the shares and the relation of the trustee and cestui que trust is thereby established between the transferor and the transferee. He also referred to the book 'Guide to the Companies Act', Seventh Edition, by A. Ramaiya, pages 200-202 which extract portions from the judgment of the Supreme Court in the case of Howrah Trading Co. Ltd. vs. CIT(3). Reliance was also placed on the commentary at pages 220 and 221 of the same book. He also referred to the decision in the case of Howrah Trading Co. Ltd. vs. CIT(3). Because of the agreement of sale these dividends did not accrue to the assessee and the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 75 per share and the cost was taken at Rs. 50 per share. The assessee's case is that she was not aware of any declaration of dividend after the agreement and at any rate she did not receive it as dividends. We have also perused the record and the agreement does not form part of the record. However, a perusal of the record would show that the agreement should have been brought to the notice of the ITO. It is no doubt true that the capital gains was not shown in the return but information was furnished before the original assessment about the transfer of the shares. We find from a letter from the assessee's representative dated 27th Oct., 1966 whereby a copy of the anamat account in the books of the assessee was furnished to the ITO that this account clearly records the receipt of Rs. 91,350 with the narration that it represents 20 per cent of the consideration money for the sale of shares. This was received on 6th Nov., 1963. The next receipt was on 24th Dec., 1963. The assessee received the first instalments of the balance amounting to Rs. 36,540. The narration clearly states that on the sale of C.S. & Co. shares 1/10th of the balance of 80 per cent was received and 500 shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceive it as income but only as a part of the payment and that too in the subsequent year. It is no doubt true that the shares stood in the name of the assessee and the dividend warrant was also in the name of the assessee. But from the course of events namely, the agreement of sale, the receipt of money, the transfer of the share scrips with blank transfer deeds, the receipt of the actual dividend warrant by the purchaser and the sending back to the assessee, the clause in the agreement showing that the seller was entitled to dividend upto the date of the agreement all go to show that the assessee was not entitled to any dividends after the date of the agreement. It has been held in Howrah Trading Co. Ltd.'s (3) case in these words : " Of course, between the transferor and the transferee, certain equities arise even on the execution and holding over of a 'blank transfer' and among these equities is the right of transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee." In view of the clause in the agreement and the other transactions even if the dividend was received by the assessee she would have held it only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of late Shri Srinivasalu Naidu As regards others there is not even a suggestion as to who paid for the shares and whether the dividends were enjoyed by late Shri Srinivasalu Naidu. In respect of one Shri Thangavelu the assessee had paid a sum of Rs. 3,600 and obtained the shares for being transferred in accordance with the agreement. The ITO himself record this in his order for the year 1965-66. In these circumstances we hold that the department has not established by any evidence that these 682 shares belonged to late Shri Srinivasalu Naidu and the others were only benamidars. In the circumstances, the dividends declared in their names in December, 1963 and added in the re-assessment have to be deleted. 11. In the result the appeal is allowed. Asst. Year ; 1965-66 12. In completing the assessment for the year 1965-66 the ITO brought to tax the capital gains on the transfer of 1985 shares. The assessee had already transferred 1500 shares in 1964-65. In this year she transferred 485 shares. The ITO took the view that though the capital gains was assessed in respect of 1500 shares in the earlier year since the actual transfer was effected only on 3rd June, 1964 which is within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares the same cannot be brought to tax in this year as the ITO has already brought the capital gains from this transfer to tax in the year 1964-65. Apart from the merits of the case we find that the present inclusion would amount to double assessment. On this score it has to be deleted. Apart from this we find that there is also no merit in the contention that the transfer took place in this year. In respect of these 1,500 shares the assessee has actually received the consideration and transferred the share scrips along with blank transfers. We have also referred to the narration in the books in dealing with earlier year's assessment. It is also seen that the transferees have got their names registered in June, 1964 but however, the position is that it would relate back to the original transfer which in this case was in the immediately preceding year. The case of Howrah Trading Co. Ltd.(9) and the passages at page 219 would clearly support the decision. Datta on 'The Company Law' Second Edition, at page 230, comments as under : "There is a distinction between the title to get on the register "and" the full property in the shares in a Company". The first right is acquired by mere d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te account. The ITO held that the interest has been paid to persons closely related to the assessee. It has not been shown that the monies borrowed from these persons have been utilised in the investments on shares or deposits for the purpose of earning income. Similarly there was a claim in the estate account. The ITO held that the interest has been paid to persons closely related to the assessee. It has not been shown that the sums borrowed were invested in shares or deposits. He, therefore, disallowed these sums. On the same reasoning he disallowed interest to the extent of Rs. 12, 356 in 1967-68 and Rs. 15,548 in 1968-69. 18. The assessee appealed to the AAC against these additions. The AAC agreed with the findings of the ITO. 19. The assessee has come on appeal before the Tribunal. The learned counsel submitted that there was no case for making any disallowance. In fact no disallowance was made in the immediately preceding year, i.e. 1964-65. In 1963-64 a sum of Rs. 5,000 was disallowed out of total claim of Rs. 12,054. In the years prior to that also only a portion of the interest was disallowed. Most of the creditors' accounts are brought forward accounts and there is, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares of Peelamedu Industrial Corporation, Interest has been allowed for income-tax purposes upto 31st March, 1964. The account of A.S. Venkataswamy Naidu showed a credit of Rs. 11,610 as on 31st March, 1960. The accounts are with the High Court. In the circumstances the assumptions of the ITO are not warranted and the AAC has failed to note the information supplied to him. The Departmental Representative on the other hand relied on the orders below. 20. Having considered the matter, we are of the opinion that on the basis of the information supplied by the assessee before the AAC and the fact that there was no disallowance in the year 31st March, 1964 we find no reason for disallowing the entire interest. From the information supplied and from also the disallowance made in the past, we hold that a disallowance on an estimated basis can be made on the facts and circumstances of this case. Even though there was no disallowance in 31st March, 1964 taking note of the disallowance between 31st March, 1962 and 31st March, 1963 we hold that it would be reasonable to estimate the disallowable interest at 50 per cent of the total in each of the years under consideration. We would acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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