TMI Blog1967 (9) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... 955-56 ? 2. Whether the income of Rs. 1,771 from dividends should be excluded from the total income of the assessee for the assessment year 1956-57 ?" It is obvious that though these two questions relate to two separate orders of assessment, the question to be answered is in substance only one. In order to understand the precise nature of the question, it is desirable to reproduce the pedigree-table of the assessee, L. Bansi Dhar : L. Bishambhar Das (deceased) | ---------------------------------------------------------------------------------------------------------------------------------- | | | L. Girdhari Lal L. Madan Mohan Lall L. Gopai Rai (deceased) | (deceased) ---------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sors shall pay out of the dividends on the said shares : (1) to the widow of the deceased shareholder for life one-fourth share of the said dividends as they fall due and, (2) to all the daughters (collectively) of the deceased shareholder from time to time, such portion of the said dividend as will give, when divided between the daughters, to each living daughter one-fourth of what may be left to each of the sons or his descendants or the successors of the descendants. The payments mentioned in sub-clauses (1) and (2) hereof shall be a first charge on the said dividends and may be made direct by this company out of the said dividends." L. Murlidhar, father of L. Bansi Dhar, assessee, died in an air crash in 1949, leaving behind two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recent decision of the Supreme Court in Commissioner of Income-tax v. Sitaldas Tirathdas and to Commissioner of Income-tax v. Thakar Das Bhargava. He has also submitted that the word "shareholder" must mean the shareholder registered in the books of the company and for this submission, he has referred to a decision of the Supreme Court in Commissioner of Income-tax v. Shakuntala. This view is sought to be fortified by the ratio of a still earlier decision of the Supreme Court in Howrah Trading Co. v. Commissioner of Income-tax. Shri Kirpal has in this connection tried to distinguish the Privy Council decision relied on by the Appellate Tribunal in Raja Bejoy Singh Dudhuria's case. Shri B. Sen, learned counsel for the assessee-respondent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge on an income and an obligation to be discharged out of income. In the present case, according to him, there is no charge but only distribution of income and the time of the receipt of the income is the crucial test, says Shri Kirpal. He has also made a reference to the decision of the Supreme Court in Provat Kumar Mitter v. Commissioner of Income-tax, and to a decision of the Privy Council in P. C. Mullick v. Commissioner of Income-tax. The true legal position, in our view, is that the person in whose name the shares of a company stand registered is to be considered to be the owner thereof and the income by way of dividends yielded by such shares is ordinarily to be considered as assessable income, but the dividends must in law come to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims his right to succeed to the shares in question provides that a part of the dividends on those shares are to go to the widow and the daughters of the deceased shareholder. This would, in our opinion, clearly show that the amount of dividends is diverted at the source by an overriding title before it started flowing into the channel which was to reach the assessee concerned. This diverted amount of dividends may perhaps be liable to assessment in the hands of the ladies, but the assessee before us is certainly not liable to be assessed on this amount. The amount required under the articles of association to be paid to the widow and the daughters can by no means be reasonably considered to be an instance of the application of the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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