9911796707
TMI Blog1964 (9) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... endar year 1950. The assessee, the Benaras State Bank Ltd. (hereinafter referred to as the "bank"), carries on its business at Ramnagar which was the capital of the erstwhile State of Benaras. The bank held securities issued by the erstwhile States of Travancore and Cochin. The bank was also getting some dividends from Vibhuti Glass Works Ltd., a company carrying on the business of production of glassware. On September 27, 1950, the Vibhuti Glass Works Ltd. declared its dividend by means of a resolution which reads: "To consider the declaration of a dividend : The recommendation of the board of directors for making provision for payment of the dividend on ordinary shares free of income-tax was approved, with the qualification that if the court allows only then payment will be made, otherwise not." In the balance-sheet "as on 30th of September, 1950" of the Vibhuti Glass Works Ltd., a sum of ₹ 30,000 was shown as "unpaid dividend and bonus". This amount included the sum of ₹ 23,000, dividend payable to the bank. The statement of the case is clear on the point that a litigation was going on in which the bank was a party and the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in respect of interest which is so chargeable, tax has been paid or deducted under section 18, or unless there is a person in the taxable territories who may be appointed an agent under section 43 in respect of such interest: Provided further that no income-tax shall be payable on the interest receivable on any security of the Central Government issued or declared to be income-tax free: Provided further that the income-tax payable on the interest receivable on any security of a State Government issued income-tax free shall be payable by the State Government." The submission on behalf of the assessee is that the expression "State Government" should be read so as to be inclusive of the State of Kerala in which the States of Travancore and Cochin have merged resulting in the securities of these States being the securities of the Kerala State. At the time of the assessment the State of Kerala did not exist. It was formed later. This submission of the learned counsel, therefore, is unfounded. The alternative argument of the assessee is that since the two merged States at the relevant time formed part of the Part B States of Travancore-Cochin, the words "State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be deemed to be Government securities. Learned counsel for the assessee has contended that the Act does not use the expression "Government security" ; on the other hand it uses three different expressions-a security of the Central Government, a security of the State Government and a security issued on behalf of the local authority. He has, therefore, urged that the definition given in section 3(24) of the General Clauses Act cannot be relevant for interpreting the provisions of section 8 of the Act. It appears to us that the words "Government security" is a comprehensive expression which includes securities issued by the Central Government and those issued by the State Governments and consequently that definition would be relevant for interpreting the words "any security of the Central Government or a State Government" occurring in section 8 of the Act. Section 3(24) expressly excludes securities issued by the Government of any Part B State. Section 8 of the Act does not create an absolute immunity from taxation in respect of the securities issued by the State Governments. It only provides for the realisation of the tax from the State Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following certificate:.... We have also examined the balance-sheet of the company and find that the sum of ₹ 23,000 is included on the liabilities side of the balance-sheet under the head 'unpaid dividend'. It is clear, therefore, that the dividend has been credited to the assessee-company in the books of Vibhuti Glass Works Limited." In our judgment the legal inference which the Tribunal drew from the facts stated in the case is incorrect. It is not possible on the basis of those facts to hold that the amount of ₹ 23,000 had been credited to the assessee in the books of Vibhuti Glass Works. To credit an amount in the name of another is a mode of payment to him. Instead of paying cash the amount is entered in the name of the other person and it is acknowledged that the money belongs to him. That is not the position in the present case. The resolution of the Vibhuti Glass Works Ltd., which we have already reproduced earlier, clearly shows that the amount was to be paid to the assessee only if the assessee succeeded in the litigation that was going on. The certificate issued by the Vibhuti Glass Works categorically states that the amount has been onl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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