TMI Blog1978 (6) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is an individual and in the reassessment proceedings for these years one of the questions that was raised pertains to the above question. The assessee and his wife were directors of a private limited company, called Bombay Chemicals Private Ltd. There were only nine shareholders, including the assessee and his wife. There were three employees at the material time by names M. B. Chitre, D. R. Ajgaonkar and B. J. Dandekar. They were on very intimate terms with the assessee. Chitre and Ajgaonkar were the classmates of the assessee for a long time. On October 17, 1950, Chitre purchased 256 shares of the above company from one F. S. Kerr, who was also a director at the material time, for the price of Rs. 25,600 at the face value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember 10, 1954 ; Rs. 2,000 on August 6, 1955 Rs. 3,000 on March 3, 1957 Rs. 3,000 on May 7, 1959 ; Rs. 8,000 on November 19, 1960 ; and the balance of Rs. 6,540 on April 3, 1962. The assessee sold 190 shares of the said company to D. R. Ajgaonkar on July 11, 1951. The amount (sic) payable by way of price of these shares, except Rs. 2,500, which was advanced by way of loan by the assessee to Ajgaonkar. Ajgaonkar received by way of dividends Rs. 7,600 on September 14, 1951, Rs. 1,900 on August 18, 1952 and Rs. 950 on June 10, 1953. The balance of price was paid by Ajgaonkar as under : Rs. 7,800 on September 10, 1951 ; Rs. 3,500 on August 20, 1952; and Rs. 1,100 on June 12, 1953. On June 2, 1954, these 190 share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng held on July 20, 1951. On these facts, a question arose before the taxing authorities and the Tribunal, whether Chitre, Ajgaonkar and Dandekar were only benamidars of the assessee in respect of the above shares or, in the alternative, the transactions between them in respect of sale of shares by the assessee to these three persons and the repurchase in 1954 attracted the provisions of s. 44E of the Indian I.T. Act, 1922. The ITO took the view that all the three transactions between the assessee on the one hand and Chitre, Ajgaonkar and Dandekar respectively on the other were benami transactions and the dividends received by these three persons should really be treated as income of the assessee. In the alternative, he held that in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee was not allowed to be raised on the ground that the same was based upon a finding of fact, and the only abovementioned question was referred to us for our determination. Mr. Joshi, on behalf of the revenue, contended that if regard be had to the facts of the case, then it is quite evident that the provisions of s. 44E of the Indian I.T. Act, 1922, are clearly attracted. He pointed out that all the three persons, viz., Chitre, Ajgaonkar and Dandekar, were the employees of the company, that the purchase of shares was effected by them on the same day and the resale was also effected by them on the same day. He also emphasised that none of the three persons paid the price of the shares in cash. Actually, as and when the divide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax apart from the provisions of this section, be deemed for all the purposes of this Act to be the income of the owner and not to be the income of any other person...... " The submission of Mr. Joshi is that if regard be had to the facts of the present case, then the provisions of sub-s. (1) of s. 44E, referred to above, are clearly attracted. He emphasised that all the three persons, Chitre, Ajgaonkar and Dandekar, were the employees of the limited company, in which the assessee was vitally interested and was a director. The shares were sold to each one of the employees on the same day and the same were repurchased on the same day ; even the price was the same. He, therefore, submitted that this is a case to which the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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