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TMI Blog1978 (2) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners in these cases. He has also jurisdiction over the recovery proceedings as against the petitioners. The second petitioner-firm (hereinafter referred to as " the partnership-firm ") had income from various sources, namely, business, immovable property, dividends, interest on securities, etc. The partnership firm had purchased 44,000 shares of Rs.10 each of Renwick & Company Private Ltd. 17,000 out of these 44,000 shares stood in the name of the first petitioner in Special Civil Application No. 1390 of 1976 and the remaining 27,000 shares stood in the name of the first petitioner in Special Civil Application No. 1391 of 1976. The total price paid for these 44,000 shares was Rs. 14 lakhs. The dividend from the said shares was taxed in the hands of the partnership firm as the said shares belonged to it and after the income of the partnership firm was allocated to the partners, the dividend income from these 44,000 shares would be reflected in the income of the two partners. On December 22, 1956, the company declared dividend which should have been received by the partnership firm in its year of account, samvat year 2013, which was the previous year for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and to delete the said dividend income which was erroneously taxed since the amount of dividend was neither received nor was likely to be received. This application for rectification was rejected. In Ramesh R. Saraiya v. Commissioner of Income-tax [1965] 55 ITR 699 decided by the Supreme Court on September 22, 1964, the contention of the department on similar facts was rejected and it was held that the dividend which was declared subject to remittance was not taxable in the hands of the shareholders. The partners of the firm and the partnership firm itself applied to the Commissioner of Income-tax in revision under section 264 of the Income-tax Act, 1961, to delete the addition of dividend income from the dividends paid on the shares of Renwick & Company Private Ltd. These applications for revision were rejected on the ground that they were time barred and it is the contention of the petitioners that the ground of rejection of the revision applications was erroneous and the decision of the Commissioner was erroneous. It is further the case of the petitioner that by a circular bearing No. 25 dated July 25, 1969, the Central Board of Direct Taxes, inter alia, stated that the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant facts bearing on this request were pointed out. The petitioners requested the Commissioner of Income-tax, third respondent herein, to intervene in the matter and direct the recovery officer not to take recovery proceedings in respect of the dividend amount declared by Renwick & Co. Pvt. Ltd. and by a letter dated February 12, 1976, the first petitioner in Special Civil Application No. 1390 of 1976 was informed by the third respondent that the partners' request for stay of demand and refund of adjustable taxes could not be acceded to because the non-receipt of dividends did not arise out of laws in Bangla Desh prohibiting or restricting remittances and it appeared that the outstanding dividends might have been recovered in getting the price in 1962 when the shares were sold. By a letter dated February 19, 1976, the first petitioner in Special Civil Application No. 1390 of 1976 requested for a personal hearing from the Commissioner, the third respondent herein, since the application of the first petitioner was rejected without a personal hearing. A personal hearing was given on 13/17th April, 1976, and by the letter dated April 20, 1976, the partners were informed that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1960-61, on December 23, 1958, and therefore, the provisions of section 16(2) as it stood prior to its omission with effect from April 1, 1960, would govern the present case. In J. Dalmia v. Commissioner of Income-tax [1964] 53 ITR 83, the Supreme Court was concerned with the provisions of section 16(2) as it stood before its deletion and at page 89, Shah J., as he then was, speaking for the Supreme Court, observed : " But whether dividend--interim or final--is income taxable in a particular year of assessment must be determined in the light of section 16(2) of the Indian Income-tax Act. The legislature had not made dividend income taxable in the year in which it becomes due : by express words of the statute, it is taxable only in the year in which it is paid, credited or distributed or is deemed to be paid, credited or distributed. The legislature has made distinct provisions relating to the year in which different heads of income became taxable ...... Chagla C.J. has himself in Purshottamdas Thakurdas v. Commissioner of Income-tax [1958] 34 ITR 204, 211 (Bom) expressed a different view. The learned Chief Justice, in delivering the judgment of the court, referred to Laxmidas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of income-tax on ' B ' preference shares. (c) A moiety of the amount of the dividend be paid to the shareholders on and after 16th October, 1952, whose names appear on the register of the company as on 6th October, 1952, and the other moiety be postponed for payment within two months from the date on which remittances from Pakistan become free and the moneys are actually received." It was pointed out by the Supreme Court in Ramesh R. Saraiya's case [1965] 55 ITR 699 that Narandas Rajaram Ltd. carried on business both in India and Pakistan and profits accrued to it both in India and Pakistan. The company declared dividend out of the above profits and the company in clause (c) in its resolution dated October 14, 1952, provided that one-half of the dividends payable to the shareholders should be postponed for payment within two months from the date on which remittances from Pakistan became free and the moneys were actually received. In connection with this dividend from Narandas Rajaram & Co. Ltd., the question which was referred to the High Court was : " Whether the other moiety of the dividend of Rs. 1,71,992 declared by the company on October 14, 1952, is properly includible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the income of the previous years relevant to the assessment years 1958-59 to 1960-61. The result was that, under section 3 of the Indian Income-tax Act, 1922, which was the charging section, no charge was created in respect of this dividend income of getting created (sic). Section 3 as it stood at the relevant time provided : " Where any Central Act enacts that income-tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total incomme of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually." Therefore, if on a true interpretation of section 16(2) of the Act of 1922 the amount was not, or was not to be deemed to be, the income of the previous year in which it was either paid or distributed or credited, it must follow that no charge was created in respect of this income-tax and, therefore, it was not within the jurisdiction of the Income-tax Officer concerned to include th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feat a petition under article 32 fell for consideration of the Supreme Court. It was there pointed out that the relevant considerations which should be borne in mind were, (1) that the rule which says that a court may not inquire into belated or stale claims is not a rule of law but a rule of practice based on sound and proper exercise of discretion, and there is no inviolable rule that whenever there is delay the court must necessarily refuse to entertain the petition and each case must depend on its own facts ; (2) that when the challenge based on violation of the equal opportunity clause is not directed against a thing of the past, but is a vital issue still affecting the petitioners, it is but desirable that the challenge should be examined and adjudged when the matter has come before the court at the instance of the parties properly aggrieved ; (3) that the principle on which the court proceeds in refusing relief to the petitioner on the ground of laches or delay is that the rights which have accrued to others by reason of the delay in filing the petition should not be allowed to be disturbed unless there is reasonable explanation for the delay, for, the action of courts canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary for anybody, who objects to that order, to apply to set it aside. He can rely on its invalidity when it is set up against him, although he has not taken steps to set it aside. Such an order without jurisdiction is a nullity and it cannot give rise to any right whatever, not even to a right of appeal. Such an invalid purported order does not, therefore, create a bar under section 11 of the Bombay Revenue Jurisdiction Act. Same reasoning would also apply to the facts of the case before us. The order of the Income-tax Officer in respect of this dividend income from Renwick and Company Private Ltd. was wholly without jurisdiction as that income could not be brought to charge and so long as it did not hurt the partners or the partnership firm, they were not bound to seek relief from any court. When ultimately, in spite of repeated requests, the Commisssoner of Income-tax turned down their application for relieving them against the order of the Income-tax Officer and when their application for stay of the recovery proceedings against them was turned down and adjustment of this tax against the refunds due and payable to the partners was being made, it was open to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X
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