TMI Blog1961 (7) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ndivided family was not and could not be a registered shareholder of the company, the amount in question could not be treated as the income of the Hindu undivided family under the provisions of that section. Appeal dismissed. - C.A. No. 125 of 1960 - - - Dated:- 18-7-1961 - Judge(s) : S. K. DAS., M. HIDAYATULLAH., J. C. SHAH JUDGMENT The judgment of the court was delivered by S. K. DAS J.---These three appeals, with special leave of this court, have been heard together. They arise out of three income-tax references made to the High Court of Bombay, namely, Income-tax Reference No. 29 of 1957, Income-tax Reference No. 30 of 1957 and Income-tax Reference No. 37 of 1957. The facts are similar in the three cases and the question of law which the High Court had to answer was the same in each of the cases. The High Court gave its answer in its leading judgment in Income-tax Reference No. 29 of 1957, and the other two references were disposed of in accordance with that answer. For the purposes of these appeals, it would be enough if we state the facts of Reference No. 29 and then indicate the question which arose for decision and the answer which the High Court gave to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal and directed the Income-tax Officer concerned to delete the deemed dividend income from the income of the Hindu undivided family. The Commissioner of Income-tax, Bombay, then moved the Tribunal to refer the following question of law to the High Court of Bombay : " Whether the dividend income of Rs. 54,307 is to be assessed in the hands of the assessee, the Hindu undivided family ? " The Tribunal was of the view that the question did arise out of its order and made a reference to the High Court accordingly. The High Court by its order dated September 25, 1957, answered the question in favour of the assessee. It held that in respect of an income which was deemed to be distributed under the provisions of section 23A, the section in terms provided that the proportionate share of the shareholders in such distribution should be included in their income ; and as the Hindu undivided family was not and could not be a registered shareholder of the company, the amount in question could not be treated as the income of the Hindu undivided family under the provisions of that section. The High Court re-affirmed the view it had expressed in its earlier decision in Cambatta v. Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under it is not in itself an order of assessment ; it has to be followed by an assessment on the shareholder either under section 23 or under section 34. Under the express terms of the section, the artificial or notional income has to be included in the total income of the shareholder for the purpose of assessing his total income. The High Court has referred to its earlier decision in Cambatta v. Commissioner of Income-tax. That decision laid down that where a share stood registered in two or more names, the registered holders treated as an association of persons must be regarded as the " shareholder " under section 23A and they must be assessed accordingly. It further laid down that section 23A did not say anything about equities or beneficial ownership ; it was a procedural section and not a charging section. It created a notional income which was wholly artificial and did not in fact exist in the pocket of any shareholder. In a later decision in Shree Shakti Mills Ltd. v. Commissioner of Income-tax, the same High Court held that the expression " shareholder " mentioned in section 18(5) of the Act meant the person who was shown as a shareholder in the register of the company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere actually distributed by the company, it would certainly be income in the hands of the Hindu undivided family which would be liable to pay all taxes on its income, whether actual or artificial. We do not think that either of the two points urged by the appellank is really decisive of the question. The question is really one of interpretation of section 23A, and we must interpret section 23A with reference to its own terms. The section in express terms says that " the proportionate share of each shareholder shall be included in the total income of the shareholder for the purpose of assessing his total income ". The section does not talk of the beneficial owner of the share. It talks of the shareholder only. Section 18(5) of the Act deals with grossing up of dividend and two expressions occur therein : " owner of the security " and the " shareholder ". So far as the expression " owner of the security " is concerned it may perhaps include a beneficial owner ; but it has been decided by this court that the expression " shareholder " in section 18(5) means the shareholder registered in the books of the company. As we have earlier said, no good reason exists as to why the expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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