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TMI Blog1960 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ll dividends and sums of money which might be declared or might become due on account or in respect of those shares for the term of her natural life. We may read here the material portion of the instrument. " This Deed Witnesseth that for effecting the said desire and in consideration of the natural love and affection of the Settlor for the Beneficiary the Settlor as the beneficial owner assigns unto the Beneficiary the right, title and interest to every dividend and sum of money which may be declared or become due and payable on account of or in respect of the said shares (not being the price or value thereof) and further hereby covenants with the Beneficiary to hand over and or endorse over to the Beneficiary any dividend warrant or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that it did not apply, because there was no transfer of the shares to his wife. The assessee, accordingly, appealed to the Appellate Assistant Commissioner. Before that authority a somewhat unusual contention was put forward on behalf of the Department, viz., that the third proviso to section 16(1)(c) should be ignored inasmuch as it was repugnant to the main provisions contained in section 16(1)(c) and the general scheme of the Act. A further contention urged on behalf of the Department was that since the shares continued to stand in the name of the assessee and the dividends had been declared in his name, the transfer of the dividend to the beneficiary was only an application of the dividend income and, therefore, the assessee cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The questions referred were as follows : " (1) Whether the deed dated January 19, 1953, assigning the dividends to accrue, merely on account of natural love and affection, is void as it is not registered ? (2) Whether the third proviso to section 16(1)(c) is repugnant to the main clause 16(1)(c) and the general scheme of the Act and should not be given effect to ? (3) Whether, on the facts and in the circumstances of the case, the payment of dividend income to the assessee's wife, Ena Mitter, under the covenant in the deed of assignment dated January 19, 1953, was merely a case of application of the assessee's income ?" The High Court answered the first two questions in favour of the assessee. It answered the third questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of law which arose out of its order, but it was not open to the Tribunal to refer a question which did not so arise. We are unable to accept the contention that the question did not arise out of the Tribunal's order. Indeed, it is true as we have stated earlier, that the Tribunal did not state its specific finding on this question; but in the statement of the case drawn up by the Tribunal under section 66 it has stated that though no specific finding was given, the question was raised by the Department and by implication was decided against the respondent. In its application to the Tribunal for a reference, the present respondent specifically mentioned the question as one decided adversely to it and though the appellant submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F. Guzdar v. Commissioner of Income-tax at page 6. That was a case in which the question that arose for decision was whether dividend declared by a company growing and manufacturing tea was agricultural income within the meaning of section 2(1) of the Income-tax Act and hence exempt from income-tax under section 4(3)(viii) of the said Act. It was held that the dividend of a shareholder was the outcome of his right to participate in the profits of the company arising out of the contractual relation between the company and the shareholder and the observations on which learned counsel has relied were to the effect that " the right to participate in the profits exists independently of any declaration by the company with the only difference that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... older or under his orders (see Howrah Trading Co. Ltd. v. Commissioner of Income-tax); therefore, section 16(1)(c) of the Income-tax Act was not attracted nor the third proviso thereto and the income continued to accrue to the assessee, but was thereafter paid over to his wife under the terms of the contract. The income was, therefore, assessable in the hands of the assessee, because it was part of his income though applied subsequently towards payment to the wife under the terms of the contract. In this view of the matter, it is not necessary to decide the further question if a contract of this nature operates only as a contract to be performed in future which may be specifically enforced as soon as the property comes into existence or i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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