LexBENGAL & ASSAM INVESTORS LTD versus COMMISSIONER OF INCOME TAX, WEST BENGAL
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l • < • A B c D E F G BENGAL & ASSAM INVESTORS LTD v. COMMISSIONER OF INCOME TAX, WEST BENGAL November 2, 1965 [K. SUBBA RAO, J. C. SHAH ANDS. M. SIKRI, JJ.] Indian Income-tax Act, 1922 (Act 11 of 1922), s. !0-Jnvestment Co1npany-Dividend inconze-lf taxable. The ass·~ssee, an investment company, was assessed to income~ tax on its dividend income under s. 12 of the Income Tax Act. On reference the High Court held : "it cannot be suggested in this case that the a'Ssessee investment company had no business of any kind. It certainly had one but when it held shares on which dividends were re- ceived tax has to be computed under s. 12 and the assessee cannot say that this being its main activity the income received was its 'business income' under s. 10". In appeal to this Court the assessee contended that when a company is formed for the purpose of acquiring shares and making investments and generally undertaking :financial and commercial obligations and transactions and operations of all kinds, the dividend in- come must be computed under s. 10 of Income-tax Act, because the company was formed expressly for the purpose of carrying on business and holding shares in the course of it. HELD : The High Court rightly answered the question against the asses'See. On principle, before dividends on shares can be assessed under s. 1 O~ the assessee, be it an individual or a company or any other entity, must carry on business in respect of shares; that is to say, the assessee must deal in those shares. If an individual person invests in shares for the purpose of earning dividend he is not carrying on a business. The only way he CHn come under s. 10 is by converting the shares into stock-in-trade, i.e. by carrying on business of dealing in Stock and shares. [478 E-F] The very fact that a company is incorporated to carry on inve'stn1ent does not show that the company is carrying on business. [478 G] Laksh1ninarayan Ran1 Gopal & Son Ltd. v. Gover111nent of Hydera- bad, 25 J.T.R. 449, relied upon. Apart from showing mere investment, no facts have been brought out in this case to show that the company was in any way carrying on busi- ness in respect of shares. Its position was in no way different from an individual merely buying shares with a view to holding them for the pur- pose of earning dividend9. [ 479 B-C] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 508 of 1964. Appeal from the judgment and order dated January 16, 1962 of the Calcutta High Court in Income-tax Reference No. 1 of H 1954. S. T. Desai, S. Murthy and B. P. Maheshwari, for the appel- lant. 472 SUPREME COURT REPORTS [1966] 2 S.C.R. A. V. Viswanatha Sastri, N. D. Karkhanis, R. H. Dhebar and A R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Sikri, J. This is an appeal by certificate of the High Court of Calcutta against its judgment in a reference made to it under B s. 66 ( 1) of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act.) The question referred by the Appellate Tribunal was: "Whether, in the cas~ of the assessee, an investment company, its dividend income is part of its profits and gains chargeable to tax under section 10 of the Indian Income-tax Act, 192~ ?" In the Statement of the Case, dated December 3, 1953, the Appellate Tribunal gave the following facts : The appellant, Bengal and Assam Investors Ltd., hereinafter referred to as the assessee, was incorporated on January 30, 1947, and commenced business on March 19, 1947. According to its memorandum of associa- tion, the company's objects are : "3. The objects for which the Company is estab- lished are (and it is expressly declared that the several sub-clauses of this clause and all the powers thereof are to be cumulative and in no case is the generality of any one sub-clause to be narrowed or restricted by any particularity of any other sub-clause, nor is any general expression in any sub-clause to be narrowed or restricted by any particularity of expression in the same sub-clause or by the application of any rule of construction ejusdem generis or otherwise) :- (!) To acquire and hold shares, stocks, debentures, debenture-stock, bonds, obligations, and securities issued or guaranteed by any company constituted or carrying on business in British India or elsewhere, or in any British Colony, or dependency, or possession, or in any foreign country, and debe
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