COMMISSIONER OF INCOME-TAX, BOMBAY CITY II versus SHAKUNTALA AND TWO OTHERS ETC.

Citation: [1962] 2 S.C.R. 871 · Decided: 18-07-1961 · Supreme Court of India · Bench: S.K. DAS · Disposal: Dismissed
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2 S.C.R. 
SUPREME COURT REPORTS 
s7i 
COMMISSIONER OF INCOME-TAX, BOMBAY 
CITY II 
v . 
SHAKUNTALA AND TWO OTHERS ETC. 
(S. K. DAS, M. HrnAYA'.l'ULLAH and J. C. SHAH, JJ.) 
Jncome-~f.1ax-8hares 1egistered in names of members of 
Hindu undivided family-Undistributed incorne deemed to be 
distributed dividrnd- Whether assessable in hands of farnily-
lndian Income-tax Act, 1922 (11of1922), s. 23A. 
A Hindu undivided family was the beneficiary of 1842 
shares in a company; but the !:hares 
~'ere held in the nan1es 
of different members of the family. For the assessment year 
1949-50 the Income. tax Officer applied ,the provisions of 
s. 23A of the Income-tax Act, 1922 (as it stood at that time) 
and ordered that the undisuibuted portion of the assessable 
income of the company in the previous year shall be deemed 
to have been distributed as dividend among the shareholders. 
The proportionate amount of dividend in respect of the I 842 
shares after being grossed up was added to the income of the 
joint family. The assessee-family contended that the divi-
dend deemed to have been distributed under s.23A should 
be assessed in the hands of the shareholders and not in the 
hands of the family 
Held, that the dividend deemed to have been distri-
buted nnder s. 23A of the Act could not be assessed in the 
hands of the Hindu undivided family but could be assessed 
only in the hands of the members of the family who were 
registered shareholders of the company. 
Under the express 
words of the section the artificial or notional income had 
to be included in the total income of the shareholder. The 
expression 
"shareholder" in s.23A meant the person who 
was shown as a shareholder in the register of the company. 
The section did not talk of the beneficial owner of the share. 
The Hindu undivided family was not a shareholder of the 
Company. The fiction enacted by the rrgislature must be 
restricted to the plain terms ofthestatute. 
8. C. Cambatta v •. Cornmissioner of Income-tax, Bombay, 
(1946) 14 I. T. R. 748 and Skree Shakti Mills Ltd., v. Commis-
sioner 
of Income-tax, 
Bombay, (I948) 16 I. T. R. 187, 
approved. 
Howrah Trading Co. ltd., v. Commissioner of Income-tax, 
Central Calcutta, (1959) 36 I.T.R. 215 .and Charandas Haridas 
v, Commissioner of Income-tax, Bombay, (1960) 39 I. T. R. 
202, applied. 
1961 
. Jitly,18. 
1961 
The 
Oom1ni3siotier 
of Income-tax. 
Bombay City II 
v. 
Shakunm/a and 
two others etc. . 
S.K. Das J. 
872 
SUPREME COURT REPORTS 
2 [1962] 
CIVIL APPELLATE JURISDICTION: Civil Appeals 
NoH. 125, 231 and 447 of 1960. 
AppPals from the judgment and order dated 
September 25, 1957, of the Bombay High Court of 
Ineome-tax References Nos. 30, 29 & 37/57, respec-
tively. 
K. N. Rajagopal Sastri and D. Gupta, for the 
appellant. 
A. V. Viswanatha Sastri and J. B. Dadachanji, 
for the respondents. 
1961. July, 18. 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 crl' 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 it. 
One Nanalal Haridas 
was the karta of a 
Hindu undivided family which admittedly was the 
benefkiary of 1842 shares in a company called the 
Cotton Export ancl Import Limited (hereinafter 
referred to a8 the Company). The shares were held 
in the nameB of different members of the family as 
given below. 
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2 8.C.R. 
SUPREME COURT REPORTS 
873 
No. of shares 
877 
815 
150 
Name or names in which 
they stand 
Tribhuvandas Haridas 
Nanalal Haridas 
Naualal Haridas and 
Tribhuvandas Haridas 
The Company was one in which the public were not 
substantially interested. For the assessment year 
194,9.50 the Income-tax Officer concerned applied 
the provi~ions of s. 23A of the Indian Income-tax 
Act, 1922 (as it stood previous to the amendm
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