COMMISSIONER OF INCOME-TAX, CALCUTTA versus NALIN BEHARI LAL SINGHA ETC.

Citation: [1970] 1 S.C.R. 665 · Decided: 25-07-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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COMMISSIONER OF INCOME-TAX, CALCUTIA 
v. 
NALIN BEHARI LAL SINGHA ETC. 
July 25, 1969 
[J. C. SHAH, ACTING C.J., V. RAMASWAMI AND A, N. GROVER, JJ] 
. /11.come-tax Act, 1922, s, 2(6A)-Definition of dividend-If taxable 
di\•idend is exclusive of component representing 
capital gains and not 
accumulated profits. 
Jn assessment proceedings for the year 1949-50 the respondents claimed 
that certain dividend -distributed to them by a company was exempt from 
tax. as the fund. out of· which it was distributed represented capital gains 
and not "accumulated profit" of the company. 
The Income-tax Officer 
rejected the claim, bu.t the Appellate Assistant Commissioner held that 
a part of the total .amdunt distributed represented capital gains and not 
being dividend within. the meaning of s. 2(6A) of the Income,tax Act, 1922, 
the-share distributed to. the share-holders out of that amount \Vas exempt 
from income tax. This' order was reversed in appeal by lhe Tribunal but 
lhe High .. Court,. on_ a reference, held in favour of the asses~ee. 
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On appear to ·this ·Court, 
HELD : Dismissingiilhe appeal: The proviso to the ·explanation to 
s. 2(6A) (a) clearly enacted that capital gains arising after March 31, 1948 
ul:c noi ,licible to· bt! .inclUOed within the expression ''Dividend". 
.Althou~b 
the definition of dividend' in. s. 2(6A). is an inclusive definition and a re-
ceipt by share-holders which does .not fall within the definition may, in 
some circumstance.S, ·,tega~ded. as diVidend. within the meaning of the Act, 
·it is difficult:on 'that ·~c~.il.UJ}t·to hold that .capital gains excluded from the 
definition d( dividenif•.b'filjt>tpr~ss enactment still fall within the charge of 
tax. Acc6rding to the,:aeii))iµon)n$.-2(6A) only the propartionate share of 
the member out of th<>.W,l'cum.iltated· profits (exduding capital gains aris-
ing in the excepted peri&i). distributed by the company alone will be deem-
ed .the taxable compP~etj!; [667 DJ 
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CIVIL APPELLAT~
1 JURISDICTION : Civil Appeal Nos. 736. to 
739, 913 and 1621 of 1968. 
Appeal from the judgment and order dated December 2, 1 Ol)4 
of the Calcutta 'High Court in Income-tax Reference Nos. 131 of 
1961 etc. 
Jagdish Swarup, .,Solicitor-General, 
T. A. Ramac/,.,.~!r,;in, 
R. N. Sachthey and B, D. Sharma, for the appellant (in all the 
appeals). 
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P. Barman, RanjitiJhose and Si1kumar Ghose, for the respon-
dents (in all the appeals); ... 
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SUPREME COURT REPORTS 
[1970] 1 s.c.R. 
The Judgment of the Coun was delivered by 
Sllah, Ag. C.J. In a proceeding for assessment to income. 
tax for the year 1949-50 the respondents in these appeals claimed 
that the dividend distributed by the Ukhra Estate Zamindaries 
Ltd. was exempt from tax, because the fund out of which the 
dividend was distributed did not form pan of the "accumulated 
profits" of the Company. The Income-tax Officer rejected the 
contention and brought the dividend to tax in the hands of the 
respondents. The Appellate Assistant Commissioner held that 
Rs. 1, 12 ,500 out of a total amount of Rs. 2,24,000 distributed 
by the Cimpany, represented capital gains arising to the Company 
on or after April 1, 1948 and not being dividend within the 
meaning of s. 2(6A) of the Income Tax Act, 1922, the share 
distributed to the shareholders out of that amount was exempt 
from income-tax. The order of the Appellate Assistant Commis-
~ioncr wJs reversed in appeal by the Tribunal. In the view of the 
Tribuna: the definition of 'dividend' in s. 2 ( 6A) in force in the 
year of assessment was not exhaustive, and if the amount dis II i-
buted was "dividend in ordinary parlance it became chargeable 
under the general charging section", and that clause 2(6A) "was 
concem~d with deemed dividends, and exclusion of certain capital 
gains by the proviso had no bearing on the issue raised by the 
revenue·· 
The following question referred by the Tribunal to the High 
Court of Calcutta under s. 66 (I ) of the Indian Income-tax Act : 
"Whether on the facts and in the circumstances of 
the case the amount of Rs. 28, 125 was rfghtly included 
as di\'idend in the total income of the asscssee for the 
ass~ssment year 1949-50?" 
was answered in the negative. The Commissioner has appealed to 
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this Court with certificates granted by the High Court. 
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'Dividend' in its ordinary connotation means the sum paid to 
or received by a share-holder proportionate to 

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