COMMISSIONER OF INCOME-TAX, CALCUTTA versus SHAILA BEHARI LAL SINGHA

Citation: [1970] 2 S.C.R. 32 · Decided: 21-08-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

COMMISSIONER OF INCOME-TAX, CALCUTTA 
A 
v. 
SHAILA BEHARI LAL SINGHA 
August 21, 1969 
[J. C. SHAH, ACTING C.J., V. RAMASWAMI AND A. N. GROVER, 
JJ.l 
Practice & Procedure-High Court disposing of reference under ln-
co1ne .. fax Act-Manner of disposal. 
The assessee was a share-bolder of a 
company. 
The 
Income-tax 
Appellate Tribunal referred three questions to the High Court namely, 
(i) whether the amount distributed to the assessee out of the 
amount 
nttributable to land acquisition compensation l'eceived by the company 
wu, in the hands of the anessee, receipt of 'dividend' within the meanln11 
ot 1. 2(6A) of the Income-tax Act, 1922; (ii) whether the amount dis-
tributed to the assessee out of the amount attributable to salamis realised 
by the company for grant of long-term leases was a receipt in the hands 
of the assessee taxable as income from 'other sources'; and (iii) whether 
the amount referred to in question (ii) was not, in the hands of the 
a8$Cliee, a receipt of 'dividend' within the meaning of s. 2 ( 6A) of the 
Act. 
The High Court, following its 
earlier judgment, 
answered the 
questions in the negative and observed that it was agreed between the 
parties that the answers were subject to the final 
decision in appeals 
against that earlier judgment, pending in the Supreme Court. 
Jn appeal to this Court, 
HELD : The High Court erred in the manner in which it disposed of 
the reference. 
(!) Even where there was consent of the parties the High Court had 
to record its answers to the questions referred and give its reasons; and 
such answers would be final and could not be modified by a ju1gment of 
B 
c 
D 
E 
this Court in some other case. [34 G-H] 
F 
(2) The High Court had to decide on the facts of each case whether 
any amount of salami was capital gain. [35 A] 
(3) The High Court had to decide on the facts of each case whether 
any part of the compensation received for compulsory acquisition of land 
was capital gain, because, the interest which is statutorily payable on com· 
pensation is income and not capital gain. [35 II) 
G 
Sham/a/ Narula v. C.1.T. Punjab, Jammu and Kashmir, 
H.P. and 
Pati•la 53 I.T.R. 151 (S.C.), referred to. 
(<4) Further, the question whether the rec,eiJ?t f~~ capital gains was 
Income liable to tax from 'other sources' (not bemg dtvtdend) under s. 12 
of the Act, was not the subject-matter of the appeal pending in this Court 
against the earlier judgment. [35 E-FJ 
H 
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2276 
to 2278 of 1968. 
A 
B 
c 
0 
E 
F 
G 
H 
C.I.T. v. S. B. L. SINGHA (Shah, Ag. C.J.) 
33 
Appeal by special leave from the judgment and order dated 
February 23, 1968 of the Calcutta High Court in Income-tax 
Reference No. 158 of 1964. 
Jagdish Swarup, 
Solicitor-General, 
T. A. Ramachandran, 
R. N. Sachthey and B. D. Sharma, for the appellant (in all the 
appeals). 
P. Burman, R. Ghos;; and Sukumar Ghose, for the respondent 
(in all the appeals) . 
The Judgment of the Court was delivered by 
Shah, Ag. C.J. Shaila Behari Lal Singha-hereinafter called 
'the assessee'-is a shareholder of a company styled the Ukhara 
Estates Zamindaries Ltd. 
The following table sets out the 
amonnts of dividend received by the assessee from the Company 
and the years in respect of which they were received :-
Year of 
Year of declaration 
Amount of 
assessment 
of dividend 
dividend 
1951-52 
1357 B.S. 
Rs. 37,125/-
1952-53 
1358 B.S. 
Rs. 29,250/-
1953-54 
1359 B.S. 
Rs. 28,125/-
The assessee claimed that out of the amounts set out in the table 
only Rs. 8,669/- for the year 1357 B.S., Rs. 20,469/- for the 
year 1358 B.S., and Rs. 21,822/- for the year 1359 B.S. were 
taxable as dividend, and the remaining amounts were not tax-
able, since they were declared out of capital gains of the Com-
pany which comprised salami or premia received by it as consi-
deration for grant of long-term mining and other leases and as 
compensation for compulsory acquisition of lands for public 
purposes. The Income-tax Officer brought the entire amount to 
tax declared as dividend for each of the three years in question 
and grossed up the amounts under s. 16(2) of the Income-tax 
Act, 1922. 
In appeal, the Appellate Assistant Commissioner 
held that the entire amount for each year was income in the hands 
of the assessee, but only a part of it being dividend, within the 
meaning of s. 2(6A) of the Income-tax Act, 1922, was liable 
to be grossed up. 
In second appeal, the .~ ppell

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