MESSRS. HOWRAH TRADING CO., LTD. versus THE COMMISSIONER OF INCOME-TAX, CALCUTTA

Citation: [1959] SUPP. 2 S.C.R. 448 · Decided: 26-03-1959 · Supreme Court of India · Bench: BHUVNESHWAR PRASAD SINHA · Disposal: Dismissed

Judgment (excerpt)

l959 
March 26. 
44S 
StJPREM:rn COURT R:rnPoR'l'S [1959] Supp. 
MESSRS. HOWRAH TRADING CO., LTD. 
v. 
THE COMMISSIONER OF INCOME-TAX, 
CALCUTTA 
(B. P. SINHA, J. L. KAPUR and 
M. HrnAYATULLAH, JJ.) 
Income-tax-Assessee acquiring shares by blank transfcrs-
Receipt of dividend on s"ch shares-If assessee entitled to grossing 
"P of dividend income and to credit for tax deducted at source-
Indian Income-tax A,ct, r922 (XI of r922), ss. r6(2) and r8(5). 
The assessee acquired shares in~ certain companies under 
"blank transfers" without getting the transfers registered with 
the companies and it received dividends in respect of these 
shares. It claimed-that the dividend income should be grossed 
up under s. 16(2) Income-tax Act and that it should be allowed 
credit under s. 18(5) for the tax deducted at source on the 
dividend in the hands of the companies. 
Held, that, the assessee was not entitled to the benefits of 
ss. 16(2) and 18(5) as its name was not in the register of members 
of the companies. The benefit of s. 18(5) could only go to a 
shareholder; and a shareholder in that section meant the same 
thing as in the Indian Companies Act, 1913, i. e., a "member" 
having his name on the register. 
The scheme of the Indian Companies Act, 1913, shows. that 
the words 
11 member", "shareholder" and "holder of a share" 
have been used inter-changeably. 
The words "holder of a 
share" are really equal to the word "shareholder" and the 
expression" holder of a share" denotes only a person who, as a 
shareholder, has his name entered on the register of members. 
In re Wala Wynaad Indian Gold Mining Company, (1882) 
21 Ch. D. 849, Shree Shakti Mills Ltd. v. Commissioner of Income-
tax, [1948] 1fJ I.T.R. 187, ]aluram Bhikulal v. Commissioner of 
Income-tax, 11952) 22 I.T.R. 490, Arvind N. Mafatlal v. Incomc-
tax Officer, [1957J 32 I.T.R. 350, Bikaner Trading Co. v. Commis-
sioner of Income-tax, [1953) 24 LT.~: 419, referred to. 
A company when it pays income-tax does not do so on 
behalf of the shareholders, but the shareholders get the benefit 
of such payment. The rates of income-tax applicable to the 
company are, in most instances, higher than the rates applicable 
to individual shareholders and by the process of grossing up the 
recipient of the dividend gets some benefit. 
Cull v. Inland Revenue Commissionors, (1940) A.C. 51 and 
Inland Revenue Commissioners v. Blott, (r92r) 2 A.C. lJl, refer-
red to. 
(2) S.C.R. 
StJPRF.lM~ COURT REPORTS 
449 
In blank transfers the transfer deed signed by the transferor 
r959 
is handed over with the share scrip to the transferee who may M 
H 
1 
complete the transfer by entering his name and applying to the 7' esds~s. C owLra' 
f 
. t 
t" 
f h. 
Th 
I 
ra ing 
o. 
td. 
company 
or reg1s ra !On o 
1s name. 
e company on y 
' 
recognises those persons whose names are on the register of Th 
v.. . 
members and they alone are legally entitled to the dividend 
• Commissioner 
declared. In the case of a blank transfer equities exist between 
of Income-tax, 
Calcutta 
the transferor and the transferee and the transferee has a right 
to claim the dividend from the transferor who holds it in trust 
for him, but the company is only liable to the transferor and not 
to the transferee. Though the transferee is clothed with an 
equitable ownership he is not a full owner, since the legal 
interest vis-a-vis the company still outstands in the transferor. 
CIVIL APPELLATE JURISDICTION: 
Civil Appeal No. 
65 of 1956. 
Appeal from the judgment and order dated August 
31, 1954, of the Calcutta High Court in Income-tax 
Ref. No. 57 of 1953. 
N. C. Chatterjee and B. P. Maheshwari, for the 
appellant. 
K. N. Rajagopala Sastri, R. H. Dhebar and D. 
Gupta, for the respondent. 
1959. March 26. 
The Judgment of the Court 
was delivered by 
HrnAYATULLAH, J.-Messrs. Howrah Trading Com-
Hidayatullah J. 
pany, Ltd., Calcutta (hereinafter called the assessee) 
obtained on April 28, 1955, a certificate under s. 66A(2) 
of the Indian Income-tax Act from the Calcutta High 
Court, to appeal to this Court against the judgment 
dated August 31, 1954, in Income-tax Reference 
No. 57 of 1953. The Divisional Bench (Chakravarti, 
C. J., and Lahiri, J.) in the judgment under appeal 
merely followed their earlier judgment delivered the 
same day in Income-tax Reference No. 22 of 1953, 
since reported as Hindustan Investment Corporation v. 
Commissioner of Income-tax (1). It is the latter judg-
ment which gives the reasons f

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