AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1961 (7) TMI 7
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....ch 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 of 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 Nana Lal Haridas was the karta of a Hindu undivided family which admittedly was the beneficiary of 1,842 shares in a company called the Cotton Export and Import Limited (hereinafter referred to as the company). The shares were held in the names of different members of the family as given below : No. o....
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....he Tribunal that having regard to the scheme of section 23A and the ordinary dictionary meaning of the word " shareholder ", there was no reason why the joint family should not be held to be the shareholder within the meaning of section 23A. The Tribunal by its order dated February 15, 1957, expressed the view that the interpretation of section 23A for which the assessee contended would defeat the very purpose of that section, but held that it was bound by the decision of the Bombay High Court in Cambatta v. Commissioner of income-tax. Accordingly, the Tribunal allowed the appeal and directed the Income-tax Officer concerned to delete the deemed dividend income from the income of the Hindu undivided family. The Commissioner of Income-tax, B....
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....here the Income-tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company up to the end of the sixth month after its accounts for that previous year are laid before the company in general meeting are less than sixty per cent. of the assessable income of the company of that previous year, as reduced by the amount of income-tax and super-tax payable by the company in respect thereof he shall, unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made, the payment of a dividend or a larger dividend than that declared would be unreasonable, make with the previous approval of the Inspecting Assistant Commissi....
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....me. The High Court has referred to its earlier decision in Cambatta v. Commissioner of Income-tax. That decision laid down that where a share stood registered in two or more names, the registered holders treated as an association of persons must be regarded as the " shareholder " under section 23A and they must be assessed accordingly. It further laid down that section 23A did not say anything about equities or beneficial ownership ; it was a procedural section and not a charging section. It created a notional income which was wholly artificial and did not in fact exist in the pocket of any shareholder. In a later decision in Shree Shakti Mills Ltd. v. Commissioner of Income-tax, the same High Court held that the expression " shareholder " ....
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....as a shareholder or not. His first point is that the very object of the section is to prevent avoidance of super-tax by the shareholders of a company, and if the beneficial owner of the shares is a Hindu undivided family, that family will not come within the purview of section 23A, because a Hindu undivided family as such cannot be a shareholder in a company. The argument is that the narrow interpretation put on section 23A will defeat the very purpose of the section. The second point urged is that the principle that a legal fiction must be carried to its logical conclusion cannot be overlooked in construing section 23A. The legal fiction enjoined by the section is that the profits must be " deemed to have been distributed as dividend among....
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....A shall not have the same meaning. Sub-sections (3) and (4) of section 23A also make the position clear ; they talk of members of the company and a Hindu undivided family as such is not a member of the company. The position of a Hindu undivided family via-a-vis a partnership was considered by this court in Charandas Haridas v. Commissioner of Income-tax and Commissioner of Income-tax v. Nandlal Gandalal. It is not disputed that the Hindu undivided family as such was not a shareholder of the company in the present case. Therefore, so far, as the notional income is concerned, we must go by the terms of section 23A and if there is any lacuna in the wording of the section, we cannot cure it in the guise of interpretation. The question here is....