Judgment

M. HIDAYATULLAH J.: Messrs. Howrah Trading Company, 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, 1955-27 ITR 102. It is the latter judgment which gives the reasons for the decision.

2. The facts of the case hake been stated with sufficient fulness, yet briefly, in the statement of the case submitted by the Income-tax Appellate Tribunal (Calcutta Bench) and may be conveniently set out in its own words:

"The applicant had received sums of Rs. 3,831, Rs. 6,606, Rs. 7,954 and Rs. 8,304 in the four years, respectively (assessment years, 1944-45, 1945-46, 1946-47 and 1947-48) as income from dividends. The shares in respect of which this dividend income was received were the property of the Applicant but in the books of the various companies these stood in the names of other persons. It appears that these shares were purchased by the Applicant from other persons under a blank transfer but the transfers had not been registered with the various companies. The Applicant s claim in these income-tax proceedings was that these shares although not registered in the name of the applicant were the property of the applicant. It was further claimed that this dividend income should be grossed up under S. 16(2) and credit for the tax deducted should be allowed to the Applicant under S. 18(5)."

The Income-fax Officer did not accept this claim, and the appeals of the assessee were rejected by the Appellate Assistant Commissioner of Income-tax, Calcutta, "A" Range and by the Appellate Tribunal. The Tribunal, however, on being moved, referred the following question to the High Court:

"Whether in the facts and circumstances of this case, the Applicant (the assessee) was entitled to have this dividend income grossed up under Section 16(2) and claim credit for tax deducted at source under S. 18(5) of the Income-tax Act?"

The High Court answered the question in the negative, thus affirming the decisions of the Department and the Appellate Tribunal.

3. The assessee contends that the decision of the High Court is erroneous, and that it is entitled to have the dividend income grossed up under S. 16(2) and also to claim credit for tax deducted at source, under S. 18(5) of the Income-tax Act.

4. The relevant sections are as follows:"16(2); For the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been paid, credited or distributed to him, and shall be increased to such amount as would, if income-tax (but not super-tax) at the rate applicable to the total income of the company without taking into account any rebate allowed or additional income-tax clanged for the financial year in which the dividend is paid, credited or distributed or deemed to have been paid, credited or distributed, were deducted therefrom, be equal to the amount of the dividend: (proviso omitted)

18(5): Any deduction made and paid to the account of the Central Government in accordance with the provisions of this section and any sum by which a dividend has been increased under sub-section (2) of Section 16 shall be treated as a payment of income-tax or super-tax on behalf ..... of the shareholder ....and credit shall be given to him therefor on the production of the certificate furnished under... Section 20....in the assessment, if any, made for the following year under this Act: (proviso omitted)

49B(1): Where any dividend has been paid, credited or distributed or is dee