The expression "shareholder" in S. 23-A of the Indian Income-tax Act, 1922 means the shareholder registered in the books of the company.

Judgement

S. K. DAS, J. : These three appeals, with special leave of this Court, have been heard together. They arise out of three Income-tax References made to the high Court of Bombay, namely, Income-tax Reference No. 29 of 1957, Income-tax Reference No. 37 of 1957 and Income-tax Reference No. 37 of 1957. The facts are similar in the three cases and the question of law which 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.

2. One Nana Lal Haridas was the karta of a Hindu undivided family which admittedly was the beneficiary of 1842 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. of shares Name or names in which they stand.

877 Tribhuvandas Haridas

815 Nanalal Haridas

150 Nanalal Haridas and Tribhuvandas Haridas

The Company was one in which the public were not substantially interested. For the assessment year 1949-50 the Income-tax Officer concerned applied the provisions of S. 23-A of the Indian Income-tax Act. 1922 (as it stood previous to the amendment of 1955) and ordered that the undistributed portion of the assessable income of the Company of the relevant previous year, as computed for income-tax purposes and reduced by the amount of income-tax and super-tax payable by it in respect thereof, shall be deemed to have been distributed as dividend among the shareholders as at the date of the relevant General Meeting of the Company. The proportionate amount of dividend of the 1842 shares, after being grossed up, came to Rs. 54,307. This amount the Income-tax Officer added to the income of the joint family. The assessee-family claimed that the dividend deemed to have been distributed under S. 23-A should be assessed in the hands of the shareholders, that is, the persons in whose names the shares stood registered in the books of the Company, and not in the hands of the Hindu undivided family though admittedly it was the beneficiary of the shares. The Income-tax Officer and the Appellate Assistant Commissioner rejected this contention. The matter then went in Appeal to the Income-tax Appellate Tribunal. The Department contended before the Tribunal that having regard to the scheme of Section 23-A 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 S. 23-A. The Tribunal by its order, dated February 15, 1957, expressed the view that the interpretation of S. 23-A 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 S. C. Cambatta v. Commissioner of Income-tax, Bombay, 1946-14 ITR 748. 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, Bombay, then moved the Tribunal to refer the following question of law to the High Court of Bombay:

"Whether the dividend income of Rs. 54,307 is to be assessed in the hands of the assessee, the Hindu undivided family ?"

The Tribunal was of the view that the question did arise out of its order and made a reference of the High Court accordingly.

3. The High Court by its order, dated September 25, 1957, answered the question in favour of the assessee. It held that in respect of an income which was deemed to be distributed under the provisions of S. 23A, the section in terms provided that the proportionate share of the sh