Judgment

KHANNA, J. :- These two appeals by special leave are directed against the judgment of Calcutta High Court whereby it answered the following question referred to it under Section 66 (1) of the Indian Income Tax Act, 1922 in the negative in favour of the revenue:

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in excluding from the assessable income of the assessee for the assessment years 1953-54 and 1954-55 the sums of Rupees 56,586 and Rs. 39,542 which were the amounts of divident received by the assessee s wife and two sons from shares acquired out of the profit of the assessee?"

2. The matter relates to assessment years 1953-54 and 1954-55, the corresponding previous years for which ended on March 31, 1953 and March 31, 1954 respectively. The appellant-assessee is the Managing Director of Messrs Hotels (1938) Ltd. and other associated companies controlling a number of hotels in India. For the assessment years 1953-54 and 1954-55, the appellant showed incomes of Rupees 66,694 and Rupees 87,570 as the gross dividend derived by him from the following shares held by him:

(i) Associated Hotels of India Ltd. 109,606 shares

(ii) Northern India Caterers Ltd. 20 shares

(iii) Oberoi Hotels (I) Ltd. 10 shares.

The Income-tax Officer found that besides the above mentioned shares, the appellant s wife and two sons held shares of Associated Hotels of India Ltd. and Northern India Caterers Ltd. and included the gross dividend of those shares in the total income of the assessee. In the order relating to assessment year 1953-54, the Income-tax Officer in this context observed as under:

"Besides the income shown from the above mentioned shares of the above named concerns, other income from dividends which are held by Benamidars of the assessee have also to be assessed in the hands of the assessee. It is seen from the past records that the following shares standing in the names of the assessee s wife Smt. I. D. Oberoi and the assessee s two sons, namely Mr. P. R. S. Oberoi and Mr. T. R. Oberoi do in fact belong to the assessee and are his own investments. The facts have also been admitted by the assessee before the department in the past years. The income from these shares is therefore to be rightly included in the hands of the assessee and assessed accordingly.

Name of shareholder Gross Dividend

Rs.

1. Smt. I. D. Oberoi, wife of the assessee.

(a) 15,886 shares of Associated Hotels (I) Ltd. 3,971

(b) 30 shares of Northern India Caterers Ltd. 15,273

2. Mr. T. R. Oberoi, son of the assessee.

(a) 50 shares of Northern India Caterers Ltd. 25,454

(b) 6,823 shares of Associated Hotels (I) Ltd. 1,706

3. Mr. P. S. H. Oberoi, son of the assessee.

(a) Northern India Caterers Ltd. (20 shares). 10,182

56,586

Similarly, for assessment year 1954-55 the Income-tax Officer included the following dividends in the total income of the assessee :-

"Name of the shareholders Net Dividend

Rs.

Smt. I. D. Oberoi ..... ..... 15,886 shares of Associated Hotels of India Ltd. 3,177

30 shares of Northern India Caterers Ltd. 10,500

Sri. T. R. Oberoi..... .... 50 shares of Northern India Caterers Ltd. 17,500

6,823 shares of Associated Hotels of India Ltd. 1,365

Sri. P. R. S. Oberoi ..... ..... 20 shares of Northern India Caterers Ltd. 7,000

39,542

3. When the assessee went up in appeal, the Appellate Assistant Commissioner observed that the stand of the assessee that the dividend in respect of the shares held by his wife and two sons should not be included in his income had already been negatived by the Appellate Assistant Commissioner as per order dated November 24, 1959 for the assessment year 1952-53. The Appellate Assistant Commissioner accordingly repelled the contention on behalf of the assessee that the amounts of Rupees 56,586 and Rupees 39,542 should not be included in his income. In the order dated November 24, 1959 for the assessment year 1952-53, the Appellate Assistant Commissioner had referred to the following observati