R. Dalmia vs Commissioner Of Income Tax, New Delhi

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1977 Supreme(SC) 40

SUPREME COURT OF INDIA
R.S. SARKARIA AND P.S. KAILASAM, JJ.
R. Dalmia, Appellant
Versus
The Commissioner of Income Tax New Delhi, Respondent.
Civil Appeal No. 283 of 1972,
D/- 19-1-1977.
Advocates appeared
Mr. Bishamber Lal, Advocate, for Appellant; Mr. V. S. Desai, Sr. Advocate, (M/s. J. Ramamurthi and R. N. Sachthey, Advocates with him), for Respondent.

Advocates:
Bishambar Lal Khanna, J.RAMAMURTHY, R.M.Sachthey, V.S.DESAI

Headnote:
Income-tax Act, 1922 - Section 2 – Employment and service – Claim of compensation - Assessed carried an appeal to Appellate Assistant Commissioner who found that assessed was beneficial owner of shares of Bharat Union Agencies Pvt. Ltd carrying more than per cent of voting power - He further held on basis of certain findings in Report of Commission of Inquiry on Administration of Jain Companies published in that assessed had per cent of share-holding control of Allen Berry and Co. Pvt. Ltd - Appellate Assistant Commissioner did not specifically deal with question whether assessed was concerned in management of both these Companies - In result he upheld order of Income-tax Officer – Held, In our opinion above is a correct exposition of the law on the point - Word "concern is not a term of art having a precise fixed meaning - It has several nuances, and is used to convey diverse shades of meaning over a wide spectrum - It may mean to have a relation to or bearing on be of interest or importance" or to have an anxiety, worry Concerned as an adjective may mean interested involved - In one context, it may mean one thing and in a different context another - Decisions as to the meaning of this word used in a different context in another statute, are scarcely of much value in construing it in the setting of the provision with which we are concerned - Best way therefore to construe this word is with reference to context in which it is used. In sub-clause (iii) of Section 2 Income-tax Act, 1922 word concerned" takes its color from words in management of the business" in association with which it occurs - In context of business, "manage" means "to control, to guide to administer, to conduct or direct affairs; carry on business - Management includes act of managing by direction, or regulation, or administration or control or superintendence - Construed with reference to the context and circumstances of a case, the expression "person concerned in the management of business may take in not only a person who directly participates or engages in the management of the business but also one who indirectly controls its management through the managerial staff from behind scenes - Assesses admission that he is in control of the Company necessarily includes an admission of his being "concerned in management of the business of the Company - A person who is not rightfully entitled to manage business of Company but usurps the power by virtue of his certain position, is, in our opinion, certainly a person covered by this expression - It is also not necessary that management should be carried on in an ostensible manner - One who carried on management indirectly and imperceptibly through the persons who outwardly and ostensibly carry on the management is covered by expression - It is not necessary in our opinion that the management should be both seen, and felt it is sufficient if it is felt, without being seen - Appeal dismissed

Judgment

SARKARIA, J. :- This appeal by special leave is directed against a judgment, dated July 12, 1971, of the High Court of Delhi. It arises out of these facts :

The appellant (hereinafter referred to as the assessee) is an individual. The assessment year is 1955-1956.

2. Bharat Union Agencies Pvt. Ltd. had spent Rs. 53,398/- after the personal necessities of the assessee during the previous year ending 30-9-1954, without charging for the same. The assessee was not a Director of the said Company. He however was the beneficial owner of 1800 shares out of the total of 3000 equity shares of the said Company during the previous year. Similarly, Allen Berry and Co. Pvt. Ltd. had spent a sum of Rs. 4406/- after the personal necessities of the assessee, without charging for the same.

3. The Income-tax Officer treated the total benefit of Rs. 57,804/- received by the assessee from these two Companies, as his income under Section 2 (6c) (iii) of the Income-tax Act, 1922 which was introduced by the Finance Act, 1955 with effect from 1-4-1955, and charged it to tax along with some other items of income.

4. The assessee carried an appeal to the Appellate Assistant Commissioner who found that the assessee was beneficial owner of the shares of Bharat Union Agencies Pvt. Ltd. carrying more than 20 per cent of the voting power. He further held on the basis of certain findings in the Report of the Commission of Inquiry on the Administration of Dalmia Jain Companies published in 1963, that the assessee had 100 per cent of the share-holding control of Allen Berry and Co. Pvt. Ltd. The Appellate Assistant Commissioner did not specifically deal with the question whether the assessee was "concerned in the management" of both these Companies. In the result he upheld the order of the Income-tax Officer.

5. The assessee preferred a further appeal to the Income-tax Appellate Tribunal which held that the assessee was "concerned in the management of the Bharat Union Agencies (P) Ltd. being the beneficial owner of shares carrying more than 20 percent of the voting power, and as such the benefit of Rs. 53,398/- received by him from that Company was his income within the latter part of Clause (iii) of Section 2 (6c) of the Income-tax Act, 1922". On this reasoning the Tribunal dismissed the assessees appeal in regard to the item of Rs. 53,398/- . However, it allowed, on a different ground his appeal with regard to the item of Rupees 4406/- received from Allen Berry and Co. (P) Ltd. In this appeal we are not concerned with that item any more.

6. At the instance of the assessee, the Tribunal stated the case and referred the following question under Section 66 (1) of the Income-tax Act, 1922 to the High Court.

"Whether on the facts and in the circumstances of the case, the sum of Rupees 53,398/- spent by Bharat Union Agencies P. Ltd. after the personal necessities of the assessee is income within the meaning of Section 2 (6c) (iii) of the Income-tax Act, 1922".

7. The High Court answered this question against the assessee. Hence this appeal.

8. At the outset, Shri Bishamber Lal, appearing for the appellant, tried to contend that the item of Rs. 53,398/- received by the assessee from Bharat Union Agencies Pvt. Ltd. was not a "benefit or perquisite" within the contemplation of Section 2 (6c) (iii) of the 1922 Act because, firstly, the constituents of this item were not cash amounts but gifts or bounties, and secondly, the receipt of this benefit by the assessee was unauthorised and could not be claimed by him as of right on the basis of any agreement with the Company.

9. This was altogether a new plea. It was not even indirectly raised before the authorities under the Income-tax Act or the High Court. It has not been raised even in the Special Leave Petition under Article 136 of the Constitution. It was never the case of the assessee that this amount of Rupees 53,398/- was not "benefit obtained" by the assessee from the company within the meaning of Section 2 (6c) (iii)

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