Law: Income Tax Act, 1922

Section: 10,12

[Income Tax Act, 1922 (XI of 1922)].......Sections 10, 12--Business income -Dividends--Investment company-Income from dividends, whether income from "business"-Held no For a dividend on shares to be assessed under Section 10 of the Income Tax Act, the assessee, be it an individual or a company or any other entity must carry on business in respect of shares, that is to say, the assessee must deal in those shares. An individual who merely invests in shares for the purpose of earning dividend, does not carry on a business. The only way he can come under Section 10 is by converting the shares in to stock-in-trade, i.e., by carrying on the business of dealing in stocks and shares. If a company merely acquires and holds shares with the object of receiving dividends, it does not carry on business within Section 10. The mere fact that a company is incorporated to carry on investment does not show that it is carrying on business. Cases distinguished:- Commissioner of Income Tax v. Cocanada Radhaswami Bank Ltd. Commissioner of (1965) 57 I.T.R. 306 (S.C.); Commissioner of Income Tax v. Chugandasand Co. (1965) 55 I.T.R. 17 (S.C.); and East India Prospecting Syndicate v. Commissioner of Excess Profits Tax (1951) 19 I.T.R. 571. Case relied on:- Lakshminarayan Ram Gopal and Son Ltd. v. Government of Hyderabad (1954) 25 I.T.R. 449 (S.C.) Case affirmed:- Bengal and Assam Investors Ltd. v. Commissioner of Income Tax (1962) 46 I.T.R. 655. Cases referred to: Commissioner of Income Tax v. Ahmuty & Co. Ltd. (1955) 27 I.T.R.63; Commissioner of Income Tax v. Bai Shirinbai K. Kooka (1962) 46 KT.R. 86 (S.C.), Commissioner of Inland Revenue v. Korean Syndicate Ltd. (1921) 12 Tax Cos. 181 (H.L.) and Eastern Investments Ltd., v. Commissioner of Income Tax (1951) 20 I.T.R. 1; (1951) S.C.R. 594. Appeal from the and order of the Calcutta High Court dated January 16, 1962, in Income Tax Reference No. 1 of 1954. The of the High Court is reported as Bengal and Assam Investors Ltd. v. Commissioner of Income Tax (1962) 46 I.T.R. 655. ORDER [The judgment of the court was delivered by SIKRI J.]-This is an appeal by certificate of the High Court of Calcutta against its judgment in a reference…

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