Law:

Section:

Section 61, read with section 238 of the Income-tax Act, 1961 [Corresponding to section 16(1)(c), read with section 48(3) of the Indian Income-tax Act, 1922] - Transfer of assets - Revocable - Assessment years 1949-50 to 1951-52 - Whether, if dividend income of a person who has received it is included in total income of another person under provisions of section 16(1)(c) of 1922 Act, former can not be entitled to any refund and a claim will lie only by person in whose total income dividend income is included - Held, yes - Whether where dividend income received by assessee was income arising to him from assets held under revocable transfer, income was liable to be included in total income of his vendor - Held, yes - Whether, in such a situation, having regard to aforesaid legal position, any claim for refund could be made only by his vendor, but so far as he himself was concerned, he was expressly excluded by terms of section 48(3) of 1922 Act - Held, yes FACTS In 1950 the bulk of the shares of a company called A Ltd. was owned by two groups of non-residents who have been compendiously described as the T group and the W Group. Of the 40,000 shares of the face value of Rs. 10 each into which the share capital of the company was divided the T group held 20,749 shares and the W group 18,750 shares. Only 501 shares were thus held by other persons. On the 25-3-1950, all the 39,499 shares held by the T group and the W group were sold by separate transactions to eight different persons, of whom some purchased 3,500 shares each and some a slightly smaller number. The sales appear to have been cum-dividend, already declared on the shares. After the transaction, the company paid the dividends to the purchasers and the dividend was necessarily paid out of funds on which the company had already paid income-tax at the company rate. On receipt of the dividends, the purchasers, who do not appear to have been otherwise assessable to tax, applied for refund under section 48 of 1922 Act. The ITO rejected the applications in the view that the transfers were revocable transfers within the meaning of section 16(1)(c) of 1922 Act and, therefore, the dividend income was to be deemed…

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