JUDGMENT The Income Tax Appellate Tribunal, Allahabad, has, in compliance with the direction of this court under section 256(2) of the Income Tax Act, 1961, referred the following question for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the sum of Rs. 1,15,326 being the dividend on the shares of Swadeshi Cotton Mills Co. Ltd. and a sum of Rs. 15,227 being the tax deducted at source thereon were liable to be excluded from the assessee's total income for the assessment year 1971-72 ?"
2. The said question arises out of the Tribunal's order dated 17-5-1996, passed in ITA No. 37 (All) of 1975-76 for the assessment year 1971-72.
2. The said question arises out of the Tribunal's order dated 17-5-1996, passed in ITA No. 37 (All) of 1975-76 for the assessment year 1971-72.
3. We have heard Sri Shambhu Chopra, learned counsel for the Commissioner. and Sri Ravi Kant, learned counsel for the assessee-respondent.
3. We have heard Sri Shambhu Chopra, learned counsel for the Commissioner. and Sri Ravi Kant, learned counsel for the assessee-respondent.
4. The dispute is about a sum of Rs. 1,15,326.28 which was the dividend that was declared by the company, Swadeshi Cotton Mills Co. Ltd., in respect of certain shares held by the assessee. The facts are not in dispute and have been stated as under in the assessment order :
4. The dispute is about a sum of Rs. 1,15,326.28 which was the dividend that was declared by the company, Swadeshi Cotton Mills Co. Ltd., in respect of certain shares held by the assessee. The facts are not in dispute and have been stated as under in the assessment order :
"Out of the dividend shown in the receipt and expenses account an amount of Rs. 1,15,326.28 has not actually been received during the year ending 30-6-1970. The payments of these dividend were restrained in Execution Case No. 38 of 1960 by the First Civil judge, Kanpur. As per facts of the case a decree was obtained against Jaipuria Brothers Ltd. by the receiver of the Estate of Sara Bhai Jai Singh Bhai Jaipuria Brothers Ltd. owned shares of Swadeshi Cotton Mills Ltd. The assessee-trust had purchased the shares of Swadeshi Cotton Mills Ltd. owned by Jaiptiria Brothers Ltd. before the attachment. The receivers filed a civil suit and included in their list also the shares purchased by the assessee-trust, the Union of India also moved an application for the recovery of outstanding income-tax demands against Jaipuria Brothers Ltd. The First Civil Judge to the interim order dated 29-6-1967, restrained Swadeshi Cotton Mills Ltd. from making any payment of dividend to such registered shareholders in question. It was directed that the dividend might be declared and the amount might be shown to be deposited in the account books in the credit of these shareholders. Only the dividend was prohibited, from being handed over and paid out to the registered shareholders. This attachment was released on 26-5-1972."
5. The assessee had credited this amount as income in the books of account and it was included in the returned income. Subsequently a revised return was filed in which this amount was excluded on the plea that because of the restraint order of the court in Execution Case No. 38 of 1960 the assessee had no right to receive the amount during the year under consideration and, therefore, this amount could not be treated as its income. The assessee's contention was not accepted by the assessing officer but was accepted by the Appellate Assistant Commissioner. The Tribunal too upheld the contention of the assessee. In doing so, it followed its order in the case of A. M. Jaipuria Public Charitable Trust in which similar facts and circumstances were involved. The Tribunal found that because of the restraint order passed by the court, no right had accrued to the assessee to receive this income and, therefore, this amount could not be treated as its income for the year under consideration.
5. The assessee had credited this amount as income in the books of account and it was included in the returned income. Subsequently a revised return was filed in which this amount was excluded on the plea that because of the restraint order of the court in Execution Case No. 38 of 1960 the assessee had no right to receive the amount during the year under consideration and, therefore, this amount could not be treated as its income. The assessee's contention was not accepted by the assessing officer but was accepted by the Appellate Assistant Commissioner. The Tribunal too upheld the contention of the assessee. In doing so, it followed its order in the case of A. M. Jaipuria Public Charitable Trust in which similar facts and circumstances were involved. The Tribunal found that because of the restraint order passed by the court, no right had accrued to the assessee to receive this income and, therefore, this amount could not be treated as its income for the year under consideration.
6. Admittedly, the assessee had purchased the shares concerned from Jaipuria Brothers Limited and the restraint order was passed in an execution instituted by the receiver of the Estate of Sara Bbai Jai Singh Bhai against Jaipuria Brothers Limited and the court by an interim order dated 29-9-1967, had restrained Swadeshi Cotton Mills Ltd. from paying dividends on the said shares to any one till further orders. The restraint order continued till 26-5-1972. Thus, during the year under consideration, i.e., the accounting year ending 30-6-1970, the petitioner's right to receive dividends was under suspension because of the restraint order passed by the court. In such circumstances, the dividend declared by the company could not be said to have accrued to the assessee because neither could the company pay the same to the assessee nor could the assessee recover it till the restraint order was vacated.
6. Admittedly, the assessee had purchased the shares concerned from Jaipuria Brothers Limited and the restraint order was passed in an execution instituted by the receiver of the Estate of Sara Bbai Jai Singh Bhai against Jaipuria Brothers Limited and the court by an interim order dated 29-9-1967, had restrained Swadeshi Cotton Mills Ltd. from paying dividends on the said shares to any one till further orders. The restraint order continued till 26-5-1972. Thus, during the year under consideration, i.e., the accounting year ending 30-6-1970, the petitioner's right to receive dividends was under suspension because of the restraint order passed by the court. In such circumstances, the dividend declared by the company could not be said to have accrued to the assessee because neither could the company pay the same to the assessee nor could the assessee recover it till the restraint order was vacated.
7. Learned counsel for the Commissioner has placed reliance on CIT v. Thanthi Trust (1982) 137 ITR 735 (Mad) and CIT v. Trustees of H. E. H. The Nizam's Charitable Trust (1981) 131 ITR 497 (AP). None of these rulings has any relevance to the question that has been agitated before us.
8. In view of the above discussion, we answer the aforesaid question in the affirmative, i.e., in favour of the assessee and against the Commissioner.
8. In view of the above discussion, we answer the aforesaid question in the affirmative, i.e., in favour of the assessee and against the Commissioner.