1. This reference raises a question of law which can only be answered in one way in view of a decision of a Division Bench of this court, to which I was a party, in Cambatta v. Commissioner of Income-tax, and the only reason for the Income-tax Commissioner having the question referred to us can be wishes to canvass it before a higher Tribunal. The assessee in this case is a Hindu undivided family. The family owned 1,842 shares of the Cotton Export and Import Ltd.; but since the family could not hold the shares in its own name, they were registered in the names of the different coparceners of the family. The Income-tax Officer invoked the provisions of section 23A of the Indian Income-tax Act and directed that the undistributed portion of the assessable income of the said company shall be deemed to have been distributed as dividends amongst the shareholders. The proportionate shares attributed to the 1,842 shares after being grossed up came to Rs. 54,000 and the question that has been raised is whether this amount is liable to be assessed in the hands of the assessee - the Hindu undivided family - or can only be assessed in the hands of the registered shareholders.
2. Now, in the case of Cambatta v. Commissioner of Income-tax, a Division Bench of this court took the view that under the provisions of section 16(2) regarding grossing up and of section 18(5) which provide that in respect of the difference between the actual dividend and the amount grossed up, the shareholder shall be treated as the person who has paid income-tax, the only person who is to be considered is the registered shareholder and not the beneficial owner; and applying the ratio of the case to the question referred to us, there cannot be the least doubt that this income did not fall to be assessed in the hands of the assessee but fell to be assessed in the hands of the individual shareholders. The Tribunal in their order thought fit to observe that the interpretation which this court placed upon the relevant provisions of the law in Cambatta's case defeats the purpose for which that section was enacted. The Tribunal apparently lost sight of the fact that the Tribunal was not the proper forum before which the correctness or otherwise of the decision of the court could be questioned. That decision, as the Tribunal undoubtedly recognised itself, bound the Tribunal and the Tribunal acted on it; but if they chose notwithstanding this position in law to express an opinion as to the correctness or otherwise of the decision, they might have at least stated the grounds on which they thought the purpose for which that section was enacted was defeated by the interpretation put by this court in Cambatta's case. No doubt it is true, as the Tribunal observes, that no share can be registered in the name of the Hindu undivided family because although it is an assessable entity under the Income-tax Act, it is not a legal entity as such. When you have a case of an income which is deemed to be distributed under the provisions of section 23A, the section in terms provides that the proportionate share of the shareholder in such distribution shall be included in his income. If the Hindu undivided family is not a registered holder, obviously it cannot be its income nor can it be taxed as such. How it brings about the result that the provisions of section 23A are defeated, we are quite unable to see; but in any event we are bound to follow a decision of a court of co-ordinate jurisdiction in Cambatta's case and following that decision, we answer the question raised in the negative.
3. A second question has been raised, which only arises if our answer to the main question was in the affirmative. We, therefore, do not answer that question.
4. The Income-tax Commissioner to pay the costs.
5. Reference answered accordingly.