1. This reference by the commissioner of Income-tax under s. 66(1) of the Indian I.T. Act, 1922, raises certain interesting questions but after hearing both the counsel we have come to the conclusion that these questions do not arise at this stage and that the reference in respect thereof is somewhat premature. The circumstances in which the reference arises may now be stated.
2. M/s Allied Publishers and Stationery . (hereinafter referred to as 'the company') distributed a dividend during the financial year 1955-56. 262 shares of the company stood in the name of Shri Ramanand Sachdeva (hereinafter referred to as 'the individual'). Ramanand Sachdeva, however, was also the karta of a Hindu joint family (here in after referred to as 'the family'). The individual had received from the company certain emoluments amounting to Rs. 28,879 and a dividend of Rs. 13,160.
3. For the assessment year 1956-57, relevant to the previous year which ended on March 31, 1956, the assessment of the individual was completed on February 29, 1958. The total income assessed was Rs. 46,710 comprising of the salary income (stated here to be Rs. 28,879) and dividend income of Rs. 17,831. It may be mentioned here that though the dividend income the provisions of the Indian I.T. Act, 1922, as they stood at the material time and particularly the provisions contained in ss. 16(2) and 18(5) of the said Act, the net dividend thus distributed was grossed up to the figure of Rs. 17,831. The details of the tax demand in the case of the individual are not available before us, but Shri Monga tells us that roughly the tax payable on the total income of Rs. 48,710 works out to Rs. 12,600. Against this tax the individual had to be given credit for Rs. 4,162.50, which was the tax deducted from the salaries paid to him by the company. Under s. 18(5) of the Act he had also to be given credit for Rs. 4,681 (being the difference between the gross and the net amounts of dividend referred to earlier).
4. Subsequently, some time in 1961, another ITO took up the assessment of the family for the same assessment year. In these proceedings, he came to the conclusion that the salary income received by the individual constituted the income of the family in view of the decision of the Supreme Court in the case of Kalu Babu Lal Chand : 37ITR123(SC) . He also came to the conclusions likewise that the dividend income was also to be assessed in the hands of the family. However, he pointed out that as the credit for the 'tax deducted at source' of Rs. 4,605 had been given in the individual assessment (Rs. 4,681 was the figure in the individual assessment) and as no dividend warrant had been filed by the family, credit for the said amount of difference between the gross and net dividends could not be given in the assessment of the family. In addition to the above two items, there was a business loss of Rs. 6,786 which had to be set off. There was also a slight difference in the figures of salary income and dividend income between the figures taken in the hands of the individual and those considered in the family assessment as already pointed out. The family assessment was, thereforee, competed on a total income of Rs. 39,279 with no credit for Rs. 4,605.
5. The family preferred an appeal to the AAC contending that the inclusion of the salary income in the hands of the family was not justified and that the benefit of the grossing up of the dividend should have been given. The AAC, however, rejected this contention and confirmed the inclusion of the above items of income in the family assessment. As regards the contention of the appellant regarding the grossing up of the dividend he concluded that no interference was called for. He pointed out that credit had already been given in the individual assessment. He also observed that the ITO had mentioned in the assessment order that he will allow credit for tax deduction at source under s. 36 if the in dividend income is deleted from the individual assessment (though, incidentally, it may be mentioned that we do not find any such mention in the copy of the assessment order included in the paper book).
6. The family preferred a further appeal to the Tribunal. The main contention in the appeal was whether the salary income could be included in hands of the family and this questions was answered by the Tribunal in the affirmative. so far as the dividend income was concerned, it appears that the questions of its includibility in the assessment of the family was not separately debated even before the Tribunal. The only plea in regard to dividends was the same as that before the AAC, that the dividend should be grossed up in the hands of the family. As we have seen, the ITO had grossed up in the dividends. What the assessed really wanted was that the family should be given credit for the sum of Rs. 4,605 (being the difference between the gross and net amount of dividends referred to in the assessment order). This contention was rejected by the Tribunal. It was pointed out that this stand was contrary to the decision of the Supreme Court in the case of Kishanchand Lunidasing Bajaj v. CIT : 60ITR500(SC) , where it had been held that the benefit of grossing up and consequential tax credit would be available only to the registered shareholder and not to the real owner of the shares. In the view taken by the Tribunal, the family's appeal had to be dismissed. However, before the Tribunal disposed of the appeal, the assessed filed an application seeking permission to raise an additional ground of appeal, which reads as follow :
'The respondent be directed to make appropriate adjustment of the tax (on the income to be determined by this hon'ble Bench) already realised in the hands of the appellant and his status as an individual as per assessment order dated 29-8-58.'
7. The ground only raised an equitable plea that since the same dividend income had been taxed both in the hands of the family and the individual the ITO should be directed to make an appropriate adjustment of against the family. this plea was sought to be supported by the decision of the Supreme Court of India in ITO v. Bachu Lal Kapoor : 60ITR74(SC) , at p. 80 and direct appropriate adjustment to be made by the Income-tax Officer in respect of the tax realised by the revenue in respect of that part of the income of the family assessed in the hands of Shri Ramanand Sachdeva in the status of individual.'
8. The Commissioner was aggrieved by the above direction of the Tribunal and at his instance, thereforee, three questions of law have been referred to this court by the Tribuna :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing appropriate adjustment of tax in respect of dividend income
2. Whether, on the facts and in the circumstances of the case, the adjustment to be made in the assessment of Shri Ramanand Sachdeva in the status of individual was not to be limited to the next dividend, as the credit for tax deducted at source was available only to the registered shareholder
3. Whether, on the facts and in the circumstances of the case, the assessed could obtain the benefit of tax deducted at source on the dividend income ?'
9. So far as the first question is concerned, we think that it is quite clear that the Tribunal was justified in directing that the department should make appropriate adjustment, while finalising the family assessment, in respect of the tax realised in the case of the individual assessed. This is not only equitable but is also envisaged and approved by the Supreme Court in the decision referred to. There can thereforee, be no doubt that the Tribunal was fully justified in giving the direction which it did.
10. However, the real grievance of the Commissioner seems to be that the department may face certain difficulties while giving effect to the order of the Tribunal. Apparently, his fear is that, when the matter goes back to the ITO for giving effect to the order of the Tribunal, the assessed will claim that it should be given credit for the sum of Rs. 4,605 (or Rs. 4,681, whichever is correct) which is the difference between the gross and net dividend income included in the assessment of the individual. If this plea succeeds, the Commissioner would seem to apprehend, the assessed would be getting a relief which it would not be entitled to and which in fact had already been rejected by the Tribunal in para. 11 of its order of appeal. Shri P.N.Monga, learned counsel for the assessed, however, submits that it is too premature for the revenue to raise this questions art the present stage. He points out that all that the Tribunal had done is to direct the ITO to make an appropriate adjustment of the tax collected from the individual, Ramanand Sachdeva. He submits that the assessed will be making a claim before the ITO regarding the adjustment which, in his opinion, should appropriately be made and it will be open to the ITO to accept the assessed's claim or to decide the matter according to his interpretation of the statutory provisions. He says that if and when a controversy arises, it would be time enough for the parties to put forward their respective contentions in further appeals against the officer's determination. At his stage, he urges, it is premature to speculate on the respective stands of the ITO and the assessed and to raise and decide a controversy which had not yet arisen.
11. It appears to us that the stand taken by Shri P.N.Monga is correct. We do not think we are called upon at this stage to express any opinion regarding the matter in which the adjustment directed by the Tribunal should be carried out. All that the Tribunal had stated is that appropriate adjustment should be assessed in the case of two assesses. We are, thereforee, of the opinion that the reference of question Nos. 2 and 3 extracted earlier is premature and they do not arise at the present stage of the proceedings. We leave it to the assessed to raise and the parties to fight out the issue in appropriate proceedings in due course. We, thereforee, do not render any answer to questions Nos. 2 and 3. Questions Nos. 1 has already been answered in the affirmative. The reference is disposed of accordingly. In the circumstances of the case, we make no order as to costs.