SHRIMAL J. - The Income-tax Appellate Tribunal, Jaipur Bench, at the instance of the assessee, has referred the following two question of law for the opinion of this court :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the sum of Rs. 50,293 and Rs. 97,077, being the deemed divided income under section 2(22)(e) of the Income-Tax Act, 1961, were assessable in the hands of the assessee-Hindu undivided family in respect of assessment years 1964-65 and 1966-67, respectively ?
2. Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that in order to determine the deemed dividend under section 2(22)(e) of the act, taxable in the hands of the assessee Hindu undivided family, it is the accounting year of the Hindu undivided family which is to be considered and not the accounting year of the company ?'
These questions before the Tribunal arose out of the consolidated order, dated August 31, 1973, passed in Income-tax Appeals Nos. 672 and 674(JP) of 71-72.
The assessment years are 1964-65, 1965-66 and 1966-67. The karta of the joint Hindu family (assessee) is Harish Chandra Golecha. Smt. Chandrakanta is the wife of Shri Harish Chandra Golecha. The admitted position as mentioned in the statement of the case made by the Appellate Tribunal is that the house known as 'Sohan Sadan', Prithviraj Road, C-Scheme, Jaipur, standing in the name of Srimati Chandrakanta, wife of Shri Harish Chandra Golecha, was not her 'stridhan' and belonged to the undivided Hindu family. That during the accounting period beginning from Deepavali 1962, and ending on Deepavali 1963, corresponding to the assessment year 1964-65, the assessee-HUF had drawn from the company, namely, Jaipur Mineral Development Syndicate Private Limited, an amount of Rs. 50,293. That the said company has accumulated profit exceeding the aforesaid amount of Rs. 50,293 as per the balance-sheet of the company, drawn on December 31, 1962. The shares held by the HUF in the said company stood registered in the name of the karta, Shri Harish Chandra Golecha.
In respect of the assessment year 1966-67, income, i.e., deemed dividend within the meaning of s. 2(22)(e) of the 1961 Act, was taken by the ITO at Rs. 97,077. The above sum was received by the assessee-HUF from Udaipur Mineral Development Syndicate P. Ltd., which is also a company in which the public is not substantially interest and in which the respondent, Shri Harish Chandra Golecha, karta of the HUF, is a substantial shareholder. The AAC accepted the appeal filed by the assessee on the ground that the loan was not taken by the registered shareholder, Shri Harish Chandra Golecha, but by the HUF. Therefore, according to him, the provisions of s. 2(22)(e) were not applicable to the facts of the case. The department went up in appeal. It was contended by the department that Shri Harish Chandra Golecha had not been assessed to income-tax as an individual. He had no source of income as an individual. Advances from the respective companies had been received by Shri Harish Chandra Golecha. The Tribunal after taking into consideration the ratio decidendi in CIT v. Rameshwarlal Sanwarmal : 82ITR628(SC) CIT v. C. P. Sarathy Mudaliar : 83ITR170(SC) and G. R. Govindarajulu Naidu v. CIT : 90ITR13(Mad) followed the decision of Rameshwarlal Sanwarmals case : 82ITR628(SC) and held that the income from deemed dividends paid to the karta of the HUF, Shri Harish Chandra Golecha, in whose name the share admittedly stood registered in both the companies namely, Jaipur Mineral Development Syndicate Pvt. Ltd., and M/s. Udaipur Mineral Development syndicate Pvt. Ltd., would be assessed in the hands of the HUF.
Aggrieved by the above-noted order, the assessee submitted reference petition of which the two above noted questions have been referred for the opinion of this court along with the statement of the case.
The position of law in this case no longer remains unanswered. It stands finally settled by a decision of their Lordships of the Supreme Court in Rameshwarlal Sanwarmal v. CIT : 122ITR1(SC) . Their Lordships of the Supreme Court while explaining the decision of the same court in CIT v. Rameshwarlal Sanwarmal : 82ITR628(SC) observed (p. 7 of 122 ITR) :
'The only aspect considered by this court was whether the deemed dividend under s. 2(6A)(e) could be taxed in the hands of the beneficial owner of the shares or it could be assessed to tax only in the hands of the registered shareholder, and this court held that deemed dividend did not stand on any different footing from actual dividend and just as actual dividend was liable to be taxed in the hands of the beneficial owner of the shares, so alsodeemed dividend must be held liable to be taxed in the assessment of the beneficial owner. This court did not decide the question whether a loan advanced to a beneficial owner of the shares can be regarded as deemed dividend within the meaning of s. 2(6A)(e) and the answer given by this court in favour of the revenue cannot be said to extend to this aspect of the question.'
In the same case, it was also observed (p. 8) :
'It is only the person whose name is entered in the register of shareholders of the company as the holder of the shares who can be said to be a shareholder quo the company, and not the person beneficially entitled to the shares. It is the former who is a shareholder within the matrix and scheme of the company law and not the latter. We are, therefore, of the view that it is only where a loan is advanced by the company to a registered shareholder and the other conditions set out in s. 2(6a)(e) are satisfied that the amount of the loan would be liable to be regarded as deemed dividend within the meaning of s. 2(6A)(e). The amount of the loan would not fall within the mischief of this section if it is granted to a beneficial owner of the shares who is not the registered shareholder. The decision in CIT v. C. P. Sarathy Mudaliar : 83ITR170(SC) does, in our opinion, lay down the correct interpretation of s. 2(6A)(e).'
The language of s. 2(6A)(e) of the Indian I.T. Act, 1922, and of s. 2(22)(e) of the I.T. Act, 1961, are in pari materia. In view of the above noted authoritative pronouncement made by their Lordships of the Supreme Court, out answer to question No. 1 is in the negative, i.e., in favour of the assessee. We hold that s. 2(22)(e) of the I.T. Act 1961, is not applicable to the loan advanced by the above noted firms to the HUF. In view of our answer to question No.1, it is not necessary to consider and answer question NO.2, as the matter stand finally disposed of by our answer to question No. 1.