# COMMISSIONER OF INCOME-TAX, CALCUTTA v. SHAILA BEHARI LAL SINGHA

- **Citation:** [1970] 2 S.C.R. 32
- **Court:** Supreme Court of India
- **Decided:** 1969-08-21
- **Case number:** Civil Appeals Nos. 2276 to 2278 of 1968
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-calcutta-v-shaila-behari-lal-singha-4806
- **Pages:** 4

## Headnote

COMMISSIONER OF INCOME-TAX, CALCUTTA
A
v.
SHAILA BEHARI LAL SINGHA
August 21, 1969
[J. C. SHAH, ACTING C.J., V. RAMASWAMI AND A. N. GROVER,
JJ.l
Practice & Procedure-High Court disposing of reference under lnco1ne .. fax Act-Manner of disposal.
The assessee was a share-bolder of a
company.
The
Income-tax
Appellate Tribunal referred three questions to the High Court namely,
(i) whether the amount distributed to the assessee out of the
amount
nttributable to land acquisition compensation l'eceived by the company
wu, in the hands of the anessee, receipt of 'dividend' within the meanln11
ot 1. 2(6A) of the Income-tax Act, 1922; (ii) whether the amount distributed to the assessee out of the amount attributable to salamis realised
by the company for grant of long-term leases was a receipt in the hands
of the assessee taxable as income from 'other sources'; and (iii) whether
the amount referred to in question (ii) was not, in the hands of the
a8$Cliee, a receipt of 'dividend' within the meaning of s. 2 ( 6A) of the
Act.
The High Court, following its
earlier judgment,
answered the
questions in the negative and observed that it was agreed between the
parties that the answers were subject to the final
decision in appeals
against that earlier judgment, pending in the Supreme Court.
Jn appeal to this Court,
HELD : The High Court erred in the manner in which it disposed of
the reference.
(!) Even where there was consent of the parties the High Court had
to record its answers to the questions referred and give its reasons; and
such answers would be final and could not be modified by a ju1gment of
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this Court in some other case. [34 G-H]
F
(2) The High Court had to decide on the facts of each case whether
any amount of salami was capital gain. [35 A]
(3) The High Court had to decide on the facts of each case whether
any part of the compensation received for compulsory acquisition of land
was capital gain, because, the interest which is statutorily payable on com·
pensation is income and not capital gain. [35 II)
G
Sham/a/ Narula v. C.1.T. Punjab, Jammu and Kashmir,
H.P. and
Pati•la 53 I.T.R. 151 (S.C.), referred to.
(<4) Further, the question whether the rec,eiJ?t f~~ capital gains was
Income liable to tax from 'other sources' (not bemg dtvtdend) under s. 12
of the Act, was not the subject-matter of the appeal pending in this Court
against the earlier judgment. [35 E-FJ
H

## Text

COMMISSIONER OF INCOME-TAX, CALCUTTA
A
v.
SHAILA BEHARI LAL SINGHA
August 21, 1969
[J. C. SHAH, ACTING C.J., V. RAMASWAMI AND A. N. GROVER,
JJ.l
Practice & Procedure-High Court disposing of reference under lnco1ne .. fax Act-Manner of disposal.
The assessee was a share-bolder of a
company.
The
Income-tax
Appellate Tribunal referred three questions to the High Court namely,
(i) whether the amount distributed to the assessee out of the
amount
nttributable to land acquisition compensation l'eceived by the company
wu, in the hands of the anessee, receipt of 'dividend' within the meanln11
ot 1. 2(6A) of the Income-tax Act, 1922; (ii) whether the amount distributed to the assessee out of the amount attributable to salamis realised
by the company for grant of long-term leases was a receipt in the hands
of the assessee taxable as income from 'other sources'; and (iii) whether
the amount referred to in question (ii) was not, in the hands of the
a8$Cliee, a receipt of 'dividend' within the meaning of s. 2 ( 6A) of the
Act.
The High Court, following its
earlier judgment,
answered the
questions in the negative and observed that it was agreed between the
parties that the answers were subject to the final
decision in appeals
against that earlier judgment, pending in the Supreme Court.
Jn appeal to this Court,
HELD : The High Court erred in the manner in which it disposed of
the reference.
(!) Even where there was consent of the parties the High Court had
to record its answers to the questions referred and give its reasons; and
such answers would be final and could not be modified by a ju1gment of
B
c
D
E
this Court in some other case. [34 G-H]
F
(2) The High Court had to decide on the facts of each case whether
any amount of salami was capital gain. [35 A]
(3) The High Court had to decide on the facts of each case whether
any part of the compensation received for compulsory acquisition of land
was capital gain, because, the interest which is statutorily payable on com·
pensation is income and not capital gain. [35 II)
G
Sham/a/ Narula v. C.1.T. Punjab, Jammu and Kashmir,
H.P. and
Pati•la 53 I.T.R. 151 (S.C.), referred to.
(<4) Further, the question whether the rec,eiJ?t f~~ capital gains was
Income liable to tax from 'other sources' (not bemg dtvtdend) under s. 12
of the Act, was not the subject-matter of the appeal pending in this Court
against the earlier judgment. [35 E-FJ
H
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2276
to 2278 of 1968.
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C.I.T. v. S. B. L. SINGHA (Shah, Ag. C.J.)
33
Appeal by special leave from the judgment and order dated
February 23, 1968 of the Calcutta High Court in Income-tax
Reference No. 158 of 1964.
Jagdish Swarup,
Solicitor-General,
T. A. Ramachandran,
R. N. Sachthey and B. D. Sharma, for the appellant (in all the
appeals).
P. Burman, R. Ghos;; and Sukumar Ghose, for the respondent
(in all the appeals) .
The Judgment of the Court was delivered by
Shah, Ag. C.J. Shaila Behari Lal Singha-hereinafter called
'the assessee'-is a shareholder of a company styled the Ukhara
Estates Zamindaries Ltd.
The following table sets out the
amonnts of dividend received by the assessee from the Company
and the years in respect of which they were received :-
Year of
Year of declaration
Amount of
assessment
of dividend
dividend
1951-52
1357 B.S.
Rs. 37,125/-
1952-53
1358 B.S.
Rs. 29,250/-
1953-54
1359 B.S.
Rs. 28,125/-
The assessee claimed that out of the amounts set out in the table
only Rs. 8,669/- for the year 1357 B.S., Rs. 20,469/- for the
year 1358 B.S., and Rs. 21,822/- for the year 1359 B.S. were
taxable as dividend, and the remaining amounts were not taxable, since they were declared out of capital gains of the Company which comprised salami or premia received by it as consideration for grant of long-term mining and other leases and as
compensation for compulsory acquisition of lands for public
purposes. The Income-tax Officer brought the entire amount to
tax declared as dividend for each of the three years in question
and grossed up the amounts under s. 16(2) of the Income-tax
Act, 1922.
In appeal, the Appellate Assistant Commissioner
held that the entire amount for each year was income in the hands
of the assessee, but only a part of it being dividend, within the
meaning of s. 2(6A) of the Income-tax Act, 1922, was liable
to be grossed up.
In second appeal, the .~ ppellate Tribunal
held that part of the amount distributed which was attributable
to salami received by the Company for the grant of longterm leases was not taxable as dividend, but as income of the assessee
from "other sources".
34
SUPREME COURT REPORTS
(1970] 2 S.C.R.
The Tribunal then referred under s. 66(1) of the Indian Income-tax Act, 1922, three question8 to the High Court of Calcutta : the first two questions were referred at the instance of the
assessee, and the third question at the instance of the Commissioner:-
"(l) Whether, on the facts and in the circumstances of the case, . the Tribunal was right in holding
that the distribution t'o the assessee of the amount .attri0utable to land acquisition compensation received by
the Ukhara Estate Zamindaries (P) Ltd., after the 31st
March, 1948, was in the hands of the assessee, receipt
of dividend within the meaning of s. 2(6A) of the Indian
Income-tax Act, 1922?
(2) Whether, on the facts and in the circumstances
of the case, the Tribunal was right in holding that the
receipt by the assessee of the amount attributable to
salaml~ realized by the Ukhara Estate Zamindaries (P)
Ltd. tor grant of long-term leases after the 3 lst March,
1948, was a receipt of income in the hands of the assessee and taxable as the income of the assessee from
other sources ?
(3) Whether, on the facts and in the circumstanc·es
of the casP., the distribution to the assesseP of the amount
attributable to salamis realised by the Ukhara Estate
Zamindaries (P) Ltd. for grant of long-term leases after
the 31st March, 1948, was not in the hands of the
assessee receipt of dividend within the meani11g of s.
2(6A) of the Indian Income-tax Act, 1922 ?"
The High Court recorded answers on all the questions in the negative, following their earlier judgments in Income-tax References
Nos. 131of1961 and 3 of 1964. The High Court however observed that it was agreed between the parties that the answers in
the negative on all the questions were subject to the final r~ecision
in appeals filed against the orders made in Income-tax References
Nos. 131 of 1961 and 3 of 1964 and pending in this Court.
In our judgment, even with the consent of the parties, the
learned Judges could not dispose of the reference in the manner
they have done. They had to record their answers and their reasons in support of the answers : those answers 1vere, insofar as
the High Court was concerned, final. They could not stand modified by reason of any judgment in other cases decided by this
Court. Apart from the technical defect that the High Court has
not recorded final answers, the order is sub.ject to another infirmity. The High Court had to decide on the facts of each case
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C.I.T. V. S. B. L. SINGHA (Shah, Ag. C.J.)
35
whether any amount of salami was capital gain, and whether any
part of the compensation received for compulsory acquisition of
land was capital gain.
Prima facie, receipt of compensation for
land compulsorily acquired which forms part of the fixed assets
of a Company is of a capital nature : Senairam Doongarmall v.
Commissioner of Income-tax, Assam('), but ihterest which
is
statutorily payable on compensation is income and is not capital
gain : Dr. Sham/al Narula v. Commissioner of Income-tax, Puniab, Jammu and Kashmir, Himacha/ Pradesh and Palia/a('). The
assumption made that the entire amount of compensation is deemed to be capital gain cannot therefore be sustained.
It is also necessary to observe that in Appeals Nos. 737 to
739 of 1968 and 13 of 1968 and 1621 of 1968 which arose out
of Reference No. n 1 of 1961 and other references, decided by
this Court on July 25, · 1969, the only question of law raised was
whether distribution of dividend out of capital gains was taxable.
The scope of enquiry in this group of cases, in view of the
form of the questions, is more extensive. In appeals Nos. 73 7
to 739 of 1968 we held that, having regard to the Explanation
to s. 2(6A) capital gains arising after 31st day of March, 1948
(and before the 1st day of April, 1956) were not part of accumulated profits, and if dividend be distributed to the shareholders of
the Company out of those capital gains, to the extent of the distribution out of the capital gains t~. dividend must be deemed
exempt from liability to tax under s. 12 as dividend income liable
to tax. In that case we could not consider whether .the receipt
from the capi!al gains was still income liable to tax from "other
sources" (not being dividend) under s. 12 of the Indian Incometax Act, for no such question was referred. But that question
has been expressly referred in this c: .. se.
The order passed by the High Court is therefore set aside and
the case is remanded to the High Court for disposal according to
law. There will be no order as to costs in this Court. Costs in
the High Court will be costs in the references.
V.P.S.
Appeal allowed and case remanded.
(I) 42 I.T.R.392.
(2) 53 l.T.R. 151 (S.C.)