# MOHAN SINGH OBEROI v. COMMISSIONER OF INCOME-TAX, WEST BENGAL

- **Citation:** [1973] 2 S.C.R. 1057
- **Court:** Supreme Court of India
- **Decided:** 1972-11-29
- **Case number:** Civil Appeals Nos. 2~·~2 and 2493 of 1969
- **Bench:** K. S. Hegde, P. Jaganmohan Reddy, H. R. Khanna• Jj
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mohan-singh-oberoi-v-commissioner-of-income-tax-west-bengal-5760
- **Pages:** 7

## Headnote

Income-tax-Shares standing in tire names of wife and son:r of
assuste-Dividend incorru from sl1t1res-When to be includtd 111 total
income of asse111e--Burdtn of proof.
For the uaeument yem 1953·54 and 1954·55 the appellant showed
tbe aross dividend derived by him from shares held by hlm, u hla in·
·come. The Income-tax Officer however included in the asmsee's Income
the aross dividend of certain shares held by the asmsee's wi'le and 1001.
The Appellate Assistant Commi11ioner confirmed the order. The Appel·
late Tribunal held In favour of the asse11ee on the ground that thouah
the shares might have been acquired out ol the secreted profits ol the
appellant, In the absence of any evidence that the sham remained in
substance the property of the assessee, the dividend income could not
be included in his total income, and that it was only the wife and the
sons of the assessee, who were registered holders of the shares, that could
. be assessed for the dividend income from those shares.
The High Court, in reference, held against the assessee.
Dismissing the appeal to this Court,
HELD : (I) The order of the Income-tax Officer showed th1>t it had
been admitted by the assessee in the past, before the Department, that
the shares in question, standing in the name of the assessee's wife and
sons, belonged to the assessee and were his own Investments. The Tribunal nowhere observed that the observations o'l the Income-tax Officer
were factually incorrect or that the said admission had not been made
by the assessee.
There was ample material to justily the inference that
the assessee was the real owner of the shares and that they were held
by him benami in the name of his wife and sons. [1061 E·F, G-HJ
(2) If the Tribunal had given " finding that the purchase wu not
benami, and if the finding was based on some evidenoe, the same would
have to be accepted in proceeding in reference under s. 66(1) of the
Indian Income-tax Act, 1922.
But the tribunal nowhere dealt with the
question as to whether the purchase of shares was or we~ not benami
in the name of the wife and sons of the assesse. rtQ63 B-CJ
(3) Once it was found that the assessee was the. real owner of the
shares and that they had been purchased benami in the names of his wl'fe
and sons, it would be presumed that the ownership of the share• continued to remain vested in the assessee, unless it was shown by him that
because of some subsequent event, he had ceased to be the owner of the
shares.
Therefore. even thought the wife. and sons were
the registered
holders of the shares. the dividend income from those shares should
be
assessed as the assessee's income.
111e tribunal excluded the dividend
income on a ground whld! was not legally tenable.
[1062 E·ID
Kishanchand Lunidarin11 Bajaj v. Commi.rrioner of Income Tax,
[1966] 60 I.T.R. 500 followed.
1058
SUPREME COURT REPORTS
[1973] 2 S.C.R.
Howrah Trading Co. v. Commissioner of /ncoftti! tax, [19591 36 l.T.R.
215 and Meenakshi Mills v. Commwioner of Income Tax, [1956] S.C.R.·
691 referred to.

## Text

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1057
MOHAN SINGH OBEROI
v.
COMMISSIONER OF INCOME-TAX, WEST BENGAL
November 29, 1972
[K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA• JJ.J
Income-tax-Shares standing in tire names of wife and son:r of
assuste-Dividend incorru from sl1t1res-When to be includtd 111 total
income of asse111e--Burdtn of proof.
For the uaeument yem 1953·54 and 1954·55 the appellant showed
tbe aross dividend derived by him from shares held by hlm, u hla in·
·come. The Income-tax Officer however included in the asmsee's Income
the aross dividend of certain shares held by the asmsee's wi'le and 1001.
The Appellate Assistant Commi11ioner confirmed the order. The Appel·
late Tribunal held In favour of the asse11ee on the ground that thouah
the shares might have been acquired out ol the secreted profits ol the
appellant, In the absence of any evidence that the sham remained in
substance the property of the assessee, the dividend income could not
be included in his total income, and that it was only the wife and the
sons of the assessee, who were registered holders of the shares, that could
. be assessed for the dividend income from those shares.
The High Court, in reference, held against the assessee.
Dismissing the appeal to this Court,
HELD : (I) The order of the Income-tax Officer showed th1>t it had
been admitted by the assessee in the past, before the Department, that
the shares in question, standing in the name of the assessee's wife and
sons, belonged to the assessee and were his own Investments. The Tribunal nowhere observed that the observations o'l the Income-tax Officer
were factually incorrect or that the said admission had not been made
by the assessee.
There was ample material to justily the inference that
the assessee was the real owner of the shares and that they were held
by him benami in the name of his wife and sons. [1061 E·F, G-HJ
(2) If the Tribunal had given " finding that the purchase wu not
benami, and if the finding was based on some evidenoe, the same would
have to be accepted in proceeding in reference under s. 66(1) of the
Indian Income-tax Act, 1922.
But the tribunal nowhere dealt with the
question as to whether the purchase of shares was or we~ not benami
in the name of the wife and sons of the assesse. rtQ63 B-CJ
(3) Once it was found that the assessee was the. real owner of the
shares and that they had been purchased benami in the names of his wl'fe
and sons, it would be presumed that the ownership of the share• continued to remain vested in the assessee, unless it was shown by him that
because of some subsequent event, he had ceased to be the owner of the
shares.
Therefore. even thought the wife. and sons were
the registered
holders of the shares. the dividend income from those shares should
be
assessed as the assessee's income.
111e tribunal excluded the dividend
income on a ground whld! was not legally tenable.
[1062 E·ID
Kishanchand Lunidarin11 Bajaj v. Commi.rrioner of Income Tax,
[1966] 60 I.T.R. 500 followed.
1058
SUPREME COURT REPORTS
[1973] 2 S.C.R.
Howrah Trading Co. v. Commissioner of /ncoftti! tax, [19591 36 l.T.R.
215 and Meenakshi Mills v. Commwioner of Income Tax, [1956] S.C.R.·
691 referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2~·~2
and 2493 of 1969.
Appeals by special leave from the judgment and order dated
November 25, 1969 of the Calcutta High Court in I. T. Reference No. 149 of 1963.
B
S. T. Desai, T. R. Bhasin, R. N. Banerjee and La/it Bhan~,
Ravinder Narain, J. B. Dadachanji and 0. C.· Mathur for thi
"·'
appellants.
c
B. Sen, P. L. Juneja, S. P. Nayar and R. N. Sachthey, for
the respondent.
KHANNA, J. These two appeals by special leave are directed
against the judgment of Calcutta High Court whereby it answered
the following question referred to it under section 66 ( 1) of the
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Indian Income Tax Act, 1922 in the negative in favour of the ·
revenue :
"Whether on the facts and in the circumstances of
the case, the Tribunal was justified in excluding from
the assessable income of the assessee for the assessment
years 1953-54 and 1954-55 the sums of Rs. 56,586 and
Rs. 39,542 which were the amounts of dividend received
by the assessee 's wife and two sons from shares acquired out of the profits of the assessee ?"
The matter relates to assessment years 1953-54 and 1954-55,
the corresponding previous years for which ended on March 31,
1953 and March 31, 1954 respectively. The appellant-assessee is
the Managing Director of Messrs Hotels (1938) Lt& 'and other
associated companies controlling a number of hotels in 'India. For
the assessment years 1953-54 and 1954-55, the appellant showed
incomes of Rs. 66,694 and Rs. 87 ,570 as the gross dividend
derived by him from the following shares held by him :
(i) Associated Hotels of
India Ltd.
(ii) Northern India Caterers Ltd.
(iii) Oberoi Hotels (I) Ltd.
. .
. . 109, 606 shares
. .
. . 20 shares
. .
. . 10 shares
The Income Tax Officer found that besides the above mentioned
shares, the appellant's wife and two sons held shares of Associated
Hotels of India Ltd. and Northern India Caterers Ltd. and included
the gross dividend of those shares in the total income of the
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M. s. OBEROI v. C.I.T. (Khanna, J.)
105 !)
assessee.
In the order relating to assessment year 1953-54, the
Income Tax Officer in this context observed as under :
''Besides the income shown from the above mentioned shares of the above named concerns, other income from dividends which are held by Benamidars of
the assessee have also to be assessed in the hands of
the assessee.
It is seen from the past records that the
following shares standing in the names of the assessee's
wife Sm.· J. D. Oberoi and the assessee's two sons.
namely. Mr. P.R.S. Oberoi and Mr. T.R. Oberoi do in
fact belong to the assessee and are his own investments. The facts have also been admitted by the
assessee before the department in the past years.
The
income from these shares is therefore to be rightly included in the hands of the
assessee
and assessed
accordingly.
Name of shareholder
Gross
divid:nd
Rs.
.l. Sm. I. D. Oberoi, wife of the asscsseed.
(a)
15,886 shares of Associated Hotels (I) Ltd.)
(b) 30 shares of Northern India Caterers Ltd.
2.
Mr. T.R. Obcroi, son of the asscssee.
(a)
50 Shares of Northern
India Caters Ltd.
(b) 6, 823 shares of Associated Hotels (1) ltd.
3. Mr. P.R.S. Obcroi son, of the assessee.
(a) Northern India Caterers Ltd (20 shares)
3,971
15,273
25,454
1,706
10,182
56,586
Similarly, for assessment year 1954-55 ~e Income Tax Officer
included the following dividends in the total income of the assessee:
Name of the Shareholders
Smt. l.D. Oberoi
15,886 shares of Associated Hotels of India Ltd . .
.
30 shares of Northern India Caterers Ltd . .
Shn T.R. Obcroi
50 shares of Northern India Caterers Ltd.
.
6,823 shares of Associated Hotels of India Ltd
Shri P.R.S. Oberoi:
..
.!O shares of Northern India Caterers Ltd ..
Net
Dividend
3,177
10,500
17,500
l,36S
7,000
39,542
~e~ the assessee went up in 'appeal, the Appellate Assistant
C:o!Iln11ss1?ner observed that the stand of the assessee that the
d1V1dend m r~pect of t~e ~h~ held by his wife and two rnns
should not bn mcluded m his mcome ,had already been negatived
b J the Appellate Assistant Commissioner a~ per order dated NovH -
~;J Sup CI/73
1060
SUPREME COURT REPORTS
[1973) 2 S.C.R.
ember 24, 1959 for the assessment year 1952-53. The Appellate
Assistant Commissioner accordingly repelled the contention on behalf of the assessee that the amounts of Rs. 56,586 and Rs. 39,547
should not be included in his income. In the order dated November 24, 1959 for the assessment year 1952-53, the Appellate
Assistaut Commissioner had referred to the following observations
of the Income Tax. Investigation Commission :
"It was found that Sri M. S. Obercii owned· 78,650
ordinary shares in his own name, 15,885 shares in the
name of his wife Sm. Iswarani Debi, 6823 shares in
the name of Sri T. R. Oberoi and 5,000 shares in the
name of his daughter Sm. Rajarani Kapoor out of a total ·
of 2000,000 ordinary shares issued and paid up as on
31-2-47".
.
Reliance was also placed upon the following ex.tract from a letter
addressed by the assessee to the Commission :
"In preparing the statement of wealth, I have taken
into account all the assets of which I and o:her members
of my family are possessed. According to the statement
of wealth furnished the evaded income comes to Rs. 20
lakhs. All the money that was evaded is invested mainly
in the shares of Associated Hotels of India Ltd. There
has been great fall in the price of these shares. In fix.
ing up my liability and the payment thereof due account
will have to be taken of the fall in prices of these shares
ar.d my capacity to pay."
Jt was also found that the Income Tax Investigation Commission
had held that the shares had been acquired by the assessee out of
the suppressed income which was detennined to be R~. 16,62,211.
fo second appeal before the Income Tax Appellate Tribunal,
the assessee contended that the Income Tax Investigation Commission had considered oniy the shares of the Associated Hotels
of Indi.1, but the bulk of dividend included in the assessee's income
in the two assessment years in questio11 was the dividend declared
by Northern India Catereres Ltd. Contention was further· advanced that assuming that the shares in question were acquired
out of the assessee's secreted ;irofits in 1943, the wife and the two
sons of the assessee could only be assessed in respect of the dividend income as they were the registered holders of those shares.
These ;ontentions found favour with the Tribunal. The Tribooal
accordingly directed that the income assessed for the assessee should
be reduced by the amounts of Rs. 56,586 and Rs. 39.452 in the
assessment'years 1953-54 and 1954-55 respectively. On application filed by tlje Commissioner. the question reproduced above was
thereafter referred to the High Court.
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M. s. OBEROI v. C.I.T. (Khanna, J.)
1061
The High Court, in answering the question in the. negative,
observed that the shares in question had been purchased by the
assessee in the name of his wife and two sons and, in the circumstances, the natural inference was that the purchases were benami
transactions. It was, in the opinion of the lligh Court, for the
assessee to discharge the burden which lay upon hinl to show that
the shares had not been purchased by hinl benami in the name of
his wife and sons but he had failed to discharge that burden. The
High Court also held that the real owner could be assessed on the
dividend income even though his wife and sons were the registered
holders of the shares. In the result, the question referred, as already mentioned earlier, was ·answered in the negative.
In appeal before us, Mr. Desai on behalf of the assessee-appellant has contended that the High Court was in error in interfering
with the finding of the Tribunal that the wife and the two sons of
the assessee, who were the registered holders of the shares in question, .could only be assessed for the dividend income from those
shares. In this respect we find Ji)at the question referred to the
cp11rt assumes that the shares on account of which the wife and
the two sons of the assessee received the dividend amounts of
Rs. 56,586 and Rs. 39,542 had been acquired out of the profits
of the assessee. In addition, to that, we find that the order of the
Income Tax Officer for the assessment year 1953-54 shows that it
had been admitted by the assessee in. the past before the department that the shares in qqestion standing in the name of the wife
and two sons of the assessee belonged to hinl and were his own
investments, Although it is normally for the department to show
that the apparent is not the real, in the present case we find that
there was ample material to justify the inference that the assessee
was the real owner of the shares and they were held by him
benami in the name of his wife and two sons.
It was urged before us during the course of arguments that no
such admission had been made, but nothing was brought to our
notice to show that the above ob~ervation made by the Income
Tax Officer hacl been challenged in appeal. No copy of the memorandum of appeal filed against the order of the Income Tax Officer has been produced. We also find that the above observation
containing the admission has been incorporated in the statement
of the case and is an integral part of it. The Tribunal nowhere
observed that the above observation was factually incorrect and
that the said admission had not been made by the assessee. It was
not even mentioned that the above admission was erroneous. On
the contrary. the Tribunal took the view that as the wife and two
sons of the ass~ssee were the registered holders of the shares in
CjUestion. dividend income from those shares should have been
assessed as their income and not that of the assessee. The Tribu-
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106:.!
SUPREME COURT REPORTS
[1973] 2 S.C,ll,
nal in this context relied upon the decision of this Court . in
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Howrah Trading Co. v. CQmmissioner of Income Tax('). What
was held in that case was that a person who purchases shaIP.s in a
company under blank transfer and in whose name the shares have
not been registered in the books of th!l company is not a "shareholder"' h respect of such shares within the meaning of section
18(5J of the Indian Income Tax Act, 1922 notwi~tanding his
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equitable right to the dividend on such shares. It was further held
that such a person was not entitled to have his dividend income
grossed up under section 16 ( 2) of the Act by the addition of the
income tax paid by the company in n;spec{ of those shares.
~"
Th~ decision in Howrah Trading Co. (supra) was considered
by a larger bench of this Court in Kishanchand Lunidasing Bajaj
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v. Commissioner of Income Tax(l); It was held in that case d1at
a company for its purpose does not recogni~e any trust or equitable
ownership in shares. It merely recognizes the registered shareholder as· the owner and pays dividend to that shareholder. But
the shares may because of a trust or other fiduciary relationship,
.belong to a person other than the registered sha1eholder, and the
I)
dividend distributed by the company would for the purpose of tax
be deemed to accrue or arise to the real owner of the shares. The
scheme of "grossing up", .it was observed, is not susceptible to. the
interpretation that the. income from dividend is to be regarded as
the income only of the registered shareholder· and not of the real
owner of the shares. In the aforesaid .case, shares were acquired
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with the funds of a Hindu undivided family in the name of the
karta. It was held that the. Hindu undivided fainily could be
assessed to tax on the dividend from those shares.
We thus firtd that the Tribunal excluded the dividend income
on a ground which was not legally tenable.
The Tribunal also observeg that though the shares might have
been acquired out of the secrete4 profits of the appellant, in the
absence of any evidence that the shares remained in substance the
property of the assessee, the dividend income could not be included in his -total income. The approach of the Tribunal in this
respect too was erroneous. Once it was found that the assessee
was the real owner ,of the shares and they had · been purchased
benami in the name of his wift and two sons, it would be presUllled
that t_he f>wnership of the shares continued to remain vested in
the assessee, unless it was shown that because of some subsequeat
event, he had ceased to be the owner of the shares.. No such
attempt was made by the assessee.
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In view of the admissions referred to in the order of the InH
<;
come Tax Officer, nothing hinges, in our opinion, upon the fact
(I) [1959J 36 I.T.R,. 215.
(2) (1966J 6<>I,T.R. 500.
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M. s. OBEROI v. c.r:r. (Khanna, J.)
I 063
that the shares referred to in the letter of the assessee to the Income Tax Investigation Commission were mainly of the Associatd Hotels of India and not of Northern India Caterers Ltd.
We may also observe that if the Income Tax Appellate Tribunal records a finding on the point as to whether a .Purchase was
made benami or not, such a finding as observed m Meenakshi
Mills v. Commissioner of Income Tax( 1) would be considered to
be one of fact. If such finding is based upon some evidence, the
.same would have to be accepted in proceedings in a reference
under section 66(1) of the Indian Income Tax Act. This as-
:pect. however, does not help the assessee in the present case because the Tribunal nowhere dealt with the question as to whether
the purchase of shares was or was not benami in the name of the
wife and sons of the assessee.
· Submission was made by Mr. Desai during the course of arguments for adjournmen.t of the appeal to enable the assessee-appellant to produce the detailed findings of the Income Tax Investigation Commission. We, however,
declined to do so as, in our
opinion, the appeal had to be disposed of on the basis of the
material before us.
As a result of the above, we dismiss the two appeals with costs.
One hearing fee.
V.P.S.
Appeals dismissed.
(I) (1956] S.C.R. 691.