Madras High Court
Commissioner Of Income-Tax vs T. Saraswathi Achi on 22 October, 1979
Equivalent citations: [1982]133ITR315(MAD)
JUDGMENT Sethuraman, J.
1. This is a reference under Section 256(1) of the I.T. Act, 1961. The following two questions have been referred:
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the dividend income received by the assessee on the bonus shares cannot be included in the total income of the assessee by invoking the provisions of Section 64(iv) of the Income-tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the dividend received by the assessee's minor daughter in respect of the bonus shares cannot be said to be income arising from an asset transferred by the assessee directly or indirectly to her minor daughter within the meaning of Section 64(iv) of the Income-tax Act, 1961 ?"
2. On 22nd September, 1960, the assessee gifted to her minor daughter 10,000 shares in Rajendra Mills Ltd. During the course of the year ending March 31, 1969, Rajendra Mills Ltd. issued bonus shares as a result of which the minor daughter of the assessee came to own another 10,000 shares. The dividend on the 10,000 bonus shares amounting to Rs. 3,897 came to be included in the assessee's total income under Section 64(iv) of the Act. The assessee appealed to the AAC, who, following the decision of the Bombay High Court in Poppatlal Bikamchand v. CIT [1959] 36 ITR 577, held that the dividend income from the bonus shares issued to the minor daughter could not be included in the total income of the assessee. The revenue went up on appeal to the Tribunal and the appeal came to be heard along with the wealth-tax appeals filed by the same assessee in which also there was a similar point regarding the inclusion of the bonus shares as part of the wealth of the assessee by invoking Section 4(1)(a) of the W.T. Act. The Tribunal dealt with the wealth-tax appeal as the main appeal and held thereon that the value of the bonus shares could not be taxed in the hands of the mother, i.e., the present assessee, and that the dividend income from the bonus shares could not be included under Section 64(iv) of the I.T. Act, 1961. This order of the Tribunal under the I.T, Act has given rise to the present reference.
3. The wealth-tax matter came up for reference in T.C. Nos. 592 and 593 of 1975 (CWT v. T. Saraswathi Achi [1980] 125 ITR 186); By judgment dated 16th October, 1979, it was held that there was no transfer of any assets by the assessee in favour of her minor daughter so as to justify the application of Section 4(1)(a) of the W.T. Act. Section 64(iv) of the I.T. Act, 1961, is also applicable only when there is a transfer directly or indirectly of assets to a minor child and, in such a case it applies to tax the income arising from such asset on the transferor. An the case of bonus shares, the assessee never had any interest or right at all and could effect-no transfer. The question of inclusion of the income from the bonus shares which were never hers so as to be transferred did not arise. The result is that the questions referred to us are answered in the affirmative and in favour of the assessee. There will be no order as to costs.