Dipak Kumar Sen, J.
1. This reference arises out of the assessment of M/s. Karam Chand Thapar & Sons Ltd., the assessee, to income-tax for the assessment years 1964-65 and 1965-66, the relevant accounting years ending on the 30th June of 1963 and 1964.
2. In the assessment year 1964-65, the assessee sold certain shares of other companies held by it at a loss of Rs. 22,969. The assessee contended that it had held shares by way of investment and claimed the loss as capital loss. The Income-tax Officer, however, held that the assessee was a dealer in shares and, accordingly, treated the loss as a business loss.
3. Being aggrieved, the assessee preferred an appeal against the said decision to the Appellate Assistant Commissioner. Following the decision of the Tribunal in the case of the assessee in earlier years, the Appellate Assistant Commissioner held that the assessee was holding the shares by way of investment and that there was nothing to show that the assessee dealt in shares in the said assessment year by way of business. The Appellate Assistant Commissioner held that the loss was a capital loss.
4. Being aggrieved, the Revenue preferred an appeal before the Income-tax Tribunal. The Tribunal considered its earlier decision in the case of the assessee for the assessment years 1958-59 and 1961-62, where it was held that the assessee was not a dealer in shares but was an investor. The Tribunal found further that the Revenue had not brought in any new material on record to show that in the assessment year involved the assessee acted as a dealer in shares and not as an investor. The Tribunal upheld the order of the Appellate Assistant Commissioner and allowed the loss as capital loss.
5. The assessee had pledged a number of shares of other companies held by it with its brokers who had, in turn, pledged the said shares with different banks. The said shares stood registered in the name of the banks concerned. From the gross dividends payable on the said shares, tax had been deducted at source for the assessment years 1964-65 and 1965-66, The assessee in whose total income the dividends from the said shares had been included claimed the benefit of such deduction of tax at source in each of the said assessment years, as a beneficial owner of the said shares. In support of its claim, the assessee furnished certificates in Form No. 15B as prescribed in rule 30A of the Income-tax Rules. The Income-tax Officer held that the assessee was not entitled to the benefit of tax credit in respect of the dividend on the said shares in the said assessment years onthe ground, inter alia, that in the certificates in Form No. 15B, the banks had not described the assessee as the beneficial owner of the said shares. The assessee preferred an appeal against the said assessment before the Appellate Assistant Commissioner. It was held by the Appellate Assistant Commissioner that it was established that the assessee was the beneficial owner of the shares and had obtained loans against them through brokers. He held that the assessee had substantially complied with the provisions of the relevant rules and was entitled to the credit of tax deducted at source in respect of such dividends.
6. Being aggrieved, the Revenue came up in appeal from the decision of the Appellate Assistant Commissioner to the Income-tax Appellate Tribunal. It was contended on behalf of the Revenue before the Tribunal that the assessee had not complied with Rule 30A as the shares had not been pledged by the assessee with the bank but the same had been pledged by the brokers. It was contended on behalf of the assessee that Rule 30A did not require the pledging of the shares by the beneficial owner with the banks and the tax deducted at source could not be considered as the income of the assessee. The assessee should have been given the benefit of such tax deducted at source in computing the income of the assessee from dividend.
7. It was held by the Tribunal that the beneficial holders of shares had been allowed the benefit of tax deducted at source from the dividends under the amended Section 199 of the Income-tax Act, 1961, in the circumstances as prescribed in Rule 30A of the Income-tax Rules. The beneficial owner was entitled to tax credit if such shares had been pledged with the banks by way of security against loan. It was not required under Rule 30A that the beneficial owner himself had to pledge the shares with the bank. The Tribunal held that the assessee had not received the tax deducted at source as its income. Necessary certificates from the banks had been submitted by the assessee. The Tribunal upheld the decision of the Appellate Assistant Commissioner and held that the assessee was entitled to credit in respect of tax deducted at source from the dividends.
8. On an application of the Revenue under Section 256(1) of the Income-tax Act, 1961, the following questions have been referred, as questions of law arising out of the order of the Tribunal, for the opinion of this court:
'1. Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in holding that the assessee did not carry on a business or an adventure in the nature of trade in dealing in shares ?
2. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Rule 30A, the Tribunal was correct in holding that the assessee was entitled to the benefit of the credit of the tax deducted at source from the dividend in respect of the shares held by the banks ?'
9. At the hearing before us, learned advocate for the Revenue contended in respect of question No. 1 that the transactions on which the assessee was claiming a capital loss were not genuine. He submitted that the shares had been sold by the assessee to its associates who formed a group and the sales were made at prices below the market price or at a figure lower than the break-up value of the said shares. He submitted that whether the assessee was dealing in shares as an investor or by way of business was a mixed question of law and fact and it was open to this court to consider the relevant facts for the purpose of deciding the nature of the transaction. In support of his contentions, he cited a decision of the Supreme Court in Oriental Investment Co. P. Ltd. v. CIT : [1969]72ITR408(SC) and a decision of the Delhi High Court in South Asia Industries (P.) Ltd. v. CIT : [1985]155ITR392(Delhi) .
10. In the latter case, the assessee, before the Delhi High Court, after purchasing shares of a defunct company belonging to the same group had sold them to another company of the same group within a short period at a very low price. The loss incurred in the transaction was claimed by the assessee to be a capital loss. On the facts, it was held by the Delhi High Court that the transaction was neither an investment nor a case of dealing in shares, but it was more in the nature of a gift. On the facts, it was held by the Delhi High Court that the loss suffered was a capital loss because the loss did not arise in the course of business.
11. Learned advocate for the assessee contended to the contrary and submitted that it was not open to the Revenue to impugn the transactions in view of the question referred. The only question before this court was whether the transactions were a business deal in shares or whether the transactions were only a sale of investments. Learned advocate submitted that the case of the Revenue in the proceedings below was that the assessee was a dealer in shares and not an investor and, therefore, the loss should have been held to be a business loss and not a capital loss. The contentions of the learned advocate for the assessee are of substance and we accept the same.
12. It appears to us that an identical question had come up before the Tribunal in the case of the assessee in earlier years and it had been held that the assessee was an investor and not dealer in shares. The Tribunal has noted in the instant case that the Revenue was unable to bring any fresh material before the Tribunal on the basis of which the Tribunal could come to a different conclusion in the assessment year involved and followed its decisions in the earlier years. No particular fact was shown to us on behalf of the Revenue on which it could be contended that the Tribunal's decision on the facts found was erroneous. The facts found on thebasis of which the Tribunal had proceeded were not challenged as perverseor based on no evidence or contrary to the evidence on record.
13. For the reasons as above, we are unable to accept the contentions of the Revenue. We answer question No. 1 in the negative and in favour of the assessee.
14. On question No. 2, it was contended by the learned advocate for the Revenue that the Tribunal erred in allowing credit for the tax deducted at source in respect of the shares which were being held by the different banks at the material time. He submitted that the assessee had not pledged the shares with the banks but had pledged the same with its brokers who had, in turn, pledged the same with the banks and obtained further credit. He submitted that in the certificate issued by the bank in Form No. 15B, the assessee had not been described as the beneficial owner of the shares involved. He submitted that the assessee should not be allowed credit for the tax deducted at source from the dividends. Learned advocate drew our attention to a decision of the Andhra Pradesh High Court in CIT v. Smt. Batool Begum : [1976]104ITR642(AP) . In that case, a Division Bench of the Andhra Pradesh High Court held that the assessee who was not the registered shareholder was not in a position to file a declaration in Form No. 15B required under Rule 30A of the Income-tax Rules, 1962. It was also held that such an assessee was not entitled to the benefit of credit of tax deduction made at source on the dividend income received by her from companies on the shares held by the trust in terms of Rule 30A of the Rules.
15. Learned advocate for the assessee contended to the contrary and drew our attention to the relevant provisions of the Income-tax Act, 1961, which are noted hereinafter.
Section 199:
'Credit for tax deducted.--Any deduction made in accordance with the provisions of Sections 192 to 194, Section 194A, Section 194B, Section 194C, Section 194D and Section 195 and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security or of the shareholder, as the case may be, and credit shall be given to him for the amount so deducted on the production of the certificate furnished under Section 203 in the assessment (including a provisional assessment under Section 141A), if any, made for the immediately following assessment year under this Act:
Provided that--.....
(ii) in any other case, where the dividend on any share is assessable as the income of a person other than the shareholder, the payment shall, be deemed to have been made on behalf of, and the credit shall be given to, such other person in such circumstances as may be prescribed.'
Rule 30A :
'Subject to the provisions of Sub-rule (2), where the dividend on any share is assessable as the income of a person other than the shareholder, any deduction made in accordance with Section 194 and paid to the Central Government, shall be deemed to be a payment of tax on behalf of, and the credit in respect thereof shall be given to, such other person in the circumstances specified below, namely :--.....
(v) where any person deposits with any other person any shares owned by him, by way of security for the repayment of any loan or the performance of any obligation and such shares are held by, or on behalf of, any of the following, namely :--.....
(d) any banking company, including a co-operative bank or a land mortgage bank. '
17. Learned advocate for the assessee submitted that Section 199 of the Income-tax Act, 1961, had been amended with retrospective effect by the Finance Act, 1968.
18. Learned advocate for the assessee submitted further that the Andhra Pradesh High Court did not consider the effect of the retrospective amendment introduced in Section 199 of the Income-tax Act, 1961, in Smt. Batool Begum : [1976]104ITR642(AP) , which has been relied on by the Revenue.
19. On the facts as found, it appears to us that the assessee had claimed to be and had been treated as a beneficial owner of the shares. It has also been found that the shares were at the material time being held by different banks. The assessee, in our view, therefore, comes within the ambit of the amended Section 199 of the Act of 1961 and Rule 30A. It has also been found that the assessee had submitted a certificate in Form No. 15B as required under Rule 30A from the banks concerned. No doubt, in the said form, the assessee has not been declared by the banks to be the beneficial owner but, in our view, the absence of such a declaration from the banks makes little difference to the controversy. The brokers concerned through whom the shares reached the banks independently certified that the assessee was the beneficial owner of the said shares. The assessee has been treated by the Revenue as the beneficial owner of the shares and is being taxed on that basis. We hold that under Section 199 and Rule 30A, the assessee is entitled to the benefit of credit of tax deducted at source inrespect of the dividends on the said shares. We uphold the decision of theTribunal on the issue.
20. Question No. 2 is, therefore, answered in the affirmative and in favour of the assessee. In the facts and circumstances, there will be no order as to costs.
21. Let it be recorded that the name of the assessee has since been changed from M/s. Karam Chand Thapar & Sons Ltd. to Modern Agencies Limited.
Shyamal Kumar Sen, J.
22. I agree.