Gujarat H.C : Whether it would be necessary that at least 20 per cent of the voting power is exercisable by the assessee or by the persons referred to in sub-s. (3) of s. 13 of the IT Act, 1961, in view of Expln. 3 to s. 13 of the said Act?

High Court Of Gujarat

CIT vs. Ambalal Sarabhai Charity Trust

Sections 11, 13(1)(c), 13(2)(h)

D.M. Dharmadhikari, C.J. & A.R. Dave, J.

IT Ref. No. 142 of 1985

21st September, 2000

Counsel Appeared

Akil Qureshi with R.P. Bhatt, for the Petitioner : R.K. Patel with B. D. Karia, for the Respondent

JUDGMENT

A.R. DAVE, J. :

At the instance of the Revenue, following three questions have been referred for opinion of this Court under the provisions of s. 256(1) of the IT Act, 1961 (hereinafter referred to as ‘the Act’) :

Whether it would be necessary that at least 20 per cent of the voting power is exercisable by the assessee or by the persons referred to in sub-s. (3) of s. 13 of the IT Act, 1961, in view of Expln. 3 to s. 13 of the said Act?

Whether the shares held by charitable trust could be said to have been held by the assessee or the persons referred to in sub-s. (3) of s. 13 of the said Act?

Whether the assessee was entitled to exemption of the dividend income amounting to Rs. 1,777?

2. We have heard Mr. Akil Qureshi for the Revenue and Mr. R.K. Patel for the assessee. It has been submitted by the learned advocates that while deciding the case of the present assessee, reference was made with regard to a case of Sarabhai Foundation by the Tribunal. In the case of Sarabhai Foundation, Ref. Appln. No. 557 of 1980 was filed in this Court and the said reference application was decided on 16th Sept., 1993 [reported as Sarabhai Foundation vs. CIT (1993) 115 CTR (Guj) 443 : TC 23R.1560 —Ed.]. At the time of hearing, the reference application in case of the present assessee, the Tribunal had referred to IT Ref. Appln. 557 of 1980 decided by this Court and perhaps, through oversight, the judgment in the case of Sarabhai Foundation in IT Ref. 557 of 1980 was looked into and the questions which had been referred to in IT Ref. No. 557 of 1980 had been incorporated in the present reference, with which we are not concerned. In view of the circumstances stated above, perhaps on account of some inadvertences, questions Nos. 1 and 2 have been incorporated in the present reference. In the circumstances stated above, we need not answer questions Nos. 1 and 2 and the only question which is to be answered by us is question No. 3.

3. It has been submitted by the learned advocates that question No. 3 has been now concluded by a judgment delivered in the case of CIT vs. Insaniyat Trust (1988) 71 CTR (Guj) 145 : (1988) 173 ITR 248 (Guj) : TC 23R.1545 which has been referred to by this Court in IT Ref. No. 557 of 1980, decided on 16th Sept., 1993 (supra). Learned advocates has fairly submitted that as the said question has been now decided, looking to the law laid down in the judgments referred to above, the amount of dividend received by the assessee, which is Rs. 1,777 will have to be bifurcated into two parts. A. The dividend, which was received by the assessee on the shares which were donated to the assessee and shares which were received by the assessee by way of bonus, the provisions of s. 13 (2)(h) would not apply and, therefore, the said amount of dividend would be exempted from tax. B. So far a shares which were purchased by the assessee are concerned, the dividend which the assessee had received thereon would be subject to tax as the said shares would be subject to the provisions of s. 13(2)(h) of the Act.

4. From the question which has been referred to this Court, it is not clear as to how much dividend was received by the assessee on the shares which were donated to the assessee and the shares which were received by the assessee by way of bonus; moreover, it is also not clear as to what was the amount of dividend which the assessee had received on the shares which were purchased by the assessee.

In view of the fact that the details with regard to break-up of the dividend as mentioned above are not available to this Court, we answer the question as under :

The dividend which was received by the assessee on the shares which were donated to the assessee and the shares which were received by way of bonus by the assessee, would be exempted as per provisions of the Act and the dividend which was received on the shares which were purchased by the assessee would be subject to the provisions of s. 13(2)(h) of the Act.

We thus answer the question as stated above the leave it to the Tribunal to ascertain the relevant facts and pass appropriate orders. Reference is accordingly disposed of in view of the answer stated above with no order as to costs.

[Citation : 252 ITR 610]

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