In re Sir Dinshaw Maneckjee Petit Bari
AIR 1927 Bom. 371 Marten, C.J. – For the financial year 1925-26, the assessee Sir Dinshaw Petit has been assessed for super-tax on an aggregate income of Rs. 11,35,302 arising in the previous year. Of this sum he objects to Rs. 3,90,804 made up of two sums of Rs.2,76,800 and Rs. 1,14,004, the former of which arises from Government and other fixed interest bearing funds, and the latter from dividends in companies. Nothing appears to turn on this distinction, and I shall accordingly ignore it. Admittedly the assessee is the legal owner of most of these funds in the sense that they stand in his name and the interest and dividends are paid to him direct. Admittedly as regards the rest the apparent legal owners are his nominees and he receives the interest and dividends. Admittedly he has retained all the above interest and dividends and applied the same to his own use. But he contends that he is only a trustee for certain family companies which he has formed: that the interest and dividends are theirs and not his: that he has credited them in account, and that though he has had the benefit of them in specie this is because the family companies have lent him these moneys at interest which he has credited to them in account although he has not actually paid the interest in cash. He says that the family companies are under no obligation to declare a dividend, and are entitled to lend out their income in this way, even though it results over a series of years in the fixed preference dividends being unpaid and a large sum representing back income being accumulated in the hands of the assessee. The Advocate General on the other hand contends that the alleged disposition by the assessee in favour of each family company is a sham as is also the declaration of trust that the transactions are all paper transactions and not real.