Law: Income Tax Act, 1922

Section: 2(6A)

Law: Companies Act, (VII of 1913)

Section: 95,98,99,101

(a) Income tax Act (XI of 1922)---S. 2(6 A) Words and phrases Word "dividend" Means a share of profits, whether at a fixed rate or otherwise, allocated to holders of shares in a company Term generally used with reference to trading or other companies and to payments made to members of company as such and not by way of remuneration for services. Crales on Statute Law, 1952 Edn., p. 197 ; Maxwell on Interpretation of Statutes, 12th Edn., p. 270 ; Black's Law Dictionary; Stroud's Judicial Dictionary, Halsbury's Laws of England, Vol. VII, 4th Edn.; Kantilal Manilal and others v. Commissioner of Income tax, Bombay North, Kutch and Saurashtra, Ahmedabad A I R 1956 Bom. 381 ref: (b) Income tax Act (XI of 1922) ---S. 2(6 A) Words and phrases Word "interest" Not defined in f Act Word "interest" in its narrow sense, however, understood to mean amount one has contracted to pay for use of borrowed money. Stroud's Judicial Dictionary, p. 42 ; Black's Law Dictionary ; Wharton's Law Lexicon ; Paget's Law of Banking, 8th Edn., p. 276 and Whiteman do Wheatcrof on Income tax, 2nd Edn., p. 379 ref. (c) Income tax Act (XI of 1922) -- S. 2 (6 A) Interest Dividend Petitioner investing amount as a shareholder and not advancing such amount as loan Relationship between parties to agreement Obviously that of shareholder and not that of borrower and creditor Company's share capital Not "capital borrowed" nor a debt payable by company to shareholders Share¬holder in eye of law, held, not a creditor of company for its share capital and payment made to him out of profits earned by company,,on his investment cannot be termed as interest Disputed amount, held further, dividend within meaning of S. 2 (6 A). (d) Income tax Act (XI of 1922) -- ----S. 2(6 A) Interest Disputed amount paid out of profits and not out of any other source Contention that a fixed minimum return having been guaranteed independent of profits, return could be nothing but interest, held, unfounded. Pennington's Company Law, 3rd Edn., p. 362 ref. (e) Income tax Act (XI of 1922)-- ----S. 2 (6 A) Dividend Statements of accounts showing sum payable to petitioner as return on investment out of net profits Amount not detailed to…

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