Law:

Section:

Section 46 of the Income-tax Act, 1961 - Capital gains - Distribution of assets by companies in liquidation - Assessment year 1962-63 - Subsidiary company of assessee-company went into liquidation in 1949 - Liquidator of company made payments to shareholders towards distribution of capital in 1949, 1953 and 1961- Whether receipt of last instalment which was final dividend towards distribution of capital during relevant assessment year would not render amounts received by assessee in 1949 and 1953 subject to liability for income-tax under head "capital gains" as on dates of distribution of those amounts there was no provision in Indian Income-tax Act, 1922 to levy income-tax under head "capital gains" - Held, yes FACTS The subsidiary company of the assessee-company went into liquidation and the liquidator of the company distributed the amounts in respect of distribution of capital in 1949, 1953 and September 1961. As the last amount towards distribution of the capital was received by the assessee-company in the assessment year 1962-63 the ITO took the view that the last instalment was received as final distribution of the assets from the liquidator and the earlier amounts received in the year's 1949 and 1953 were merely in the nature of instalments, the final taxable event occurred only when the final distribution was made. Accordingly, he took the view that the entire realisation by the assessee on liquidation of the company would have to be taken into account as full value of consideration for the purpose of computing capital gains under section 46(2). On writ, the Single Judge quashed the assessment order holding that the liability created under section 46(2) must arise on the dates of transfer of the deemed gains to the shareholders by distribution made on liquidation. On appeal : HELD It is clear from the provisions of section 46(2) that where a shareholder on liquidation of a company receives any money from the company he shall be chargeable to income-tax under the head "capital gains" in respect of the money so received on the date of distribution as reduced by the amount as therein provided. The chargeability under section 46(2) is in respect of money…

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