Law:

Section:

Section 2(22) of the Income-tax Act, 1961 [Corresponding to section 2(6A) of the Indian Income-tax Act, 1922] - Deemed dividend - Assessment year 1953-54 - Assessee-company went into liquidation in midst of its accounting year - Liquidator distributed certain amount to shareholders including current profits in computing its profits - ITO also included a sum which was a notional profit under section 23A of 1922 Act - Whether current profits could not be included in expression 'accumulated profits' and, therefore, whether distribution of current profits to shareholders was not distribution of dividend within meaning of section 2(6A) of 1922 Act - Held, yes - Whether notional profit under section 23A of 1922 Act could not be considered to have been distributed when distribution was made by liquidator and, hence, that amount could not bear impression of dividend - Held, yes Section 256 of the Income-tax Act, 1961 [Corresponding to section 66(1) of the Income-tax Act, 1922] - High Court - Reference to - Whether it will not be proper to shut out a party before Tribunal from raising a question of law which clearly arises from order of Tribunal merely because that party has not made an application for a reference - Held, yes FACTS The assessee-company went into liquidation on 23-8-1952. Its accounting year ended on 30-9-1952. During the part of the year, prior to liquidation, the assessee made profit of Rs. 98,000. The liquidator distributed Rs. 17.25 lakhs to the shareholders in September 1952 and the question was whether he had distributed Rs. 98,000 as part of the dividend of the company which was liable to tax as dividend. Rejecting assessees contention the Tribunal held that this amount constituted dividend and this was distributed as dividend within the meaning of section 2(6A). The Assessing Officer while computing profits, also included a sum of Rs. 21,142 which was notional profits for the assessment year 1949-50. The Tribunal overruled the contention of the Department and held that it was notional and not available for distribution. When this point was raised by the department before the High Court by way of reference, the assessee raised a preliminary…

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