Law:

Section:

Section 46(2), read with sections 45 and 2(17), of the income-tax act, 1961-Capital gains-On distribution of assets by companies in liquidation-Assesses held shares in a company, falling under section 2(17), which went into liquidation-Assesses received certain amount in excess of original cost of shares by way of dividends from liquidator of company-Whether even if such excess amount received by assessee was not chargeable under section 45, same could be brought to charge under section 46(2)-Held, on facts, yes Facts The assessee held certain shares of a company, falling under section 2(17), which went into liquidation. The assessee was receiving dividend from the liquidator of the company during the previous few years. In the relevant year of account also, the assessee received certain sums by way of dividends from the liquidator, which, together with the amount of dividends received earlier, exceeded the original cost of the shares by a certain amount. The ITO taxed the said excess amount as capital gains. On appeal, the AAC held that the impugned sum could not be brought to charge as capital gains and the Tribunal upheld the order of the AAC. On reference, the revenue contended that even if the impugned amount was not chargeable under section 45, the same could be brought to charge under section 46(2). Held From a consideration of certain decisions of the Madras High Court and the Supreme Court, it is clear that section 46(2) is a charging provision independent of section 45 and it will apply to all receipts by way of dividends from the liquidator in the course of the liquidation of the company, if such company is a company as contemplated by section 2(17). Since the company in the instant case was admitted to be a company coming under section 2(17), section 46(2) was straightway attracted to the case. That apart, even as a matter of construction, section 45 is a general provision, while section 46(2) is confined to a special situation and being a special provision applicable to a special situation, the applicability of that section cannot be excluded, merely because the general section like section 45 does not apply. Accordingly, the impugned sum was…

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