Law: Income Tax Act, 1922

Section: 15B(5),18A

Law: Companies Act, (VII of 1913)

Section: 105(C)

Income-tax Act, 1922 -Sections 2(4), 3, 4, 15B(5), 18-A -- Income or capital -Company -Managing director holding considerable number of shares -Offer of new shares by company in proportion to existing holdings of shareholders -Purchase of new shares by managing director by raising loans from banks -Loans repaid by sale of certain existing shares -Gains arising out of sale of shares -Whether income or capital -Held, capital -- Company -Dividend -Part of profits of company exempt from tax -Dividend declared out of exempted profits -Whether exempt from tax in the hands of shareholders -Held yes -- Shareholder of a company purchasing new shares from time to time even by raising loans from Banks -Conversion of shares into cash to repay loans -Profits arising from sale, held, appreciation of capital asset -Intention of assessee material consideration -- Dividends from exempted profits -Relief ordered to be allowed on verification of facts -- Advance tax demanded on basis of assessment substantially reduced in appeal -Levy of penal interest on earlier basis cancelled -- Corresponding Sections: Income-tax Ordinance, 1979 -Sections 9(1), 48(6) -- ORDER {The order was passed by HAMIDULLAH Judicial Member}.--This is a direct appeal against the order of the Income-tax Officer, in respect of the assessment made on the appellant relating to the charge year 1958-59. 2. The appellant has attacked the assessment under appeal on three grounds namely: (1) that a sum of Rs. 1,33,600, being gains from conversion of capital was wrongly assessed to income-tax; (2) that 10.2% of his dividend income should have been exempted from tax under Section 15B(5) of the Income-tax Act and lastly (3) that demand of penal interest amounting to Rs. 22,039 could not be made on him under Section 18A. Capital gains or income from sale of shares 3. The appellant owns considerable number of shares in the Company of which he is the Managing Director. During the account year relative to the assessment year in point he sold on several occasions 3775 (but according to the appellant's statement such shares numbered 2725 only), and as per the appellant's wealth statement these sales fetched him gains to the…

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