Law: Income Tax Act, 1922

Section: 2(6A)

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 1958-59 - Assessee-company went into voluntary liquidation on 23-8-1952, at time of liquidation, assessee-company had at its disposal rupees twenty-five lakhs, being its paid-up capital, and Rs. 5,34,041, being accumulated profits, prior to assessment year 1958-59, liquidator had made distributions of Rs. 22.25 lakhs during assessment years 1953-54 to 1955-56. - However, it was only Rs. 50,500 out of distribution made during assessment year 1953-54, that the department treated as dividend under section 2(6A)(c), as it then stood, and brought that amount to tax, on 20-7-1957, liquidator made a further distribution, distribution being during the assessment year 1958-59 - The dispute in this reference was regarding amount of this last distribution, viz., Rs. 75,000, which ITO while making assessment for tax year 1958-59, treated as dividend within meaning of section 2(6A)(c) rejecting contention of assessee-company that said amount could not be regarded as dividend - Whether since there was no finding that close in when distribution of Rs. 75,000 was made, accumulated profits of earlier years had not been exhausted by previous distributions and that they reached hands of shareholders as part of this distribution, so that this distribution could be said to be referable to such accumulated profits - It was clear that the distribution of Rs. 75,000 could not be regarded as dividend under section 2(6A)(c) - Held, yes FACTS Assessee-company went into voluntary liquidation on the 23-8-1952. At the time of liquidation, the assessee-company had at its disposal rupees twenty-five lakhs, being its paid-up capital, and Rs. 5,34,041, being the accumulated profits. Prior to the assessment year 1958-59, the liquidator had made the distributions of Rs. 22.25 lakhs during assessment years 1953-54 to 1955-56. However, it was only Rs. 50,500 out of the distribution made during the assessment year 1953-54, that the department treated as dividend under section 2(6A)(c) as it then stood, and brought that amount to tax. On the 20-7-1957, the…

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