Law: Income Tax Act, 1961

Section: 2,104

[Indian income Tax Act, 1961]......Section - 2(22)(e) & 104 - Additional Tax - Demand of - Assessee was a Trading Company in which public was not substantially interested - Assessing officer held that the company did not distribute any dividend to its shareholders and made assessment u/s 104 of the Act - Appeal failed before AAC. Tribunal also rejected appeal and referred matter to High Court - High Court allowed the reference Appeal against - Payment of loans to shareholders and distribution of dividend - Connotation of Meaning of dividend - Whether payment of loans by the Company to its shareholders would be deemed dividend - Held yes - Whether object of legislature in enacting section - 2(22)(e) and Section 104 was to prevent escapement of super-tax by shareholders and companies - Held yes - Whether income Tax Act contemplated levying of Super-tax twice, once in the hands of shareholders who had received It as deemed dividend and again In hand of company - Held no - Whether in absence of anything In deeming clause regarding non-applicability to provisions of section - 104, statutory definition of word dividend will have to be applied - Held yes, A perusal of section 2(22)(e) shows that for the purpose of the Act, any payment made by a company of any sum of money by way of advance or loan to its shareholders is deemed to be a dividend. Since the Act has not provided for any other definition of the word dividend except the ones enumerated In section 2(22) of the Act, It should be construed that this definition would be applicable to all provisions which contain the term dividend in the Act. As per section 104 an Income-tax Officer, lf satisfied that a company In respect of any previous year has not distributed, as required by the statute, dividends from out of its profits and gains, shall make an order In writing that the company shall, apart from the sum determined as payable by it on the basis of the assessment under section 143 or 144, be also liable to pay income-tax at the rate provided in that section. The object of the Legislature in enacting section 2(22)(e) and section 104 of the 1961 Act is one and the same, namely, to prevent the escapement of…

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