Case Note & Summary
The respondent company was placed under voluntary winding up by resolution dated August 23, 1952. Its paid-up capital was Rs. 25 lakhs and accumulated profits stood at Rs. 5,34,041 on the date of commencement of winding up. The liquidator distributed assets to shareholders in installments. On September 3, 1952, Rs. 15 lakhs were distributed, and the Income-tax Officer assessed Rs. 52,400 as dividend under Section 2(6A)(c) in the assessment year 1953-54. By an amendment effected by the Finance Act 1956, dividend was to include any distribution on liquidation to the extent attributable to accumulated profits immediately before liquidation. On July 24, 1957, the liquidator distributed Rs. 75,000. For the assessment year 1958-59, the Income-tax Officer brought the entire sum to tax as dividend. The Appellate Assistant Commissioner confirmed. On appeal, the assessee contended that the entire accumulated profits had been exhausted by the earlier distributions and that, in any event, accumulated profits and capital should be deemed to be distributed proportionately. The Tribunal’s decision is not fully available in the extracted text. The case eventually reached the Supreme Court. The central issue was whether the distribution of Rs. 75,000 could be taxed as dividend under Section 2(6A)(c) when earlier distributions had already been made. The extract does not contain the Supreme Court’s final decision or ratio decidendi.
Headnote
A) Income Tax - Dividend - Distribution on Liquidation - Indian Income-tax Act, 1922, Section 2(6A)(c) - The court examined whether subsequent distributions during liquidation, after earlier distributions, could still be treated as dividend to the extent of accumulated profits immediately before liquidation. The extract does not contain the final decision, but the issue involved interpretation of the statutory provision that includes any distribution on liquidation to the extent of accumulated profits. Held: Not available in extracted text.
Issue of Consideration
Whether the distribution of Rs. 75,000 by the liquidator to shareholders constituted dividend within the meaning of Section 2(6A)(c) of the Indian Income-tax Act, 1922, having regard to earlier distributions and the accumulated profits
Final Decision
Final decision not available in the provided judgment extract
Law Points
- Distribution on liquidation to shareholders to the extent attributable to accumulated profits immediately before liquidation is dividend under Section 2(6A)(c) as amended by Finance Act 1956
- determination of extent of accumulated profits
