TMI Blog2013 (12) TMI 1675X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of shares, the same would be exempt u/s.10(34) r.w.s. 115-O of the Act. 2.1 The Revenue s case is that the transfer of shares by the assessee in the instant case is not by way of buy-back of its shares by the issuing company, i.e., whose shares stands transferred, inasmuch as the same does not represent a buy-back of shares in terms of section 77A of the Companies Act, 1956 ( Companies Act hereinafter). To qualify as such, the offer of buy-back must be on a proportionate basis to all the share-holders, which was not so in the instant case. 2.2 The assessee s case, on the other hand, is that the said reduction of capital was pursuant to a scheme u/ss.391 to 394 of the companies act, since approved by the hon'ble jurisdictional High Court, so that it is only by way of reduction of capital u/ss.100 to 102 of the said Act. Sections 391 to 395 and section 102 of the companies act operate in a field different from section 77A thereof, which has been held by the hon ble courts as only an enabling provision, so that a company could even prior to its enactment (i.e., by Companies Amendment Act, 1999 w.e.f 31.10.1998), reduce its capital by acquiring its shares. Toward th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the matter adjourned to a convenient date. No withdrawal petition, however, was filed; the Revenue again seeking time in view of non availability of competent authority, i.e., Commissioner of Income Tax-12 Mumbai ( CIT for short), being on leave on account of sickness. It was further explained by the ld. DR that the matter stands referred to the Chief CIT-7 Mumbai, who stands transferred by CBDT, with no one transferred in his stead. Further, he argued, that in the event of withdrawal of its appeal, the assessee s CO shall not survive. The ld. AR, on the other hand, would once again press for the closure of the matter; reiterating his stand that the assessee shall not press its CO (or the ground raised thereby) if the Revenue s appeal were to be dismissed. The hearing was closed at this stage. 3.2 Though we would normally be inclined to grant adjournment as the competent authority is stated to be sick, we cannot but keep in mind that the matter was posted only by way of abundant caution, to allow the Revenue an opportunity to state or rely upon whatever it may wish to in pursuance of its appeal and, further, that the matter has been postponed for too long. The matter, as we u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., the companies act. 3.4 Section 2(22)(d) of the Act reads as under: Definitions 2. In this Act, unless the context otherwise requires,- (22) dividend includes- (a) . (b) . (c) . (d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not; We have carefully gone through each of the decisions relied upon by the Revenue per ground no. 4 of its grounds of appeal, viz. CIT vs. G. Narasimhan [1999] 236 ITR 327 (SC); CIT vs. Urmila Ramesh [1998] 230 ITR 422 (SC); and Kartikeya V. Sarabhai vs. CIT [1997] 228 ITR 163 (SC). The issue under reference stands amply clarified by the apex court in the case of G. Narasimhan (supra), rendered after considering its earlier two decisions, i.e., in the case of Urmila Ramesh and Kartikeya V. Sarabhai (supra); the latter rendered following the decision in the case of Anarkali Sarabhai vs. CIT [1997] 224 ITR 422 (SC). It clarified that the decision in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urity) on the purchase of its shares (or the specified securities) by the issuing company, shall, to the extent it is in excess of the its cost of acquisition, and subject to s. 48, be deemed as capital gains in the year of such purchase. Sec. 2(22) was simultaneously amended (vide clause (iv) thereto) to exclude any part of such consideration for being considered as dividend u/s. 2(22) of the Act. There is accordingly no conflict between the different provisions, and s. 46A is only toward purchase of its shares, etc. by a company by way of buy-back u/s.77A, and not by way of reduction of capital through the procedure specified in its respect under the companies act. In fact, it is not even the assessee s case that it is a case of buy-back of shares u/s. 77A of the companies act, so that the provision of s. 46A, considered by the ld. CIT(A) as validly invoked by the assessee, has no application in the facts and circumstances of the case. 4. In view of the foregoing, the impugned receipt is liable to be considered as dividend u/s.2(22)(d) of the Act to the extent and as attributable of the accumulated profits of the company. We decide accordingly, and the Revenue succeeds in part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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