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2022 (4) TMI 849 - AT - Income TaxRevision u/s 263 - issue of bonus shares would amount to distribution of dividend or not - as per CIT assessee had accumulated profits and the assessee issued bonus shares during the year, therefore, the assessee was liable to pay dividend distribution tax (DDT) on such issuance u/s 115-O as profits were distributed indirectly by issue of bonus shares as covered by the provisions of Sec. 2(22)(b) - HELD THAT:- As per the provisions of Sec.2(22) dividend includes- (a)any distribution by a company of accumulated profits, whether capitalized or not, if such distribution entails the release of assets by the company to its shareholders of all or any part of the assets of the company, or (b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits, whether capitalized or not. The remaining clauses (c) to (e) are not relevant in the present case. It could be gathered that the assessee’s case do not fall u/s 2(22)(a) since the bonus shares are nothing but mere conversion of accumulated profits into equity share capital. There is no actual outflow or release of assets of the assessee. The clause (b) of Sec. 2(22) applies in two situation i.e., (i) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest; (ii) any distribution to its preference shareholders of shares by way of bonus. The amounts paid under situation (i) and (ii) shall amount to dividend to the extent to which the company possesses accumulated profits, whether capitalized or not. In preceding para (5), we have already noted that the assessee has issued only equity shares and there are no preference shares. The bonus has been issued to equity shareholders only. Thus, the assessee’s case do not fall either in Clause (a) or Clause (b) of Sec.2(22). This being so, the amount of bonus could not be held to be dividend and accordingly, Sec.115-O would have no application in such a case. Therefore, we direct Ld. AO to delete the impugned demand as raised against the assessee. The assessee succeeds on merits which render the issue of validity of revisional jurisdiction merely academic in nature. - Assessee appeal allowed.
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