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1965 (2) TMI 6 - SC - Income TaxWhether the constitutional validity of section 2(6A)(d) Indian Income-tax Act, 1922 can be supported on the ground that it was enacted to prevent evasion of income-tax? Whether the said dividends were distributed in the year 1953-54, as the appellant contends, or in the accounting year 1954-55, as the respondent argues? Held that:- When there is a factual avoidance of tax, in terms of law, the legislature steps in to amend the income-tax law so that it can catch such an income within the net of taxation. There is, therefore, no inconsistency between a receipt being a capital one under the company law, and by fiction being treated as taxable income under the Income-tax Act.Therefore, as section 2(6A)(d) of the Act embodies a law to prevent evasion of tax, it falls within the ken of entry 54 of List I of Schedule VII to the Government of India Act, 1935. We agree with the High Court that the dividends were distributed to the shareholders during the accounting year, i. e., 1954-55. Appeal dismissed.
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