TMI Blog1999 (3) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1982 (see [1990] 182 ITR 235). The following question was referred to the High Court for its opinion under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of section 104 of the Income-tax Act, 1961, were applicable to the instant case for the assessment year 1975-76 ?" The facts leading to the abovesaid reference are as follows : The respondent-company is a trading company in which the public are not substantially interested. The assessing authority assessed the income of the company for the assessment year 1975-76 at Rs. 6,27,430 holding that the company did not distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the assessee. Now the Revenue is in appeal before us. It was contended on behalf of the Revenue in this appeal that even if it is to be held that payment of a loan by a company is to be deemed to be a dividend, such payment cannot be treated as distribution of dividend as contemplated in section 104 of the Act for avoiding the levy of super-tax. The stand of the Revenue before us is that for the purpose of avoiding the levy under section 104 of the Act, there should be in fact distribution of dividend as such in favour of all the shareholders and a deemed payment of dividend is not what is contemplated under the said section. It was also contended before us that the view taken by the Calcutta High Court in Moore Avenue Properties ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits ;" A perusal of this section 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. Section 104 of the Act reads as under : "104. Income-tax on Undistributed income of certain companies.---(1) Subject to the provisions of this section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot have resulted in a benefit to the Revenue ; or (iii) that at least seventy-five per cent. of the share capital of the company is throughout the previous year beneficially held by an institution or fund established in India for a charitable purpose the income from dividend whereof is exempt under section 11. (3) If the Central Government is of opinion that it is necessary or expedient in the public interest so to do, it may, by notification in the Official Gazette and subject to such conditions as may be specified therein, exempt any class of companies to which the provisions of this section apply from the operation of this section. (4) Without prejudice to the provisions of section 108, nothing contained in this section shall apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be deemed to be a dividend, the same cannot be used as a defence in the proceedings under section 23A of the Act unless the dividend, as such, has been paid to all the shareholders. With respect, we are unable to agree with the reasoning of the Gujarat High Court. 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 super-tax by some shareholders and/or companies. While under section 2(22)(e) of the Act, by a deeming provision, the Legislature has made payment of any advance or loan to a shareholder a deemed dividend so as to subject such payments to the levy of super-tax in the hands of the receiver of the said amount, section 104 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egorical terms in the statute, in the absence of which the statutory definition given under section 2(22)(e) of the 1961 Act, in our view, will have to be applied to the word "dividend" as found in section 104 also. The Gujarat High Court had also placed reliance on a judgment of this court in the case of Navnit Lal C. Javeri v. K K Sen, AAC [1965] 56 ITR 198. In our view, the ratio laid down in the said judgment could not, in any way, support the ultimate conclusion of the High Court. This court in the said case was dealing with the constitutionality of section 23A of the 1922 Act, and was not dealing with the interpretation of sections 2(6A) and 23A of the said Act. This court in that case did not have occasion to decide the question that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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