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TMI Blog1970 (4) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... lated under section 2(6A) of the Income-tax Act of 1922 ? " The High Court answered the question in the affirmative. The Commissioner of Income-tax asked for and obtained a certificate from the High Court only in respect of the amount of Rs. 81,611. This appeal is therefore restricted to the claim of the revenue that the amount of Rs. 81,611 was not part of the " accumulated profits of the company as on October 31, 1954, as contemplated by section 2(6A)(c) of the Income-tax Act, 1922." Ajax Products Ltd. was a public limited company incorporated in 1939. It maintained its accounts according to the calendar year. The respondents to this appeal were shareholders of the company. The company " went into liquidation on October 31, 1934. " Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assets of the company distributed in the course of winding up is of the nature of capital and not of dividend, and it cannot be apportioned into capital and accumulated profits. In Birch v. Cropper, Lord Macnaghten observed : " I think it rather leads to confusion to speak of the assets which are the subject of this application as 'surplus assets' as if they were an accretion or addition to the capital of the company capable of being distinguished from it and open to different considerations. They are part and parcel of the property of the company--part and parcel of the joint stock or common fund--which at the date of the winding up represented the capital of the company. " This view was affirmed in a later judgment in Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shareholders. In 1939 the Indian Legislature incorporated by section 2 of the Indian Income-tax Act (Amendment) Act, 1939 (7 of 1939), an inclusive definition of the expression " dividend ". Clause (c) of that definition read : " any distribution made to the shareholders of a company out of a cumulated profits of the company on the liquidation of the company : Provided that only the accumulated profits so distributed which arose during the six previous years of the company preceding the date of liquidation shall be so included. " But the profits of the year in the course of which the company was ordered to be wound up not being accumulated profits were not part of the dividend : Appavu Chettiar v. Commissioner of Income-tax. Girdha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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