TMI Blog1971 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... k Factory Ltd. The share capital of the company consisted of 1,500 shares and it was not a company in which the public were substantially interested within the meaning of section 23A. The assessee had a current account with the company in which the assessee borrowed diverse sums of money from the company from time to time and repaid the same to the company at intervals. The account of the company in the books of the assessee for Samvat year 2011 disclosed the following transactions between the assessee and the company: -------------------------------------------------------------------------------------------------------------------------------------------------- Dr. Cr. -------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. 21-12-54 60,000 Balance B/over. 75,000 28-12-64 17,765 31-12-64 (Interest) 2,769 31-12-54 4 ----------------- 77,769 ----------------- 77,769 Balance on 18-1-55 50,000 14-11-55 1,25,000 3-3-55 50,000 20-5-55 25,000 Interest ----------------- ----------------- 2,02,769 2,02,769 ----------------- ----------------- ----------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarded as part of accumulated profits within the meaning of section 2(6A)(e) and the accumulated profits must, therefore, be taken to be Rs. 60,750 and not Rs. 93,746. The Tribunal rejected the extreme contention of the assessee that section 2(6A)(e) had no application to the facts of the present case but accepted the alternative contention urged on behalf of the assessee, namely, that on a proper interpretation of section 2(6A)(e), not the whole of the sum of Rs. 60,750 but only 1/300th part of it, representing the proportionate share which the assessee would have received if the accumulated profits had been distributed to the shareholders, was taxable in the hands of the assessee as dividend. The Tribunal accordingly modified the assessment and directed the Income-tax Officer to include only 1/300th part of the accumulated profits of Rs. 60,750 as dividend in the assessable income of the assessee. The Commissioner was dissatisfied with this decision of the Tribunal in so far as it held that only 1/300th part and not the whole of the sum of Rs. 60,750 was assessable in the hands of the assessee as dividend and he accordingly applied for a reference. Since a question of law involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, 1948 (and before the 1st day of April, 1956)." Section 2(6A) was introduced in the Income-tax Act by the Indian Income-tax (Amendment) Act, 1939, but it did not then contain clause (e) in its present form. Section 2(6A)(e) in its present form was enacted by the Finance Act, 1955, which came into force with effect from 1st April, 1955. We shall presently refer to the object of the enactment of section 2(6A)(e) but before we do so, we may first look at the language of the provision. If there is one rule of construction clearer than any other, it is that the meaning of a statutory provision must be gathered from a plain natural construction of the words used by the legislature. If the words of the statutory provision are themselves precise and unambiguous, then no more can be necessary than to expound those words in their ordinary and natural sense. The words themselves alone in such a case best declare the intention of the law giver. Now, turning to the language of section 2(6A)(e), it is clear that it seeks to bring to tax as dividend in the hands of a shareholder, three types of payments made by a company: (1) any payment of any sum (whether as representing a part of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is therefore sought to be taxed on such payment. The concept of distribution of accumulated profits is wholly absent in section 2(6A)(e) and it is not possible to project that concept in the section and then to read the section as meaning that so much of the payment as represents the proportionate share of the shareholder in the accumulated profits must be treated as dividend. To construe section 2(6A)(e) in the manner suggested on behalf of the assessee would involve reading words in the section which are not there. A comparison of the language of section 2(6A)(e) with that of clauses (a), (b), (c) and (d) of section 2(6A) also supports this conclusion. Section 2(6A), clauses (a), (b), (c) and (d) speak of distribution by a company amongst shareholders and the concept of taking the share of accumulated profits represented by the distribution received by each shareholder is inherent in each one of these clauses. But, when we come to section 2(6A)(e), it is clear that the section is dealing with an individual shareholder who receives payment from the company and this payment is sought to be taxed in his hands as dividend. The language of section 2(6A)(e) is clear and explicit: it s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al transaction would be a loan. Section 2(6A)(e), however, creates a fiction that it should be treated as dividend subject to the condition that it shall be so treated only to the extent that the company possesses 'accumulated profits'. . . . The amount of the loan, however, though a borrowing and not income, is to be deemed to be a dividend and the shareholder must, therefore, include it as forming part of his income to be taken into account in his income-tax assessment." There are also certain observations in the judgment of the Supreme Court in Navnit Lal C. Javeri v. K. K. Sen, which seem to support our construction. When we are referring to this case, we must concede at the outset that no question of construction of section 2(6A)(e) was raised in this case before the Supreme Court. It was assumed by both parties that section 2(6A)(e) authorizes the whole of the payment by a company to a shareholder to be treated as dividend subject only to the limitation that it would be treated as dividend to the extent of accumulated profits in the hands of the company at the time of payment and on this assumption, the validity of section 2(6A)(e) was challenged on the ground of lack of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature is a common but very slippery phrase, which, popularly understood, may signify anything from intention embodied in positive enactment to speculative opinion as to what the legislature probably must have meant. When we are interpreting a statutory provision, we can gather the intention of the legislature only from the language used. What the legislature intended to be done or not to be done can only be legitimately ascertained from what it has chosen to enact, either in express words or by reasonable and necessary implication. The legislature must be presumed to mean what it says. It would not, therefore, be right on our part to presume a certain intention on the part of the legislature and then to bend the language of the section with a view to making it accord with such presumed intention. Moreover, it is well-settled that in a taxing statute, one has to look merely at what is clearly said. There is no room for any intendment. But, even if we try to derive the intent of the legislature by considering the object in enacting section 2(6A)(e), there can be no doubt that the construction which has been accepted by us does not go beyond the intention of the legislature. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
