9911796707
TMI Blog1971 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 ----------------- ----------------- -------------------------------------------------------------------------------------------------------------------------------------------------- There was an aggregate sum of Rs. 1,25,000 due and owing by the assessee to the company at the close of Samvat year 2011. This consisted of three payments made by the company to the assessee by way of advance or loan, namely, Rs. 50,000 on 18th January, 1955, Rs. 50,000 on 3rd March, 1955, and Rs. 25,000 on 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 involving interpretation of section 2(6A)(e) admittedly arose out of the order of the Tribunal, the Tribunal made a reference to this court submitting the following question for the opinion of the court: "Whether, on the facts and in the circumstances of the case, only 1/300th being the proportion of the number of shares of the company held by the assessee to the total number of shares of the company, of the accumulated profits of the company can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assets of the company or otherwise) by way of advance or loan to a shareholder; (ii) any payment on behalf of a shareholder; and (iii) any payment for the individual benefit of a shareholder. Two conditions must be fulfilled in order that any such payment should be liable to tax under this clause: (1) the company should not be one in which the public are substantially interested within the meaning of section 23A; and (2) the company should possess accumulated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould 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 says in words which admit of no doubt or ambiguity that any payment made by a company which falls within one of the three categories specified in the section shall be liable to be treated as dividend subject only to this limitation that it shall be to the extent to which the company possesses accumulated profits at the time of payment. We may point out that in placing this construction on section 2(6A)(e) we are not alone. We find that there are at least tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 legislative competence. But, while considering the validity of section 2(6A)(e), the Supreme Court has made certain observations as regards the true scope and ambit of the section which lend support to the view we are taking. The majority judgment which held section 2(6A)(e) to be valid was delivered by Gajendragadkar C.J. and the learned Chief Justice, speaking on behalf of the majority, said, after referring to sections 2(6A)(e) and 12(1B) : "It is thus clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nact, 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 majority judgment of the Supreme Court in Navnit Lal C. Javeri's case sets out the reasons which prompted the legislature to enact section 2(6A)(e) and these reasons clearly indicate that the intention of the legislature was that the whole of the payment made by the company to a shareholder should be regarded as dividend in his hands subject only to the limitation that it should not exceed the accumulated profits available with the company at the time of payment. S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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