TMI Blog1993 (4) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend under section 2(22) of the Income-tax Act ? So far as the first question is concerned, it is an agreed position that it is covered by the decision of this court in the case of CIT v. Indokem P. Ltd. [1981] 132 ITR 125, and following the same, it has to be answered in the affirmative, i.e., in favour of the assessee and against the Revenue.We answer the same accordingly. The sole question that survives for consideration is question No. 2. Hence, we shall set out only those facts which are relevant for determining the issue involved in that question. The assessee is a limited company and this reference relates to the assessment year 1973-74. The dispute is in regard to the computation of capital gain on redemption of preference shares. On September 13, 1971, the assessee had purchased 67,714 preference shares of Messrs. Mafatlal Gagalbhai and Co. Pvt. Ltd., at the rate of Rs. 100 per share. An expenditure of Rs. 16,929 was incurred as transfer fees, stamp charges, etc., in connection with the aforesaid purchase. The said shares were redeemed on July 1, 1972, for which the assessee received a sum of Rs. 67,71,400. The total amount of Rs. 67,71,400 received by the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edemption of preference shares at " nil " as the same had already been considered as dividend under section 2(22) of the Income-tax Act, 1961. While arriving at the above decision, the Appellate Assistant Commissioner followed an earlier decision in I. T. A. No. 15303 of 1963-64. Against the order of the Appellate Assistant Commissioner, the Revenue went in appeal to the Tribunal. The Tribunal upheld the order of the Appellate Assistant Commissioner and rejected the appeal of the Revenue. Hence, this reference at the instance of the Revenue. We have heard learned counsel for the Revenue, Dr. Balasubramaniam at length. Counsel does not dispute any of the facts set out above. Learned counsel was fair enough to state that redemption of preference shares amounts to " transfer " within the meaning of section 2(47) of the Act. It is a case of relinquishment of an asset. The only dispute is whether in case where a part or the whole of the consideration had been assessed as dividend by virtue of the definition of dividend contained in section 2(22) of the Act, the sale consideration will get reduced to that extent or not. The submission of counsel for the Revenue is that it is by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt can be treated by the Income-tax Officer both as dividend and as consideration received as a result of a transfer of a capital asset. In our opinion, the answer, in clear terms, is " No ". The Revenue cannot approbate and reprobate. It cannot be permitted to treat a part or the whole of the consideration as dividend and to assess the same as such and also to say that this will not have the effect of reducing the amount of consideration for the purpose of computation of capital gain. It cannot be ignored that in the instant case, the whole of the amount received by the assessee in respect of the transfer of preference shares has already been treated by it as dividend and what is left with the assessee by way of consideration is only the amount received minus the amount deemed to be dividend. It may be observed that it is not the assessee who wants to say that the entire amount is not "consideration in respect of transfer". It is only because the whole of the amount received by it has been deemed to be dividend that it is contended by the assessee that the consideration for the purpose of computation of capital gain is nil and capital gain/loss has to be computed on that basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en treated as dividend. There may, however be cases where only a part of the consideration is treated as dividend. The balance amount of consideration in such cases will still be available for computation of capital gain. If the amount so left is higher than the cost of acquisition of the asset, the balance shall be profit and gain arising from transfer of a capital asset which will be assessable under the head " Capital gain ". Learned counsel for the Revenue submitted that the amount received by the assessee for transfer of the assets should not be reduced by the amount which is treated as dividend within the meaning of section 2(22) of the Act for the purposes of calculation of capital gain under section 48 of the Act. Reliance is placed in this connection on the language of section 46(1) of the Act. We have perused section 46. Sub-section (1) of this section provides that a company cannot be regarded as having made a capital gain if it merely distributes its assets among its shareholders on liquidation. Sub-section (2), however, provides that the shareholder may be chargeable to tax under the head Capital gains " in respect of the money received or the market value of other ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntend that this fact should not be taken into account in reducing the true amount of consideration for the transfer. The effect of deeming a part or whole of the consideration as dividend for the purpose of levy of income-tax is to reduce the consideration to that extent. There is no escape from this conclusion. We are also not impressed by the submission of learned counsel for the Revenue that there is no bar in the Income-tax Act on double taxation of the very same receipt under two different heads, viz., " Dividend " and " Capital gain ". This argument does not require any elaborate discussion whatsoever because it is well-settled that the very same income or the very same receipt cannot be assessed twice under two different heads of income It should not be forgotten that what is chargeable to tax under the Income-tax Act is the total income of the assessee. " Dividend " which is income from other sources and " capital gains " are only two different heads under which the income falls to be charged. That being so, once a particular receipt has been treated as dividend, it cannot be treated as income under any other head. The duty of the Income-tax Officer is only to find out th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
