TMI Blog1960 (11) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution of a right which had a monetary value. But by the form of the resolution sanctioning the distribution, the true character of the resolution could not be altered. We are, therefore, of the view that the High Court was right in holding that the distribution of the right to apply for and obtain two shares of the Bank of India (at half their market value) for each share held by the shareholders of the mills amounted to distribution of dividend. Appeal dismissed. - - - - - Dated:- 22-11-1960 - Judge(s) : J. L. KAPUR., M. HIDAYATULLAH., J. C. SHAH JUDGMENT The judgment of the court was delivered by SHAH, J.----This is an appeal by seven appellants with leave granted by the High Court of Judicature at Bombay certifying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal and Rs. 50 as premium per each share and it is considered proper to invest in the said issue of the said bank the funds of this company to the extent of 66 shares only and to distribute the right of this company to the remaining 1,600 shares of the said issue amongst the shareholders of this company in the proportion of the shares held by them in this company. IT IS HEREBY RESOLVED that the funds of this company may be invested in the 66 shares out of 1,666 shares offered by the Bank of India Ltd., and the right to the remaining 1,600 shares is hereby distributed among 800 shares of this company in the proportion of right to two shares of the bank per one ordinary share held in this company. The managing agents may take steps to inti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend' within the meaning of section 2(6A) of the Indian Income-tax Act ? " The High Court reframed the question as follows : " Whether on the facts and circumstances of the case, the distribution of the right to apply for the shares of the Bank of India by Navjivan Mills Ltd., in favour of the assessees amounted to a distribution of 'dividend' ? ", and answered it in the affirmative. The High Court observed that the definition of " dividend " in section 2(6A) was an inclusive and not an exhaustive definition, and even if the distribution of the right to the shares of the Bank of India could not be regarded as dividend within the extended meaning of that expression in section 2(6A), it was still dividend within the ordinary mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of that expression. In the question framed by the Tribunal there is nothing to indicate that the High Court was called upon to advise on the question whether the receipts by the appellants amounted to dividend only within the extended definition of that expression in section 2(6A). It was also urged that in nominating its shareholders to exercise the option to purchase the new issue of the Bank of India, the mills did not distribute any dividend. The mills were, it is true, not obliged to accept the offer made by the Bank of India, however advantageous it might have been to the mills to accept the offer : it was open to the mills to renounce the offer. The mills had three options, (1) to accept the shares, (2) to decline to accept the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution would undoubtedly have been distribution of dividend. If instead of selling the right in the market and then distributing the proceeds, the mills directly transferred the right, the benefit in the hands of the shareholders was still dividend. Dividend need not be distributed in money ; it may be distributed by delivery of property or right having monetary value. The resolution, it is true, did not purport to distribute the right amongst the shareholders as dividend. It did not also take the form of a resolution for distribution of dividend; it took the form of distribution of a right which had a monetary value. But by the form of the resolution sanctioning the distribution, the true character of the resolution could not be alter ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
