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TMI Blog1960 (11) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 shares of the Bank of India Ltd. At an extraordinary general meeting of the shareholders of the Bank of India held on May 6, 1948, a resolution was passed increasing the share capital of the bank and for that purpose offering new shares to the existing shareholders in the proportion of one new share for every three shares held by the shareholders. The face value of the new shares was to be Rs. 50, but the shares were issued at a premium of Rs. 50. The shareholders had to pay Rs. 100 for each new share. The mills as the holder of 5,000 shares became entitled to receive 1,666 2/3 shares of the Bank of India at the rate of Rs. 100 per share. The Bank of India communicated its resolution by letter dated May 25, 1948, and enclosed therewith t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders. The seven appellants as holders of 570 shares of the mills became entitled to 1,140 shares of the Bank of India. The appellants agreed to the allotment of these shares and ultimately transferred them to a private company---Jesinghbai Investment Co. Ltd. The assessment of the seven appellants and of other shareholders of the mills was reopened under section 34(1)(a) of the Indian Income-tax Act by the Income-tax Officer on the footing that the release by the mills of the shares of the Bank of India amounted to a distribution of " dividend " and the value of the right released in favour of the shareholders though taxable under section 12 of the Act, had escaped tax. The order of the Income-tax Officer reassessing the income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bank of India shares being dividend within the meaning of the definition in section 2(6A) of the Income-tax Act, in enlarging the scope of the question and in answering it in the light of its ordinary meaning. There is no substance in this contention. " Dividend " is defined in section 2(6A) as inclusive of various items and exclusive of certain others which it is not necessary to set out for the purpose of this appeal. " Dividend " in its ordinary meaning is a distributive share of the profits or income of a company given to its shareholders. When the Legislature by section 2(6A) sought to define the expression " dividend " it added to the normal meaning of the expression several other categories of receipts which may not otherwise be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 but the shareholders had to pay a premium of Rs. 50, thus making a total payment of Rs. 100 for acquiring the new share. The new shares were quoted in the market at more than Rs. 200: and the difference between the amount payable for acquiring the shares under the right offered by the Bank of India and the market quotation of the shares was indisputably the value of the right. The mills could not be compelled to obtain this benefit if it did not desire to do so : it could accept the shares or decline to accept those shares or exercise the option of surrendering them in favour of its nominees. This last option could be exercised by nominating the persons who were to take over the shares and that is what the mills did. The mills requested ..... X X X X Extracts X X X X X X X X Extracts X X X X
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