9911796707
TMI Blog1989 (10) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... profits of Rs. 1,46,529 after taxation. The company has as its paid capital redeemable preference shares, which could be redeemed only from out of profits, for which it had to necessarily appropriate the amount to the redemption reserve account, and accordingly an amount of Rs. 58,779 was set apart from out of the profits of the year under consideration. The assessee company had also transferred Rs. 14,653 representing 10 per cent of the profits of the year to general reserve account as required by the provision contained in the Company Law, before declaration of any dividend, which was accepted by the CIT(A), on the basis that the Tribunal in the assessee's case had so directed in the earlier year. His plea was that the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 653 Proposed dividend 72,600 Balance carried to Balance Sheet 14,378 ------------------- Total 1,60,410 ------------------- The ITO had arrived at the distributable income as under : Gross total income as per asst. order 2,55,502 Less : Rs. Agricultural income 6,635 Insurance 63 Interest disallowed 480 Refund of Interest u/s. 215 3,326 Preliminary expenses 174 10,678 ------------- ------------------- 2,44,824 Less : Tax payable 1,06,621 ------------------- Distributable income 1,38,203 ------------------- Rs. Amount to be distributed as dividend 90% 1,24,382 Actual amount distributed 72,600 ------------------- Shortfall 51,782 ------------------- The CIT(A) had allowed the relief for trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Provided that-- (a) no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividend or out of proceeds of a fresh issue of shares made for the purposes of the redemption ; (d) where any such shares are redeemed otherwise than out of proceeds of a fresh issue, there shall out of profits which would otherwise have been available for dividend, transferred to a reserve fund, to be called the capital redemption reserve account a sum equal to the nominal amount of the shares redeemed. The reading of the above indicates that the company could redeem the preference shares either out of the proceeds of the fresh issue of capital or out of the funds available in the capital redemption rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the Income Tax Act is contained in sec. 109. The starting point for arriving at the distributable income is the gross total income as computed as per provisions of the I.T. Act, before allowing of deductions under Chapter VI-A of that Act. The deductions are allowed from the gross total income in respect of, (a) income-tax payable; (b) taxes levied under any law to the extent not allowed as a deduction in computing the total income; (c) deduction allowable u/s 80G; (d) losses long-term on sale of capital assets; (e) income arising out of India to the extent not allowed to be remitted from that country; (f) amount transferred to reserve account as required by the Banking Companies Act, 1949 (applicable only to Banking Companies); and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutes. The term 'equity' means the same thing and equitable construction is unobjectionable, meaning thereby the profits available for distribution of dividends as under the Companies Act, have to be given the same meaning under the I.T. Act as well. The statute as are intended to counter evasion, must be applied to the substance rather than the mere form of transactions. When we proceed with this proposition that, since the I.T. Act does not override the provisions of the Companies Act, the amounts transferred to the redemption reserve account from out of its current profits not being available for distribution as dividend, it has to be further deducted from the available amount calculated as per the provisions of sec. 109 of the Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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