9911796707
TMI Blog1989 (10) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... emed 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 could not appreciate that the Company Law contained compulsory provisions of manner of appropriations of the profits of the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as per asst. order Rs. 2,55,502 Less : . . Agricultural income Rs. 6,635 . Insurance 63 . Interest disallowed 480 . Refund of interest under s. 215 3,326 . Preliminary expenses 174 Rs. 10,678 . . 2,44,824 Less : Tax payable . 1,06,621 Distributable Income . Rs. 1,38,382 Amount to be distributed as dividend 90% . Rs. 1,24,382 Actual amount distributed . 72,600 Short fall . Rs. 51,782 The CIT(A) had allowed the relief for transfer of the amount of Rs. 14,653. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed except out of profits of the company which would otherwise be available for dividend or not 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 reserve account, which reserve could be created by transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g point for arriving at the distributable income is the gross total income as computed as per provisions of the IT Act, before allowing of deductions under Chapter VIA of that Act, before allowing of deductions under Chapter VIA 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 under 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 ..... The term equity means the same thing and equitable construction in unobjectionable, meaning thereby the profits available for distribution of dividends as under the Companies Act, have to be given the same meaning under the IT Act as well. The statute as are intended to counter evasion must be applied to the substance rather than the mere form of transaction. When we proceed with this proposition that, since the IT 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 s. 109 of the Act. The justification of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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