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TMI Blog1970 (4) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... e court was delivered by SHAH J.-- The Income-tax Appellate Tribunal submitted the following question under section 66(1) of the Indian Income-tax Act, 1922, to the High Court of Madras for opinion : " Whether, on the facts and in the in the circumstances of the case, the Tribunal was right in holding that the sums of Rs. 81,611 and Rs. 1,49,444 were not the part of the accumulated profits of the company as on December 31, 1954, as contemplated under section 2(6A) of the Income-tax Act of 1922 ? " The High Court answered the question in the affirmative. The Commissioner of Income-tax asked for and obtained a certificate from the High Court only in respect of the amount of Rs. 81,611. This appeal is therefore restricted to the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the year in which the company was ordered to be wound up was not dividend and was on that account not liable to taxed as dividend. Under the Indian Companies Act, 1913, no dividend could be paid otherwise than out of profits of the year or undistributed profits of previous years. A company as going concern may distribute by way of dividend to the shareholders profits of the year or accumulated profits of the the previous years. But a share in the assets of the company distributed in the course of winding up is of the nature of capital and not of dividend, and it cannot be apportioned into capital and accumulated profits. In Birch v. Cropper, Lord Macnaghten observed : " I think it rather leads to confusion to speak of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... especially per Atkin L.J.) and it has never since been questioned. " The Indian Income-tax Act, 1922, when originally enacted, contained no definition of " dividend " : the expression " dividend " had, therefore, the same meaning as it had in the Indian Companies Act, 1913, and the amount distributed among the shareholders, by the liquidator out of the assets of the company after meeting the liabilities was regarded as a capital receipt in the hands of the shareholders. In 1939 the Indian Legislature incorporated by section 2 of the Indian Income-tax Act (Amendment) Act, 1939 (7 of 1939), an inclusive definition of the expression " dividend ". Clause (c) of that definition read : " any distribution made to the shareholders of a compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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