1969 (2) TMI 20

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..... ember, 1951, the said company, namely, the Chemical Manufacturing Co. of India Ltd., went into voluntary liquidation and a liquidator was appointed for the winding-up of the company. By 11th July, 1955, the liquidators had paid to the assessee a sum of Rs. 2,80,400 as dividends. This reference arises out of the assessment for the assessment year 1957-58, the previous year being the period from April 1, 1956, to March 31, 1957. On the 26th September, 1936, during the course of the previous year relevant for the present assessment, the assessee received a further sum of Rs. 21,100 from the liquidators as refund of capital at the rate of 50 nP. per share on 42,200 shares mentioned hereinbefore. The question is whether the said sum received by .....

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..... lies renunciation or abandonment thereof which is a voluntary act. Liquidation of company, on the other hand, involves the extinguishment of the rights of the shareholders in its shares. When an asset or any right therein is extinguished in the hands of a person, it is not correct to say that such person had relinquished it. It may be noted here that in the Income-tax Act, 1961, Parliament, obviously, alive to this distinction, enlarged the scope of section 45 for the assessment of any profits or gains arising from the 'transfer' of capital asset by defining in section 2(47) the word ' transfer' to include' the sale or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law .....

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..... s capital gains. There is, however, another aspect of the matter. It appears that the company went into liquidation voluntarily on 8th September, 1951. Section 12B(1) as it stood at the relevant time indicates that in respect of any profit or gain arising from the sale, exchange, relinquishment or transfer of the capital asset effected after 31st March, 1956, such profits would be deemed to be income. Even if it was possible to accept the argument that by liquidation there was relinquishment of the rights of the shareholder such relinquishment or transfer took place prior to 31st March, 1956 We have, however, indicated our view that there was neither relinquishment nor transfer nor sale nor exchange of any asset in this case. In any view of .....

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