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TMI Blog2018 (11) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning as it given to dividend under Sub-Section (22) of Section 2, but shall not include sub-clause (e) thereof. The plain effect of the explanation, therefore, would be that even the deemed dividend under Section 2(22)(d) of the Act would be covered from the purpose of Chapter XIID. In turn, therefore, such deemed dividend would be one which is referred to Section 115O of the Act. Inescapable conclusion, therefore, would be that such dividend also would be exempt from tax in the hands of the receiver in terms of Section 10(34) of the Act. The contention of the Revenue that the company having not paid such dividend distribution tax, exemption under Section 10(34) should be deprived to the assessee needs to be noted only for rejection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: Respondent-assessee is an individual. The issue pertains to the Assessment Year 2008-09. The assessee was holding shares of one M/s Spirax Marshall Limited pursuant to a scheme of arrangement formulated by the company and approved by the Bombay High Court, the Company purchased shares held by the assessee and several other shareholders of the same group. The income received by the assessee under such arrangement was offered by the assessee by way of capital gain in the return filed for the said assessment year. The Revenue was of the opinion that the income was in the nature of a deemed dividend in terms of Section 2 (22)(d) of the Income Tax Act, 1961 ( the Act for short). 4. The issue eventually reached the Tribunal. The Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income Tax Vs. Modipon Limited (2018) 400 ITR 1 (SC) to argue that merely because in case some other assessee, Revenue has not preferred appeal, would not preclude the revenue from filing appeal in later cases. 6. On the other hand, learned counsel Mr.Porus Kaka appearing for the assessee submitted that the income generated by way of buy back of shares by the company was in the nature of capital gain. Assessee had offered the same to tax accordingly. If the Revenue contends that the income is in the nature of deemed dividend, the effect of Section 10(34) of the Act would automatically follow. He further submitted that all other assessees who were shareholders of the same company and who formed a common group had made declaration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es would be included in the term dividend . 9. Section 10(34) in turn exempts from payment of tax, any income by way of dividend referred to Section 115O. As per Sub-section (1) of Section 115O notwithstanding anything contained in the provisions of Act and subject to the provisions of the said section in addition to the income tax chargeable in respect of the total income of the domestic company, any amount declared, distributed or paid by such company by way of dividend on or after 1st April, 2003 would be chargeable to additional income tax referred to as tax on distributed profits. 10. The question would be whether the deemed dividend under Section 2(22)(d) would fall within the purview of Sub-Section 1 of Section 115O of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Revenue that the company having not paid such dividend distribution tax, exemption under Section 10(34) should be deprived to the assessee needs to be noted only for rejection. If a certain income is exempt at the hands of receiptant by virtue of statutory provision, unless a provision is made in the statute itself, such exemption cannot be withdrawn only because the payer has not paid tax. The statute has made specific provision for recovery or unpaid tax from the company. In the result, the tax appeal is dismissed. 13. For the view that we have taken, it is not necessary for us to elaborate on the assessee's contention of consistency and the Revenue's arguments that even if no appeal has been filed in the similar case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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