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TMI Blog1997 (7) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1961 (in short the " Act "), require consideration of the following question of law : " Whether, on the facts, the Tribunal was justified in holding that the assessee was not entitled to the deduction of the liability on account of dividend on preference shares? " The assessee is a company registered under the Companies Act, 1956. For the assessment years 1980-81 and 1981-82, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholders should be construed as interest paid in respect of capital borrowed by the company within the meaning of the above quoted provisions and as such should be allowed as a deduction. In our opinion, the construction sought to be placed on behalf of the company cannot be supported either on a plain reading of the statutory provisions or by employing any permissible rule of interpretation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a preferential right to the payment of either or both of the following amounts, namely :--- (i) any money remaining unpaid, in respect of the amounts specified in clause (a), up to the date of the winding up or repayment of capital ; and (ii) any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company." Further, section 205 of the Companies Act spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. Therefore, by no stretch of imagination the dividend sought to be paid can be equated with or treated as " interest " paid on the borrowed capital. For the reasons stated as above, in our opinion, the contention raised on behalf of the company is devoid of any merit and needs to be rejected outright. The question referred to us is accordingly answered against the company/assessee and in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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