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TMI Blog1977 (1) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... l cost, the balance of Rs. 1,46,000 was offered for assessment as "capital gains" in the previous year for 1965-66 assessment. Consequently, at the beginning of the year of account relevant for assessment year 1966-67 the cost price of Rs. 300 each for 50 shares was outstanding pending adjustment. During the year of account relevant to assessment year 1966-67, now under consideration, the liquidation proceedings were completed and the assessee was allotted 746 shares of Rs. 1,000 each in M/s. Chettinad Company Private Ltd., Pudukkottai, by the liquidator of the Bank of Chettinad Ltd. The distribution of the shares in M/s. Chettinad Company Private Ltd., Pudukkottai, was in proportion to the shares held by each of the shareholders in the Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the correctness of this order of the Tribunal that is challenged in the form of the present reference in which the following question has been referred to this court for its opinion under section 256(1) of the Income-tax Act, 1961. " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that any sum received by the assessee from the liquidator of the Bank of Chettinad Ltd. in the form of shares in M/s. Chettinad Company Private Ltd. in the year of account relevant to the assessment year 1966-67, cannot be included in the chargeable income of the assessee under the head 'capital gains' ?" Pending this reference on the file of this court the Supreme Court has rendered a decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount in question was that though section 46(2) of the Income-tax Act, 1961, is a charging section it will apply only to companies as defined in section 2(17) of the Income-tax Act, 1961, and will not apply to the company with which the Supreme Court was dealing as the parties had agreed that that was not a company as defined in the Act. As far as the present reference is concerned, the order of the Tribunal shows that no argument was advanced before it based upon the definition of the term "transfer" occurring in section 2(47) of the Income-tax Act, 1961. The argument that would appear to have been addressed before the Tribunal is that section 46(2) itself is not a charging section, and it is only section 45 which is the charging secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of the Supreme Court makes it clear that but for the provisions contained in section 46(2) the distribution of the assets of a company in liquidation would not constitute transfer as defined in section 2(47) of the Income-tax Act, 1961, and section 46(2) will apply only to companies as defined in section 2(17) of the Income-tax Act, 1961. Consequently, the basic requirement for the application of section 46(2) is the status of the company as to whether it is a company falling within the definition of the term "company" as contained in section 2(17) of the Income-tax Act, 1961, or not. Since the judgment of the Supreme Court itself came to be rendered only during the pendency of this reference the parties did not concentrate their a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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