Uday K. Pradhan v. ITO - Taxpublishers.in

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2016 TaxPub(DT) 1900 (Mum-Trib) Uday K. Pradhan v. ITO INCOME TAX ACT, 1961 --Appeal (Tribunal)--AdmissibilityAdditional ground--The income of assessee was determined in view of the addition under section 2(22)(d) on account of deemed dividend. Assessee raised an additional ground before Tribunal that even if the provisions of section 2(22)(d) were held applicable, the amount of dividend would be exempt from tax in view of the provisions of section 10(34). AO questioned the admissibility of additional ground. *Held:* Since the additional grounds raised pertain to legal issue that goes to the root of the matter and that all facts in the matter already form part of the record, the same may be admitted for consideration and adjudication in the interest of justice and equity. Income Tax Act, 1961 Section 254 *REFERRED :* NTPC v. CIT (1998) 229 ITR 383 (SC), Jute Corporation of India v. CIT (1991) 187 ITR 688 (SC) and Ahmadabad Electricity Co. Ltd. v. CIT (1993) 199 ITR 351 (Bom) (FB). FAVOUR : In assessee's favour A.Y. : 2005-06 INCOME TAX ACT, 1961 --Dividend--Deemed dividend under section 2(22)(d)Redemption of preference share capital--Assessee was a partner in the firm which was converted into a company. Admittedly as per the books of firm, assessee had a credit balance of Rs. 38,74,178 as on 31-3-2001 and in lieu of the said credit balance assessee, received two lakhs equity shares and 2,07,417 redeemable preference shares. In the year under consideration, the said redeemable preference shares were redeemed at par and assessee received Rs. 20,74,170. AO opined that assessee's receipt of the sum of Rs. 20,74,170 on redemption of preference shares resulted in reduction of the authorised share capital and invoked the provisions of section 2(22)(d) to bring the same to tax as deemed dividend. CIT(A) held that this was a colourable device for distribution of accumulated profits without any payment by the assessee and which benefitted the assessee/shareholder to the tune of Rs. 20,74,170 and was exigible to tax under section 2(22)(d). *Held:* Respectfully following the decision in the case of Parle Biscuits Pvt. Ltd. in ITA No 447/Mum/2009 dated 19-8-2001,it was held that in terms of section 80(3) of the Companies Act, 1956, there is no reduction in the authorised share capital of the company by virtue of the redemption of the aforesaid preference shares at face value, which were acquired by assessee for valuable consideration in lieu of its credit balance in his capital account with the erstwhile firm and therefore this amount of Rs. 20,74,170 did not fall within the definition of deemed dividend under section 2(22)(d). SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2016 TaxPub(DT) 1900 (Mum-Trib)

Uday K. Pradhan v. ITO

INCOME TAX ACT, 1961

--Appeal (Tribunal)--AdmissibilityAdditional ground--The income of assessee was determined in view of the addition under section 2(22)(d) on account of deemed dividend. Assessee raised an additional ground before Tribunal that even if the provisions of section 2(22)(d) were held applicable, the amount of dividend would be exempt from tax in view of the provisions of section 10(34). AO questioned the admissibility of additional ground. Held: Since the additional grounds raised pertain to legal issue that goes to the root of the matter and that all facts in the matter already form part of the record, the same may be admitted for consideration and adjudication in the interest of justice and equity.

Income Tax Act, 1961 Section 254

REFERRED : NTPC v. CIT (1998) 229 ITR 383 (SC), Jute Corporation of India v. CIT (1991) 187 ITR 688 (SC) and Ahmadabad Electricity Co. Ltd. v. CIT (1993) 199 ITR 351 (Bom) (FB).

FAVOUR : In assessee's favour

A.Y. : 2005-06

INCOME TAX ACT, 1961

--Dividend--Deemed dividend under section 2(22)(d)Redemption of preference share capital--Assessee was a partner in the firm which was converted into a company. Admittedly as per the books of firm, assessee had a credit balance of Rs. 38,74,178 as on 31-3-2001 and in lieu of the said credit balance assessee, received two lakhs equity shares and 2,07,417 redeemable preference shares. In the year under consideration, the said redeemable preference shares were redeemed at par and assessee received Rs. 20,74,170. AO opined that assessee's receipt of the sum of Rs. 20,74,170 on redemption of preference shares resulted in reduction of the authorised share capital and invoked the provisions of section 2(22)(d) to bring the same to tax as deemed dividend. CIT(A) held that this was a colourable device for distribution of accumulated profits without any payment by the assessee and which benefitted the assessee/shareholder to the tune of Rs. 20,74,170 and was exigible to tax under section 2(22)(d). Held: Respectfully following the decision in the case of Parle Biscuits Pvt. Ltd. in ITA No 447/Mum/2009 dated 19-8-2001,it was held that in terms of section 80(3) of the Companies Act, 1956, there is no reduction in the authorised share capital of the company by virtue of the redemption of the aforesaid preference shares at face value, which were acquired by assessee for valuable consideration in lieu of its credit balance in his capital account with the erstwhile firm and therefore this amount of Rs. 20,74,170 did not fall within the definition of deemed dividend under section 2(22)(d).