| Case ID |
20347da7-6dcf-4a86-9a5c-7b4829a21851 |
| Body |
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| Case Number |
A.A.R. No. 654 OF 2004 |
| Decision Date |
Apr 04, 2005 |
| Hearing Date |
|
| Decision |
The ruling determined that the distribution of accumulated profits by a company through the issuance of bonus redeemable preference shares to existing equity shareholders does not constitute a deemed dividend under section 2(22) of the Income-tax Act, 1961. The authority concluded that no income would accrue to the non-resident equity shareholders as allottees, and therefore, the company is not obligated to deduct tax at source at this stage. This decision emphasizes the importance of understanding the legal definition of dividends and the implications of share allotments on tax liabilities. |
| Summary |
This case revolves around the interpretation of the Income-tax Act, 1961, specifically concerning the definition of deemed dividends under section 2(22). The applicant, a wholly owned subsidiary of a UK company, sought clarification on whether issuing bonus redeemable preference shares to existing shareholders would amount to a dividend requiring tax deduction at source. The authority ruled that since the bonus shares do not entail a release of assets to shareholders, they do not constitute income, and thus no tax deduction is necessary. This interpretation aligns with previous judicial pronouncements, reinforcing the need for clarity in corporate financial transactions and their tax implications. The case highlights the nuances of tax law and corporate finance, making it an essential reference for companies considering similar financial maneuvers. |
| Court |
Authority for Advance Rulings
|
| Entities Involved |
Briggs of Burton PLC (U.K.)
|
| Judges |
JUSTICE SYED SHAH MOHAMMED QUADRI,
K.D. SINGH,
A.S. NARANG
|
| Lawyers |
Yashwant Y. Chavan
|
| Petitioners |
Briggs of Burton (India) P. Ltd.
|
| Respondents |
Not available
|
| Citations |
2005 SLD 2245,
(2005) 274 ITR 595
|
| Other Citations |
CIT v. Dalmia Investment Co. Ltd. [1964] 52 ITR 567 (SC),
Sashibala Navnitlal v. CIT [1964] 54 ITR 478 (Guj.)
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
2(22),
194
|