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Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Hon'ble Mr. Justice Prabodh Dinkarrao Desai
Acts
  • section 2 (6A) (e) with that of clauses (a), (b), (c) and (d) of section 2 (6A)
  • Income-tax Act by the Indian Income-tax (Amendment) Act, 1939,
  • section 2 (6A) of the Indian Income-tax Act, 1922.
  • Section 2 (6A), clauses (a), (b), (c)
  • 1956)." 5. Section 2 (6A)
  • Finance Act, 1955,
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Hon'ble Mr. Justice Prabodh Dinkarrao Desai
Acts
  • section 2 (6A) (e) with that of clauses (a), (b), (c) and (d) of section 2 (6A)
  • Income-tax Act by the Indian Income-tax (Amendment) Act, 1939,
  • section 2 (6A) of the Indian Income-tax Act, 1922.
  • Section 2 (6A), clauses (a), (b), (c)
  • 1956)." 5. Section 2 (6A)
  • Finance Act, 1955,
See more information ...
Smart Summary

Structured Summary of the Opinion — Section 2(6A)(e), Indian Income-tax Act, 1922

Factual and Procedural Background

This reference arises from an income-tax assessment for the assessment year 1956-57 (account year Samvat 2011: 27 October 1954 to 14 November 1955). The assessee (now deceased) held five shares in Ahmedabad Silk Factory Ltd., whose share capital comprised 1,500 shares. The assessee maintained a current account with the company and received advances/loans from the company on three occasions: Rs. 50,000 on 18 January 1955, Rs. 50,000 on 3 March 1955 and Rs. 25,000 on 20 May 1955, leaving an aggregate outstanding of Rs. 1,25,000 at the close of Samvat year 2011.

The Income-tax Officer initially found accumulated profits as on 31 December 1954 to be Rs. 93,746 and included that sum in the assessee's taxable income under section 2(6A)(e). The Appellate Assistant Commissioner dismissed the assessee's appeal. On further appeal, the Tribunal remitted certain points to the Income-tax Officer for a report, received the report, and then held that Rs. 32,996 (deemed profits under section 10(2)(vii)) should be excluded from accumulated profits. The Tribunal took accumulated profits to be Rs. 60,750 and, while rejecting the extreme contention that section 2(6A)(e) did not apply, held that only 1/300th of the accumulated profits (the proportion equal to the assessee's shareholding) should be treated as dividend and included that proportion in the assessment. The Commissioner was dissatisfied and referred the question of law under section 2(6A)(e) to the High Court.

Legal Issues Presented

  1. Whether, on the facts and in the circumstances of the case, only 1/300th (being the proportion of the number of shares held by the assessee to the total number of shares of the company) of the accumulated profits of the company can be treated as dividend under section 2(6A)(e) of the Income-tax Act and taxed accordingly?

Arguments of the Parties

Assessee's Arguments (as recorded)

  • The assessee initially contended that the company was one in which the public were substantially interested within the meaning of section 23A; after the remand report, this contention was not pressed and was effectively abandoned.
  • The assessee disputed the inclusion of Rs. 32,996 (deemed profits under section 10(2)(vii)) within accumulated profits and succeeded on this point before the Tribunal, which reduced accumulated profits to Rs. 60,750.
  • On the principal question under section 2(6A)(e), the assessee advanced two alternate contentions: (a) that section 2(6A)(e) had no application to the facts (an “extreme contention”), and (b) more moderately, that only a proportionate part of the accumulated profits — specifically 1/300th corresponding to the assessee’s shareholding — should be treated as dividend and taxed.

Commissioner / Revenue's Position (as recorded)

  • The Commissioner (and earlier the Income-tax Officer) treated the payments made by the company to the assessee as dividends to the extent of the company’s accumulated profits and was dissatisfied with the Tribunal’s view that only 1/300th should be taxed.
  • By seeking the reference, the Commissioner challenged the Tribunal’s legal conclusion and asked the court to determine whether the whole of the accumulated profits (to the extent of the payments) could be treated as dividend rather than only a shareholder's proportionate share.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
K. M. S. Lakshmana Aiyar v. Additional Income-tax Officer (Madras High Court) Interpreted section 2(6A)(e) as a comprehensive fiction: a shareholder who borrows may be taxed on the whole amount borrowed (treated as dividend), even if that exceeds his pro rata share of accumulated profits. The court cited this decision as supporting the construction that section 2(6A)(e) permits the whole of a payment by way of advance or loan to be treated as dividend (subject to the limit of accumulated profits), and relied on it as corroborative authority for that plain-language construction.
Commissioner of Income-tax v. P. K. Badiani (Bombay High Court) Held that section 2(6A)(e) legislates in respect of "any payment" and creates a fiction treating such payments (loans/advances) as dividend to the extent of accumulated profits. The court relied on the Bombay High Court's observation to support the conclusion that the provision treats the payment as dividend (subject to the accumulated profits limit) rather than only a pro rata share.
Navnit Lal C. Javeri v. K. K. Sen (Supreme Court) The majority treated section 2(6A)(e) (read with section 12(1B)) as rendering three kinds of payments taxable as dividend to the extent of accumulated profits; the majority accepted the legislative purpose of preventing evasion by controlled companies. The minority (Raghubar Dayal J.) considered the provision ultra vires because it allowed taxation of the whole payment rather than a pro rata part. The court treated the majority observations in Navnit Lal as lending support to the construction that the whole of the payment may be treated as dividend (subject to the accumulated profits limit), and noted that the minority judgment also implicitly supported that construction insofar as it identified the feature that troubled the minority.

Court's Reasoning and Analysis

The court anchored its analysis in statutory construction and the plain language of section 2(6A)(e), which it reproduced in extenso. The court applied the following steps in its reasoning:

  1. Rule of construction: The starting point is the plain, natural meaning of the statutory words. If the words are precise and unambiguous, they should be given their ordinary meaning.
  2. Textual parsing of section 2(6A)(e): The provision enumerates three categories of payment by a company that are to be treated as dividend — (i) any payment by way of advance or loan to a shareholder, (ii) any payment on behalf of a shareholder, and (iii) any payment for the individual benefit of a shareholder — subject to two conditions: (a) the company is not one in which the public are substantially interested (section 23A), and (b) the company possesses accumulated profits at the time of payment.
  3. Meaning of "any payment": The court emphasized that the statute uses the expression "any payment," which, in ordinary language, denotes every payment falling within the categories, not merely a proportionate part. The only statutory limitation on quantum is that treatment as dividend is "to the extent to which the company possesses accumulated profits."
  4. Absence of pro rata/distribution language: The court contrasted clause (e) with clauses (a)–(d) of section 2(6A), which speak of distribution amongst shareholders and inherently involve taking the share of accumulated profits represented by a distribution. Clause (e), by contrast, addresses payments to an individual shareholder and contains no reference to shareholding, distribution, or a pro rata allocation.
  5. Rejection of the assessee's construction: Reading a pro rata/distribution concept into clause (e) would require inserting words not present in the statute. The court held that such an interpretive insertion is impermissible; the proper approach is to give effect to the unambiguous words used by the legislature.
  6. Consideration of precedent and legislative purpose: The court observed that decisions of the Madras and Bombay High Courts support the textual construction adopted. It also referred to observations in the Supreme Court’s Navnit Lal decision: the majority in that case framed the section as creating a fiction to prevent tax evasion by controlled companies; that legislative purpose is consistent with treating the whole of a qualifying payment as dividend (subject to the accumulated-profits limit). The court rejected the argument that the adopted construction exceeded any legitimate legislative purpose because the statute itself, and the Supreme Court’s majority reasoning, demonstrate that the legislature intended to deal with devices by controlling shareholders to withdraw accumulated profits by loans/advances.
  7. Application to the facts: On the admitted facts (accumulated profits as on 31 December 1954 equal to Rs. 60,750; payments/advances to the assessee after that date aggregating to Rs. 1,25,000 and outstanding at the close of Samvat year 2011), the court concluded that section 2(6A)(e) requires the whole sum of Rs. 60,750 (i.e., the company’s accumulated profits limit) to be treated as dividend in the hands of the assessee.

Holding and Implications

Holding: Question answered in the negative. The court held that the whole of the sum of Rs. 60,750 (being the accumulated profits possessed by the company as on 31 December 1954) is liable to be taxed as dividend in the hands of the assessee under section 2(6A)(e) of the Income-tax Act.

Implications:

  • Direct effect on the parties: The Tribunal's contrary conclusion that only 1/300th of the accumulated profits is assessable as dividend was set aside; the entire accumulated profits sum of Rs. 60,750 must be included in the assessee's taxable income as dividend under section 2(6A)(e).
  • Costs: The assessee was ordered to pay the costs of the reference to the Commissioner.
  • Precedential effect: The court's reasoning rests on the plain language of section 2(6A)(e) and aligns with earlier High Court and Supreme Court observations cited in the opinion; the decision applies the statute to the admitted facts rather than announcing an unrelated new legal principle beyond that construction.

End of summary — the contents of this document are drawn exclusively from the provided opinion and do not add information beyond that text.

Show full summary ...

    Commissioner Of Income-Tax, Gujarat I v. Mayur Madhukant Mehta

    1. This reference raises an interesting question of law relating to the interpretation of section 2 (6A) of the Indian Income-tax Act, 1922. It raises out of an assessment to income-tax made on the assessee for the assessment year 1956-57, the relevant account year being Samvat year 2011, that is, 27th October, 1954, to 14th November, 1955. The assessee, who is now deceased, held five shares in the limited company called Ahmedabad Silk Factory Ltd. The share capital of the company consisted of 1,500 shares and it was not a company in which the public were substantially interested within the meaning of section 23A. The assessee had a current account with the company in which the assessee borrowed diverse sums of money from the company from time to time and repaid the same to the company at intervals. The account of the company in the books of the assessee for Samvat year 2011 disclosed the following transaction between the assessee and the company :

    ----------------------------------------------------------------------

    2. There was an aggregate sum of Rs. 1,25,000 due and owing by the assessee to the company at the close of Samvat year 2011. This consisted of three payments made by the company to the assessee by way of advance or loan, namely, Rs. 50,000 on 18th January, 1955, Rs. 50,000 on 3rd March, 1955, and Rs. 25,000 on 20th May, 1955. Now the company maintained its accounts according to the calendar year and there were admittedly certain accumulated profits with the company as on 31st December, 1954. The Income-tax Officer assessing the assessee to income-tax for the assessment year 1956-57 found that the accumulated profits were Rs. 93,746 and he held, applying the provision enacted in section 2 (6a) (e), that the three payments aggregating to Rs. 1,25,000 made by the company to the assessee were, therefore, liable to be taxed in the hands of the assessee as dividend to the extent of the accumulated profits, namely, Rs. 93,746. The Income-Tax Officer accordingly included a sum of Rs. 93,746 in the assessable income of the assessee. The assessee preferred an appeal to the Appellate Assistant Commissioner but the appeal was unsuccessful. The assessee thereupon carried the matter in further appeal to the Tribunal. The Tribunal felt that in order to arrive at a proper determination of some of the points raised in the appeal, it was necessary to have further facts and it, therefore, called for a remand report from the Income-tax Officer on certain specific points. After the remand report was received, the Tribunal proceeded further with the hearing of the appeal. One of the contentions raised by the assessee was that the company was one in which the public were substantially interested within the meaning of section 23A but in view of the facts set out in the remand report, this contention was not pressed and it was conceded by the assessee that the company was, what may, for the sake of convenience and brevity, be described as section 23A company. The assessee disputed the computation of the accumulated profits at Rs. 93,746 and contended that a sum of Rs. 32,996 representing deemed profits under section 10 (2) (vii) was wrongly included in it. The Tribunal was impressed by this contention and it held that the sum of Rs. 32,996 could not be regarded as part of accumulated profits within the meaning of section 2 (6a) (e) and the accumulated profits must, therefore, be taken to be Rs. 60,750 and not Rs. 93,746. The Tribunal rejected the extreme contention of the assessee that section 2 (6a) (e) had no application to the facts of the present case but accepted the alternative contention urged on behalf of the assessee, namely, that on a proper interpretation of section 2 (6a) (e), not the whole of sum of Rs. 60,750 but only 1/300th part of it, representing the proportionate share which the assessee would have received if the accumulated profits had been distributed to the shareholders, was taxable in the hands of the assessee as dividend. The Tribunal accordingly modified the assessment and directed the Income-tax Officer to include only 1/300th part of the accumulated profits of Rs. 60,750 as dividend in the assessable income of the assessee. The commissioner was dissatisfied with this decision of the Tribunal in so far as it held that only 1/300th part and not in the whole of sum of Rs. 60,750 was assessable in the hands of the assessee was dividend and he accordingly applied for a reference. Since a question of law involving interpretation of section 2 (6a) (e) admittedly arose out of the order of the Tribunal, the Tribunal made a reference to this court submitting the following question for the opinion of the court :

    "Whether, on the facts and in the circumstances of the case, only 1/300th being the proportion of the number of shares of the company held by the assessee to the total number of shares of the company, of the accumulated profits of the company can be treated as dividend under section 2 (6a) (e) of the Act and taxed accordingly ?"

    3. This question has to be answered by us on the admitted position that the accumulated profits which the company possessed as on 31st December, 1954, were Rs. 60,750 and three payments of Rs. 50,000, Rs. 50,000 and Rs. 25,000 were made by the company to the assessee by way of advance or loan on 18th January, 1955, 3rd March, 1955, and 20th May, 1955, respectively, and the aggregate amount of the advance or loan was outstanding against the assessee at the close of Samvat year 2011.

    4. The determination of this question turns entirely on the true interpretation of section 2 (6a) (e) and it would, therefore, be convenient to reproduce that provision in extenso :

    "2. In this Act, unless there is anything repugnant in the subject or context :- ...

    (6A) 'dividend' included - ...

    (e) any payment by a company, not being a company in which the public are substantially interested within the meaning of section 23A, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder or zany payment by any such company on behalf or for the individual benefit of a shareholder, to the extent to which the company in either case possesses accumulated profits;

    but 'dividend' does not include - ......

    (ii) any advance or loan made to a shareholder by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the company;

    (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of clause (e), to the extent to which it is so set off.

    Explanation. - The expression 'accumulated profits', wherever it occurs in the clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948 (and before the 1st day of April, 1956)."

    5. Section 2 (6A) was introduced in the Income-tax Act by the Indian Income-tax (Amendment) Act, 1939, but it did not then contain clause (e) in its present form. section 2 (6a) (e) in its present form was enacted by the Finance Act, 1955, which came into force with effect from 1st April, 1955. We shall presently refer to the object of the enactment of section 2 (6a) (e) but before we do so, we may first look at the language of the provision.

    6. If there is one rule of construction clearer than any other, it is that the meaning of a statutory provision must be gathered from a plain natural construction of the words used by the legislature. If the words of the statutory provision are themselves precise and unambiguous, then no more can be necessary than to expound those words in their ordinary and natural sense. The words themselves alone in such a case best declare the intention of the law giver. Now, turning to the language of section 2 (6a) (e), it is clear that it seeks to bring to tax as dividend in the hands of a shareholder, three types of payments made by a company : (1) any payment of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder; (ii) any payment on behalf of a shareholder; and (iii) any payment for the individual benefit of a shareholder. Two conditions must be fulfilled in order that any such payment should be liable to tax under this clause : (1) the company should not be one in which the public are substantially interested within the meaning of section 23A; and (2) the company should possess accumulated profits at the time it makes the payment. If these two conditions are satisfied, any such payment would be liable to be taxed in the hands of the shareholder as dividend to the extent to which the company possess accumulated profits at the time when such payment is made. section 2 (6a) (e) uses the words "any payment" meaning every payment made by a company which falls within one of the three categories specified in the section and provides that such payment shall be included within the meaning and connotation of the word "dividend" provided, of course, the two conditions which we have just referred to are satisfied. The reference in section 2 (6a) (e) is to "any payment" and not to any proportionate part of it. The only limitation on the quantum liable to be treated as dividend is that it should be to the extent to which the company possesses accumulated profits. If the accumulated profits possessed by the company at the time of payment exceed the amount of payment made my the company, the whole of the payment should be liable to be regarded as dividend. There is nothing in section 2 (6a) (e) to indicate that the legislature intended to tax not the whole of the payment made by the company but only that apart of it which represented proportionate share of the shareholder in the accumulated profits of the company. There is no reference in section 2 (6a) (e) to any holding of shares by the shareholder nor is there any reference to the concept of distribution of the accumulated profits. There could not in fact be any reference to distribution of accumulated profits pro rata amongst the shareholders, since such reference would have been wholly incompatible with the subject-matter of the section which deals essentially with an individual shareholder who receives payment from the company. Here the body of shareholders is not on the scene but only an individual shareholders who receives payment from the company and who is therefore sought to be taxed on such payment. The concept of distribution of accumulated profits is wholly absent in section 2 (6a) (e) and it is not possible to project that concept in the section and then to read the section as meaning that so much of the payment as represents the proportionate share of the shareholder in the accumulated profits must be treated as dividend. To construe section 2 (6a) (e) in the manner suggested on behalf of the assessee would involve reading words in the section which are not there. A comparison of the language of section 2 (6A) (e) with that of clauses (a), (b), (c) and (d) of section 2 (6A) also supports this conclusion. Section 2 (6A), clauses (a), (b), (c) and (d) speak of distribution by a company amongst shareholders and the concept of taking the share of accumulated profits represented by the distribution received by each shareholder is inherent in each one of these clauses. But, when we come to section 2 (6a) (e), it is clear that the section is dealing with an individual shareholder who receives payment from the company and this payment is sought to be taxed in his hands as dividend. The language of section 2 (6a) (e) is clear and explicit : it says in words which admit of no doubt or ambiguity and any payment made by a company which falls within one of the three categories specified in the section shall be liable to be treated as dividend subject only to this limitation that it shall be to the extend to which the company possesses accumulated profits at the time of payment.

    7. We may point out that in placing this construction on section 2 (6a) (e) we are not alone. We find that there are at least two decisions, one of the Madras High Court and the other of the Bombay High Court where the same view has been taken in regard to the construction of section 2 (6a) (e). The decision of the Madras High Court is to be found in K. M. S. Lakshmana Aiyar v. Additional Income-tax Officer. The question which arose for decision before the Madras High Court in that case was whether section 2 (6a) (e) was within the legislative competence of Parliament under entry 82 of List I of Schedule VII of the Constitution of India. While dealing with the question of legislative competence, the Madras High Court was naturally required to determine the proper construction of section 2 (6a) (e), for the question of legislative competence could not be determined in vacuo. The Madras High Court speaking through Ramachandra Iyer J., pointed out at page 473 of the report :

    "The fiction created by section 2 (6a) (e) is so comprehensive, that a shareholder who borrows from the company will have to pay tax on an amount which might be far in excess of what he would obtain by way of dividend, if dividends had been duly declared. To explain this by an illustration : suppose a member of a controlled company owning one share borrows from the company the entire accumulated profits available, the entire amount taken by way of loan would be treated as dividend and taxed, though his share of the dividend, if declared, would only be a fraction thereof, corresponding to his one share."

    8. The Bombay High Court also said much to the same effect in Commissioner of Income-tax v. P. K. Badiani. The learned Acting Chief Justice, delivering the judgment of the court in that case, observed in relation to section 2 (6a) (e) :

    "This provision legislates in respect of 'any payment'. This case concerns payments by the company by way of loans or advances to the assessee and, therefore, we will omit reference to any payment made on behalf of the assessee. Now, the original transaction would be a loan. section 2 (6a) (e), however, creates a fiction that it should be treated as dividend subject to the condition that it shall be so treated only to the extent that the company possesses 'accumulated profits'.... The amount of the loan, however, though a borrowing and not income, is to be deemed to be a dividend and the shareholder must, therefore, include it as forming part of his income to be taken into account in his income-tax assessment."

    9. There are also certain observations in the judgment of the Supreme Court in Navnit Lal C. Javeri v. K. K. Sen, which seem to support our construction. When we are referring to this case, we must concede at the outset that no question of construction of section 2 (6a) (e) was raised in this case before the Supreme Court. It was assumed by both parties that section 2 (6a) (e) authorizes the whole of the payment by a company to a shareholder to be treated as dividend subject only to the limitation that it would be treated as dividend to the extend of accumulated profits in the hands of the company at the time of payment and on this assumption, the validity of section 2 (6a) (e) was challenged on the ground of lack of legislative competence. But, while considering the validity of section 2 (6a) (e), the Supreme Court has made certain observations as regards the true scope and ambit of the section which lend support to the view we are taking. The majority judgment which held section 2 (6a) (e) to be valid was delivered by Gajendragadkar C.J., and the learned Chief Justice, speaking on behalf of the majority, said, after referring to sections 2 (6a) (e) and 12 (1b) :

    "It is thus clear that the combined effect of these two provisions is that three kinds of payments made to the shareholder of a company to which the said provisions apply, are treated as taxable dividend to the extent of the accumulated profits held by the company.... Section 12 (1B) provides that if a controlled company adopts the device of making a loan or advance to one of its shareholders, such shareholders will be deemed to have received the said amount out of the accumulated profits and would be liable to pay tax on the basis that he has received the said loan by way of dividend.... If the legislature realises that the private controlled companies generally adopt the device of making advances or giving loans to their shareholders with the object of evading the payment of tax, it can step in to meet this mischief, and in that connection, it has created a fiction by which the amount ostensibly and nominally advanced to a shareholder as a loan is treated in reality for tax purposes as the payment of dividend to him."

    Raghubar Dayal J.

    10. who gave the minority judgment, held section 2 (6a) (e) to be outside the legislative competence of Parliament on the ground that the section authorizes imposition of tax on the whole of the payment made by the company to the shareholder and not merely on that part of it which represents the proportionate share of the shareholder in the accumulated profits. If the construction contended for on behalf of the assessee were correct, Raghubar Dayal J. would not have been constrained to declare the section to be ultra vires. This decision of the Supreme Court also impliedly supports the construction we are placing on section 2 (6a) (e).

    11. It was then contended on behalf of the assessee that the construction which we are placing on section 2 (6a) (e) would go far beyond what the legislature could have had in view when it enacted section 2 (6a) (e). Now it is well-settled that the intention of the legislature is a common but very slippery phrase, which, popularly understood, may signify anything from intention embodied in positive enactment to speculative opinion as to what the legislature probably must have meant. When we are interpreting a statutory provision, we can gather the intention of the legislature only from the language used. What the legislature intended to be done or not to be done can only be legitimately ascertained from what it has chosen to enact, either in express words or by reasonable and necessary implication. The legislature must be presumed to mean what it says. It would not, therefore, be right on our part to presume a certain intention on the part of the legislature and then to bend the language of the section with a view to making it accord with such presumed intention. Moreover, it is well-settled that in a taxing statute, one has to look merely at what is clearly said. There is no room for any intendment. But, even if we try to derive the intent of the legislature by considering the object in enacting section 2 (6a) (e), there can be no doubt that the construction which has been accepted by us does not go beyond the intention of legislature. The majority judgment of the Supreme Court in Navnit Lal C. Javeri's case sets out the reasons which prompted the legislature to enact section and these reasons clearly indicate that the intention of the legislature was that the whole of the payment made by the company to a shareholder should be regarded as dividend in his hands subject only to the limitation that it should not exceed the accumulated profits available with the company at the time of payment. section 2 (6a) (e) was enacted with the view to preventing evasion of income-tax by shareholders who control the company and, taking advantage of that control, avoid distribution of accumulated profits by way of dividend which would be liable to bear super-tax in the hands of shareholders and yet secure for themselves the benefit of such accumulated profits by taking them in the shape of advance or loan from the company. Where the company is controlled by a group of persons, which would necessarily be the position in the case of section 23A-company, any shareholder belonging to the group may take the accumulated profits by way of advance or loan from the company for the benefit of the group. If the accumulated profits were distributed as dividend, each one of the group would be liable to pay tax on such dividend. But, the benefit of the accumulated profits, which would otherwise have reached their hands as dividend, becomes available to the group by device of one of them taking an advance or loan to the extent of the accumulated profits. This subterfuge was sought to be foiled by the legislature by enacting section 2 (6a) (e) and it was for this reason that section 2 (6a) (e) provided that, to the extent of the accumulated profits, the whole of the payment and not merely a proportionate part of it, shall be liable to be regarded as dividend in the hands of the shareholder.

    12. We are, therefore, of the view that, on a proper interpretation of section 2 (6a) (e), the question referred to us for our opinion must be answered in the negative. The whole of the sum of Rs. 60,750 would be liable to be taxed as dividend in the hands of the assessee under section 2 (6a) (e). The assessee will pay the costs of the reference to the Commissioner.

    13. Question answered in the negative.

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    Commissioner Of Income-Tax, Gujarat I v. Mayur Madhukant Mehta
    (Aug 20, 1971)