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N. Dharmadan Advocate, Liquidator, Asoka Bank Ltd., Shertallay (In Liquidation) Residing at Rema Mahal, T. D. East Road, Ernakulam, Cochin-11 Vs. the Commissioner of Income-tax, Ernakulam. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberApplication No. 212 of 1975
Reported in(1976)5CTR(Ker)0037B
AppellantN. Dharmadan Advocate, Liquidator, Asoka Bank Ltd., Shertallay (In Liquidation) Residing at Rema Mah
RespondentThe Commissioner of Income-tax, Ernakulam.
Excerpt:
- .....ltd. (in liquidation), shertallai, stating that he is proposing to distribute 25% dividend to the shareholders which, according to him, represents only share capital and not accumulated profits, that he applied to the income-tax authorities for sanction as required under section 178 of the income-tax act, that after repeated reminders, ultimately, he got reply granting sanction but subject to the condition that he will deduct the tax at source on rs. 14,753/-, the dividend under sec. 2(22)(c) of the income-tax act, that as there was no accumulated profit he is not bound to deduct the tax at source as the dividend which he proposes to distribute is not liable to be taxed and that, in the circumstances, he may be granted permission to distribute 25% dividend to the share-holders of the.....
Judgment:
ORDER

S. K. Kader, J. - This is an application filed by the voluntary Liquidator of the Asoka Bank Ltd. (in Liquidation), Shertallai, stating that he is proposing to distribute 25% dividend to the shareholders which, according to him, represents only share capital and not accumulated profits, that he applied to the Income-tax Authorities for sanction as required under section 178 of the Income-tax Act, that after repeated reminders, ultimately, he got reply granting sanction but subject to the condition that he will deduct the tax at source on Rs. 14,753/-, the dividend under sec. 2(22)(c) of the Income-tax Act, that as there was no accumulated profit he is not bound to deduct the tax at source as the dividend which he proposes to distribute is not liable to be taxed and that, in the circumstances, he may be granted permission to distribute 25% dividend to the share-holders of the company (in liquidation).

2. This application is very strongly opposed by the Income-tax Department on various grounds. A counter-affidavit has been filed denying the allegations made by the applicant that what was sought to be distributed was only share-capital. It is contended that it is evident from the copy of the balance-sheet produced in the case that what the Liquidator seeks to distribute is really the assets of the company including accumulated profits, that the Liquidator has not placed sufficient materials before the Income-tax Department in support of the claim put forward by him in the application, that the dividend having been already declared is an income due to the share-holders, which is liable to be taxed, that under the statute it is for the concerned authorities under the Income-tax Act to go into the disputed facts in this respect and find out whether the amount in question is taxable or not, that this Court has no jurisdiction to go into such matters and that the Liquidator who is only an agent of the Bank has no locus standi to file this application representing the share-holders.

3. The prayer in the application is that the applicant may be granted permission 'to distribute 25% return of capital to the share-holders of the Banking Company (in liquidation)'. The counsel for the applicant admitted that there is no necessity for permission of this court for distribution of share capital to the shareholders. If that is so, on that short ground, this application is liable to be dismissed. There is no prayer as such in the application that this Court should go into the disputed question and decide whether the amount sought to be distributed is liable to be taxed and whether in the circumstances of the case, the Income-tax Department was competent to grant the sanction subject to the condition mentioned above. Even if there was such a prayer In think, this Court sitting in Company matters has no jurisdiction to go into such questions. It is not disputed before me that return of capital is not liable to be taxed. Now it is alleged in the application filed by the Liquidator that what he was seeking to distribute among the share-holders was only share capital and therefore he is not bound to deduct tax at source. As already stated, this has been seriously disputed by the Income-tax Department and counter affidavits have been filed.

4. In these circumstances, the question whether the assets sought to be distributed among the share-holders is purely share capital or assets including the accumulated profit is a matter which has to be decided by the Income-tax Department in accordance with the statutory provision in this regard. It is not proper for this Court at this stage to enquire into this matter in the light of the disputed facts on the question and interfere with the jurisdiction vested in the authorities under the Income-tax Act.

5. This application is therefore dismissed.

6. The petitioner can take up the matter with the concerned Income tax Authorities.


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