M/S Information Technology Park ... vs Income Tax Officer Ward-3(1)(4), ... on 24 August, 2022
19. In connection with the contention that the payments to AFPI is
dividend under section 2(22)(d) the ld AR submitted that section
2(22)(d) states that any distribution made to the shareholders of the
company on reduction of capital shall be considered as deemed
dividend to the extent of its accumulated profits. The ld AR also
submitted that there is a distinction between the terms-'redemption of
shares' and 'reduction of shares' and two different sections of the
Companies Act deals with them. Therefore it was submitted that
redemption of preference shares cannot be considered as 'reduction' of
share capital. Reliance in this regard is placed on the decision of the
Mumbai Tribunal in Parle Biscuits Pvt Ltd. v ACIT in ITA no. 5318 &
5319/Mum/2006 & 447/Mum/2009 and Shri Uday K. Pradhan vs. ITO
in ITA No. 4669/Mum/2014 [Page 415-435 & Page 436-444
respectively]. Further the ld AR submitted that even otherwise, Item (i)
of the exceptions to section 2(22) state that a distribution made in
accordance with clause (d) of section 2(22) shall not apply to
distributions of share, the holder of the which is not entitled to a share
in the surplus assets on liquidation and a preference shareholder is not
entitled to participate in the surplus assets on liquidation. Therefore,
the provisions of section 2(22)(d) of the Act is not applicable and
hence no DDT is payable.