Strict construction of taxing provisions excludes liquidation proceeds from deemed dividend treatment under section 44F.

Section 44F of the Indian Income-tax Act, 1922 did not apply to amounts distributed on liquidation as deemed dividend under section 2(6A)(c). The provision was directed at securities yielding periodical income that could be apportioned as accruing from day to day, whereas liquidation distributions represent a shareholder's share of the company's assets after the shares have ceased to be income-yielding. The deemed-dividend fiction in section 2(6A)(c) was confined to its own context and could not be extended into section 44F. As a taxing provision, section 44F had to be construed strictly, and its language did not clearly cover liquidation proceeds.

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Issues: Whether section 44F of the Indian Income-tax Act, 1922 could be applied to amounts distributed on liquidation as deemed dividend under section 2(6A)(c).

Analysis: Section 44F was aimed at preventing avoidance through dealings in securities yielding periodical income, where the income could be treated as accruing from day to day and apportioned accordingly. Distribution of assets on liquidation is not income arising from securities or shares in that sense, because after liquidation the shares cease to be income-yielding assets and the shareholder receives a share of the company's assets. The deemed dividend created by section 2(6A)(c) is a legal fiction limited to its own setting and cannot be carried into section 44F. A taxing provision must be construed strictly, and the language of section 44F does not clearly extend to such liquidation proceeds.

Conclusion: Section 44F was inapplicable to the liquidation distributions, and the question was answered in favour of the assessee.

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