Compulsory statutory transfer is not dividend, so dividend distribution tax does not apply

A compulsory transfer of funds to the Central Government under section 23(2) of the Export-Import Bank of India Act, 1981 was not a distribution of profit to shareholders and therefore did not constitute dividend. Dividend, in its ordinary and statutory sense, presupposes share capital and shareholders, which were absent on these facts. As the transfer was a statutory and mandatory payment rather than a shareholder distribution, section 115-O dividend distribution tax was inapplicable and the amount was not taxable as dividend under section 2(22) of the Income-tax Act, 1961.

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Issues: Whether the amount transferred by the assessee to the credit of the Central Government under section 23(2) of the Export-Import Bank of India Act, 1981 constituted dividend so as to attract dividend distribution tax under section 115-O of the Income-tax Act, 1961.

Analysis: The assessee's transfer to the Central Government was held to be a statutory and mandatory transfer of funds under section 23(2) of the Export-Import Bank of India Act, 1981, and not a distribution of profit to shareholders. The Tribunal noted that dividend, in its ordinary and statutory sense, presupposes share capital and shareholders, which were absent in the present facts. The conclusion of the Commissioner (Appeals) was consistent with the Tribunal's own earlier decision in the assessee's case, and no change in facts or law was shown for the years under appeal.

Conclusion: Section 115-O was not applicable to the impugned transfer, the amount was not taxable as dividend under section 2(22), and the Revenue's challenge to the deletion failed.

Ratio Decidendi: A compulsory statutory transfer to the Central Government, made otherwise than by way of distribution to shareholders, does not constitute dividend and therefore does not attract dividend distribution tax under section 115-O of the Income-tax Act, 1961.

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