https://www.taxtmi.com/caselaws?id=97372 A pro rata distribution to shareholders of a company asset representing distributable profits is treated as dividend for income-tax purposes when the asset is not part of the company's capital. The absence of a formal dividend declaration under company law does not prevent the tax authority from looking to the true character of the transaction. Where the company could have realised the asset and distributed the proceeds, a direct transfer of the asset itself may equally amount to dividend. On this reasoning, the right to apply for shares distributed to shareholders was held taxable as dividend in their hands. en-us Wed, 22 Feb 1956 00:00:00 +0530 Fri, 23 Nov 2018 13:22:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=97372 A pro rata distribution to shareholders of a company asset representing distributable profits is treated as dividend for income-tax purposes when the asset is not part of the company's capital. The absence of a formal dividend declaration under company law does not prevent the tax authority from looking to the true character of the transaction. Where the company could have realised the asset and distributed the proceeds, a direct transfer of the asset itself may equally amount to dividend. On this reasoning, the right to apply for shares distributed to shareholders was held taxable as dividend in their hands. Case-Laws Companies Law Wed, 22 Feb 1956 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=97372