https://www.taxtmi.com/caselaws?id=5706 A deemed dividend under s. 2(22)(e) must be treated as a dividend payment out of accumulated profits, because s. 194 mandates tax deduction on such "dividend" and the legal fiction must be carried to its logical end; consequently, the amount treated as deemed dividend is adjusted against and reduces the company's accumulated profits whenever those profits are computed. The HC's view was upheld and the issue was decided in favour of the assessee. On reduction of share capital where a shareholder received cash and property, the portion attributable to accumulated profits is excluded as dividend, but the balance is a capital receipt and capital gains must be computed by valuing the property and applying cost of acquisition; the Tribunal's "no transfer/no capital gains" view was rejected and the matter remitted, in favour of the Revenue. en-us Mon, 14 Dec 1998 00:00:00 +0530 Thu, 18 Dec 2025 16:16:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=5706 A deemed dividend under s. 2(22)(e) must be treated as a dividend payment out of accumulated profits, because s. 194 mandates tax deduction on such "dividend" and the legal fiction must be carried to its logical end; consequently, the amount treated as deemed dividend is adjusted against and reduces the company's accumulated profits whenever those profits are computed. The HC's view was upheld and the issue was decided in favour of the assessee. On reduction of share capital where a shareholder received cash and property, the portion attributable to accumulated profits is excluded as dividend, but the balance is a capital receipt and capital gains must be computed by valuing the property and applying cost of acquisition; the Tribunal's "no transfer/no capital gains" view was rejected and the matter remitted, in favour of the Revenue. Case-Laws Income Tax Mon, 14 Dec 1998 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=5706