Section 2(22)(b)

Section 2(22)(b) — the law in short

What the courts have decided on section 2(22)(b), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• ITO v Ketan Bhanuchandra Mahta ITATCuts both waysValidity unconfirmed
  The Assessing Officer has included the company's share premium account in accumulated profits to support a s.2(22)(e) addition. Can he?
  No. The Tribunal held that share premium is not available for distribution as dividend and is required to be treated as part of the share capital, so it cannot be commercial profits and cannot be included in accumulated profits for s.2(22)(e). The same order confirms, against the assessee, that current year's profits up to the date of each payment must be included, because Explanation 2 defines accumulated profits to include all profits up to the date of payment.
• Statutory position — s.2(22)(a), (b), (c) and (d): release of assets, debentures and bonus to preference shareholders, distribution on liquidation, and distribution on a reduction of capital CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer has treated a company payment as a deemed dividend but the order does not say which limb of section 2(22) he is using, and it plainly is not a loan to a shareholder. What do limbs (a) to (d) actually cover?
  These four limbs have nothing to do with buy-backs and are unaffected by the 1 October 2024 changeover, which operates through sub-clause (f). Each of them turns on "accumulated profits": (a) catches any distribution of accumulated profits, whether capitalised or not, if it entails the release by the company to its shareholders of all or any part of the company's assets; (b) catches any distribution to shareholders of debentures, debenture-stock or deposit certificates in any form, with or without interest, and any distribution to PREFERENCE shareholders of shares by way of bonus, to the extent of accumulated profits whether capitalised or not; (c) catches any distribution on liquidation, to the extent attributable to accumulated profits immediately before liquidation, whether capitalised or not; and (d) catches any distribution on a reduction of capital, to the extent the company possesses accumulated profits which arose after the end of the previous year ending next before 1 April 1933, whether capitalised or not.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.