Section 2(22)(d)

Section 2(22)(d) — the law in short

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

• CIT v G. Narasimhan Supreme CourtCuts both ways
  My company reduced its share capital and paid me cash and property for the reduction. Is that dividend, capital gains, or both?
  Both, in that order. The Supreme Court held that what a company distributes on a reduction of capital splits into two components. So much as can be correlated with its accumulated profits, capitalised or not, is deemed dividend under section 2(22)(d) and is taxed as income. Only the excess over accumulated profits is a capital receipt, from which the cost of acquiring the extinguished portion of the shareholding is deducted to find any capital gain. The Court also held that a loan already taxed as deemed dividend under section 2(22)(e) reduces the company's accumulated profits.
• Cognizant Technology Solutions India P Ltd v ACIT ITATHelps departmentUnder appeal
  We repurchased shares through a court-approved scheme. Can the department still call it a dividend?
  On these facts, yes. The Chennai Tribunal held the repurchase was a colourable device — in substance a reduction of capital releasing the company's assets to shareholders — taxable as deemed dividend under s.2(22)(d), alternatively s.2(22)(a), with dividend distribution tax under s.115-O payable by the company. The High Court's sanction of the scheme conferred no tax immunity.

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.