14% Redemption of Cumulative Non- Convertible Redeemable Preference Shares (CNCRPS) - Conversion of dividend terms into compounding effect with 75% shareholders approval - Taxability of excess amount as dividend in hands of recipient company

Facts:

Assessee was subscriber to CNCRPS of one private limited company JEPL. As part of the issue document of CNCRPS the dividend terms were changed into compounding basis of 14% as the redemption period shrank by 5.5 years ahead from their original term of 20 years which was done after securing 75% shareholders approval. The excess amount on redemption which was the cumulative compounded dividend received by the assessee was taxed as dividend despite DDT being paid by JEPL under section 115-O. Assessees claim was it was exempt under section 10(34). CIT(A) concurred with assessee. On higher appeal by revenue -

Held against the revenue that the addition was uncalled for.

Case: ACIT v. Earth Stone Holding (Two) (P) Ltd. 2023 TaxPub(DT) 6215 (Del-Trib)