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<h1>Court deems advances to shareholder as dividends under Income-tax Act, upholding Revenue decision.</h1> The court upheld the decision of the Appellate Tribunal, ruling in favor of the Revenue and against the assessee. It found that the advances made by the ... Deemed Dividend, Dividends, HUF Issues:Interpretation of section 2(6A)(e) of the Indian Income-tax Act, 1922 regarding deemed dividend for advances made by a company to a Hindu undivided family shareholder.Analysis:The case involved a question of law referred by the Income-tax Appellate Tribunal regarding the applicability of section 2(6A)(e) of the Indian Income-tax Act, 1922 to advances made by a company to a Hindu undivided family shareholder. The assessee, a Hindu undivided family, was a shareholder in a company, and the Income-tax Officer treated certain debits in the family's account with the company as deemed dividend under section 2(6A)(e). The Commissioner of Income-tax (Appeals) held that only a portion of the accumulated profits should be considered for this purpose. The Revenue contended that advances made in earlier years should not reduce the accumulated profits, but the Appellate Tribunal disagreed. The Tribunal found that the Hindu undivided family was the shareholder in the company, not the 'karta,' and the loans and advances were made to the family, leading to the application of section 2(6A)(e).The Appellate Tribunal's decision was based on the fact that the Hindu undivided family was the shareholder in the company, applied for shares, received dividends, and received the loans and advances. As the shareholder, the family was subject to section 2(6A)(e) of the Income-tax Act. The court noted that the Tribunal's findings established that the loans and advances were made to the Hindu undivided family, which was the assessee in this case. The court agreed with the Tribunal's interpretation of the law and upheld the decision that section 2(6A)(e) was applicable in this situation. As a result, the question referred to the court was answered in the affirmative, in favor of the Revenue and against the assessee.In conclusion, the court affirmed the decision of the Appellate Tribunal, finding that the advances made by the company to the Hindu undivided family shareholder fell under the purview of section 2(6A)(e) of the Indian Income-tax Act, 1922. The court's ruling favored the Revenue, emphasizing that the loans and advances were made to the family, which was the shareholder in the company, leading to the application of the deemed dividend provision. The judgment was forwarded to the Income-tax Appellate Tribunal for further action.
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