Higher authority upholds computation under section 2(22)(e), treating only Rs.28,500 and Rs.10,000 as deemed dividend

HC upheld the Tribunal's computation under section 2(22)(e), finding that only specific payments-Rs. 28,500 (AY 1968-69) and Rs. 10,000 (AY 1969-70)-constituted advances/payments within the provision and could be treated as deemed dividend to the extent of accumulated profits. The Department did not dispute the Tribunal's factual finding; consequently the HC affirmed the Tribunal's restriction to those sums and ruled in favour of the assessee.

---

---

Issues involved: Interpretation of section 2(22)(e) of the Income-tax Act regarding the computation of 'dividend' based on cash transactions only.

Summary:

The High Court of BOMBAY considered a case where the Department questioned the Tribunal's computation of 'dividend' u/s 2(22)(e) based on cash transactions only. The assessee, a shareholder in a company, received cash payments from the company, leading to a dispute on whether these payments constituted deemed dividend income. The Income-tax Officer deemed the payments as dividend income, which was reduced by the Appellate Assistant Commissioner. The Tribunal, after reviewing the account details, concluded that only specific amounts represented payments or advances within the scope of section 2(22)(e).

The Tribunal's finding, which was not disputed by the Department's counsel, highlighted that only payments or advances up to the extent of accumulated profits could be treated as loans or advances u/s 2(22)(e). Consequently, the Tribunal's decision to consider only certain amounts as deemed dividend income was upheld by the High Court. The judgment favored the assessee, affirming the Tribunal's interpretation of the law.

---