TaxTMI 
TaxTMI 
2006 (4) TMI 190
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.... in its return filed on 24th Oct., 2001 by declaring deduction of Rs. 82,300 under s. 80HHC. M/s Ariel Exports (p) Ltd. advanced money to the assessee and there was credit balance in the account of M/s Ariel Exports (P) Ltd. in the books of M/s Lakra Bros., i.e., the assessee, for the substantial period. The details of advance and the account of M/s Ariel Exports (P) Ltd. in the books of assessee-firm is as under: Date Particulars Debit Credit Balance 1-4-2000 To balance b/f: 10,000 Dr. 10,000 4-8-2000 To Cheque No. 054517 paid to Satyam Infoways 5,000 Dr. 15,000 12-9-2000 To Cheque No. 54687 for Adv. Tax 12,000 Dr. 27,000 13-9-2000 To Cheque No. 54687 dt. 13-9-2000 50,000 Dr. 77,000 25-9-2000 By Cheque No. 54688 dt. 13-9-2000 7,00,000 Cr. 6,23,000 30-9-2000 To Cheque No. 103855 dt. 30-9-2000 3,00,000 Cr. 9,23,000 4-10-2000 To Bill No. 929 dt. 4-10-2000 Wt. 665-630 1,06,501 Cr. 8,16,499 4-10-2000 To Bill No. 930 dt. 4-10-2000 Wt. 661-230 1,05,797 Cr. 7,10,702 9-10-2000 By Cheque No. 10355....
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....xplain as to why payment of Rs. 17,09,299 advanced by M/s Ariel Exports (P) Ltd. be considered for addition under s. 2(22)(e) of the Act. The AO added back Rs. 17,09,299 to the income of the assessee and the taxable income was computed at Rs. 27,08,425. The order was successfully carried in appeal before the learned CIT(A). Now, the Revenue is aggrieved and is in appeal before the Tribunal. 5. During arguments, we have heard Smt. Sukhwinder Khanna, learned senior Departmental Representative and Shri Sudhir Sehgal, learned counsel for the assessee. The major plea of the learned Departmental Representative is that M/s Ariel Exports (P) Ltd. is the sister-concern of the assessee and dividend includes "any payment by a company, not being a company in which the public are substantially interested or any sum made after 31st of May, 1997 by way of advance or loan to a shareholder being a person who is the beneficial owner of shares". Our attention was also invited to the conditions laid down under s. 2(22)(e) of the Act. In nutshell, the order of the learned AO was supported. On the other hand, the major plea of the learned counsel for the assessee is that no discrepancy whatsoever ....
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....terested or any sum (whether as representing a part of the assets of the company or otherwise) made after 31st day of May, 1987, by way of advance or loan to a shareholder being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits." 7. Sub-cl. (e) of s. 2(22) shows that for the purpose of the Act any payment made by a company of any sum of money by way of advance or loan to its shareholder is deemed to be a dividend since the Act has not provided for any other definition of the word "dividend" except the words enumerated in s. 2(22), it should be construed that this definition would be applicable to all provisions which contains the term dividend in the Act. Distribution ....
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....for which certain advances were taken from the assessee-company and various products were exhibited at Hotel Taj Palace, New Delhi. Undisputedly, the exhibition took place as per the schedule and thereafter the dealers were in the process of being appointed but during that period Sh. Ashok Singhania, managing director of M/s Madhav Mktg. (P) Ltd. died as is mentioned in para 5, p. 12 of the paper book. In the next para of the said letter, there is a mention of certain payments like Rs. 2 lakhs as security with M/s Ariel Exports (P) Ltd. on 7th Feb., 2001 vide Cheque No. 873038, Rs. 1.60 lakhs vide Cheque No. 017549 on 14th Feb., 2001 and Rs. 3.40 lakhs vide Cheque No. 873039 on 15th Feb., 2001. Our attention was also invited to the account of M/s Ariel Exports (P) Ltd. which is available at pp. 15 and 16 of the paper book and on 1st April, 2001 the opening balance was Rs. 5,99,383. The assessee also furnished the photocopies of certain photographs in the paper book which are available at pp. 26 to 31 in which there is a mention of demand of C&F agents and distributors in India. 11. The Hon'ble apex Court in the case of Bombay Steam Navigation Company (P) Ltd. vs. CIT (1965) ....
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....ly interested. (ii) The second condition is that the loan was advanced to a shareholder at the date when the loan was advanced; (iii) The third condition is that the loan advanced to a shareholder by such a company can be deemed to be dividend only to the extent to which it is shown that the company possessed accumulated profit on the date of the loan; (iv) The fourth condition is that the loan must not have been advanced by the company in the ordinary course of its business. The learned CIT(A) concluded that the AO stretched the definition of s. 2(22)(e) to include even legitimate transactions carried out in the ordinary course of business where the intention is neither to give a loan or advance or to confer some individual benefit on the shareholders. The important words in the section are loan or advance and for the individual benefit of such shareholders. The loan is something different from debt. For a loan there must be a lender, borrower as well as a contract/agreement between the parties for the return of the loan amount. Every sale of goods on credit does not amount to a transaction of loan. Reliance can be placed on the decision of Hon&....