TaxTMI 
TaxTMI 
2011 (8) TMI 16
X X X X Extracts X X X X
X X X X Extracts X X X X
....present appeal arises out of the assessment for the Assessment Year 1999-2000 for which the relevant previous year was the Financial Year ending March 31, 1999. b) The appellant has substantial shareholding in a private company called Sumoson Exports (P) Ltd. The appellant has his immovable property being plot No.22, Sector XIV, Gurgaon, Haryana which was let out to the said company on monthly rent. In the year 1987, the appellant permitted the company to provide the said property which was of substantial value, as collateral security to Vijaya Bank in order to enable the said company to obtain loan from the said bank. c) Consequently, the property was mortgaged to the bank and in December, 1987, the Board of Directors of the company passed a resolution authorizing the appellant to obtain from the company interest-free deposit up to Rs.50,00,000/- as and when required for making available the said property as collateral security to the bank for the loan facility enjoyed by the company. d) According to the appellant, he required funds for his personal needs and security including education of his son abroad. During the Financial Year 1997-98 relevant to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ious year relevant to Assessment Year 1999-2000, the appellant obtained from the said company a sum of Rs.20,75,000/- by way of security deposit. Out of the said amount, a sum of Rs.20,00,000/- was subsequently returned by the appellant to the said company in the Financial Year 2001-2002. j) According to the appellant, in the assessment made on September 18, 2001 for the Assessment Year 1999-2000, the Assessing Officer added the said sum of Rs.20,75,000/- as deemed dividend under Section 2(22)(e) by not following the decision of the Commissioner of Incometax (Appeals) dated June 9, 2000 for the Assessment Year 1988-99 on the ground that the department was in appeal against the same before the Tribunal. k) Being dissatisfied, the appellant preferred an appeal before the Commissioner of Income-tax (Appeals) who by an order dated December 19, 2001 following the appellate order dated June 9, 2000 for the Assessment Year 1998-99 deleted the said addition of Rs.20,75,000/-. l) Being dissatisfied, the Revenue preferred an appeal before the Tribunal and the Bench of the Tribunal observed that since the Commissioner of Income-tax (Appeals) in the Assessment Yea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as dividend under section 2(22)(e) of the Income Tax Act, 1961 without granting any opportunity to the appellant to make his submissions on merits and without considering the documents placed on record by him in the Paper Book. "(ii) Whether on a true and proper interpretation of section 2(22)(e) of the Income Tax Act, 1961 the Tribunal was justified in law in holding that the sum of Rs.20,75,000/- received by the appellant from M/s. Sumoson Exports (P) Ltd., because the appellant's valuable immovable property was mortgaged with the bank as security for the loan facility enjoyed by the said company, was loan/advance/dividend to a shareholder within the meaning of the said section and the purported findings of the Tribunal in that behalf are arbitrary, unreasonable and perverse having been arrived at by ignoring the documents in the Paper Book before the Tribunal. "(iii) In the event the answer to Question no.(ii) is in the affirmative, whether, and in any event, having regard to the provisions of sections 10(3) and 115-O of the Income Tax Act, 1961, the appellant was liable for any tax on the said sum of Rs.20,75,000/-." 5. At the very outset, Mr. Khai....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits, whether capitalised or not; (c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not; (d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not; (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place. Explanation 3.-For the purposes of this clause,- (a) "concern" means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company; (b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern;" (Emphasis supplied by us). 10. After hearing the learned Counsel for the parties and after going through the aforesaid provisions of the Act, we are of the opinion that the phrase "by way of advance or loan" appearing in sub-section (e) must be construed to mean those advances or loans which a share holder enjoys for simply on account of being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of ....