TaxTMI 
TaxTMI 
2011 (9) TMI 363
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.... (hereinafter referred to as the A & A Periodicals). The paid up share capital of A & A Periodicals was 50,2000/- [50,200 shares of Rs. 10 each]. The assessee was holding 50% shares in this company and remaining 50% shares were held by Smt. Sunita Jain. The AO further found that in the books of accounts the assessee had shown taking unsecured loan of Rs. 47,23,5318/- from A & A Periodicals. The assessee being 50% shareholder in the said company, the aforesaid purported loan received by the assessee was treated as "deemed dividend" under Section 2 (22) (e) of the Act. 2. We may note that explanation furnished by the assessee was that the aforesaid amount was not a loan and in fact there was a business transaction between the assessee and ....
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.... shown to the Tribunal as well that all the transactions between the two entities are recorded in the current account maintained by the parties and outstanding in the said account was merely because of the trade transaction and did not represent any advance or loan. 4. It is not in dispute that Section 2 (22) (e) of the Act creates a fiction of making such loan and advance under circumstances, as deemed dividend, would be attracted only when some loan or advance is given by the company to another person who is having particular shareholding in the said company. However, in the present case, two authorities below have arrived at a finding of fact that the amount in question represented the credit balance as a result of transactions betwee....
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....at these payments must be to the extent of accumulated profits, possessed by such a company." x x x x x Therefore, if the said background is kept in mind, it is clear that Sub-clause (e) of Section 2(22) of the Act, which is pari-materia with Clause (e) of Section 2(6A) of the 1922 Act, plainly seeks to bring within the tax net accumulated profits which are distributed by closely held companies to its shareholders in the form of loans. The purpose being that persons who manage such closely held companies should not arrange their affairs in a manner that they assist the shareholders in avoiding the payment of taxes by having these companies pay or distribute, what would legitimately be dividend in the hands of the shareholders, money i....
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....ound that the paper manufactured by the assessee was "coated paper' to which as per the proviso to the said notification the concession was not available. The Supreme Court in coming to the conclusion that the assessee's case did not fall within the proviso and was thus entitled to the benefit of the notification applied the rule of construction of noscitur a sociis. Importantly, the broad principles which emerge from the judgment of the Supreme Court with regard to the applicability of the said rule of construction are briefly as follows: (i) does the term in issue have more than one meaning attributed to it i.e., based on the setting or the context one could apply the narrower or wider meaning; (ii) are words or terms used found ....