2014 (12) TMI 442

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....sessing Officer made an addition of Rs. 12,50,455.00 to the total income of the assessee treating it to be a deemed dividend within the meaning of Section 2 (22) (e) of the Act. In appeal, the Commissioner (Appeals), by an order dated 29 March 2011, deleted the addition. An appeal was filed by the Revenue before the Tribunal. The Tribunal allowed the appeal by its judgment dated 29 November 2013. The assessee thereafter moved this Court under Section 260A of the Act. By a judgment dated 17 April 2014 in Kishori Lal Agrawal v Commissioner of Income Tax (2014) 364 ITR 158 (All), a Division Bench of this Court restored the proceedings back to the Tribunal with the following observations: "...The first ingredient of exclusionary clause (ii) of....

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....ing loan, which forms substantial part of the business of the lending company and hence leading to the conclusion that the case is covered under exception clause (ii) to Section 2 (22) (e) of the Act." The assessee, in the present case, held more than 10% of the shareholding of two private limited companies, namely Kukki Color Photos Pvt. Ltd. and Kukki Color Prints Pvt. Ltd. The assessee had received loans and advances from the aforesaid two companies during the assessment year in question. The issue was, whether the exclusionary provision contained in Section 2 (22) (e) of the Act was attracted. Section 2 (22) (e) of the Act, insofar as is material, defines the expression 'dividend' as follows: "2 (22) (e). any payment by a com....

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....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 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. However, the exclusionary clause (ii), operates to exclude any advance or loan made to a shareholder or to the said concern by a company in certain cases. Within the purview of the exclusionary provision, the advance or loan must be, firstly, to a shareholder; secondly, the payment must be in the ordinary course of business; and thirdly, the lending of money must constitute a substantial part of the business of the company. What con....