TaxTMI 
TaxTMI 
2015 (11) TMI 733
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....disclosed source of income in the total income of the petitioner." 2. In ground Nos.1 and 2, the assessee has challenged the action of the learned Commissioner of Income-tax( Appeals)[in short „CIT(A)‟] in confirming the addition of the „deemed dividend‟ of Rs. 6,36,117/- under section 2(22)(e) of the Income Tax Act, 1961 (in short „the Act‟) made by the learned Assessing Officer( in short „ld. AO‟). In ground No.3, the assessee has agitated confirming the addition of Rs. 80,000/- against low house withdrawals. 3. The facts in brief are that the assessee is an individual and during the year under consideration shown income under heads "income from salary", "profit and gains of business", "capital gains" and "income from other sources". The assessee filed its return of income on 31.03.2009 declaring total income of Rs. 1,29,570/-. The case was selected for scrutiny under Computerised Assisted Selection of Scrutiny (CASS). The assessee was director of the Company i.e. M/s. CASCO Electronics Pvt. Ltd. (in short „company‟) at the beginning of the year i.e. on 1st April 2007 and was holding 1,22,500 equity shares in the comp....
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....the ld. CIT(A) and relying on the judgement of the Hon‟ble Kerala High Court in the case Smt S. P. Ammal reported in 87 Taxman 370 pleaded that the loan / advance received by the assessee from the company was not liable for considering as deemed dividend. The ld. CIT(A) distinguished the facts of case cited by the assessee and confirmed the action of the ld. AO in considering the advance as deemed dividend limited to Rs. 6,36,117/- and also confirmed the addition of Rs. 80,000/- made by the ld. AO against the low household withdrawals. Aggrieved, the assessee is before us. 4. At the time of hearing, learned authorized representative (in short „ld. AR‟) filed written submissions and paper book containing Page 1 to 86 and advanced arguments on both the grounds. In his written submissions, he has stated the facts in respect of the addition of deemed dividend and then submitted that money advanced by the company if at all to be considered as deemed dividend, then, advance outstanding as on the date, the assessee sold his share holding having voting power of more than 10 %, should only be considered as deemed dividend. Further, he relied on the judgement of the Hon....
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........................... (c) ............................... (d)................................ (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 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." 8. From the plane reading of the section, we find that any payment whether it is loan or advance falls into the category of deemed dividend must fulfill the three conditions mentioned above. If any loan or advance by the company to the assessee fails....
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....to be understood as submitted in accordance with the provisions thereof and in the process of consideration of the situation on the basis of probabilities, again in the absence of any material to show that there was any defect in the matter of applications, we will also have to proceed with the steps in the process of transfer are without any legal difficulty or impediment in regard thereto" 9. The ld. AR in his submission has also relied on the decision of the ITAT, Delhi „C‟ Bench in the case of Victor Aluminum Industries (P) Ltd. Vs. ACIT (2006) 9 SOT 197 wherein it is held that "evidence on record showing that assessee company's director 'P' held 33.33 per cent shareholding in company „O' as on 1st April, 1997, and 4.84 per cent on 4th April, 1997, loan obtained by assessee from 'O' as on 1st April, 1997, would be deemed dividend under s. 2(22) (e) but loan obtained thereafter will not be so treated." 10. From the above judicial pronouncements, it is ample clear that, for qualifying any loan or advance as deemed dividend, it must fulfill all the conditions of the section 2(22)(e) of the Act, on the date of such loan or advance received by that person. The....
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....3. The said share transfer form is filed in the office of the Registrar of Companies on 27.07.2007, so the date of transfer should be taken as 27.07.2007, however, the assessee in its submission has mentioned the date of share transfer deed as 30.07.2007, So even if we taken 30.07.2007 as date of transfer of shares, it does not make any material difference in present case. After careful consideration of all the documentary evidence submitted before us and the precedents relied upon by the ld AR, we are of the considered opinion that finding of the AO and the ld CIT(A) as regards to considering the advance of Rs. 9.83 lakhs as deemed dividend , is not based on the correct appreciation of the law as well as facts and therefore, we hold that the loans/ advances given by the company to the assessee during the year under consideration till the date of sale of shares by the assessee, should only be considered for deemed dividend. Accordingly, we remit the matter back to the file of the AO and direct the AO to compute the loan/ advances given by the company till the date of sale of shares by the assessee as deemed dividend, subject the availability of accumulated profit of the company. 1....