TaxTMI 
TaxTMI 
2016 (5) TMI 1269
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....appeal, the Tribunal noted that the assessee was one of the directors of M/s.Charan Life Devices Pvt. Ltd which did not have any landed property or building of its own; the company was facing hurdles in obtaining loans and financial assistance from banks and other financial institutions to conduct their business; the directors had mortgaged their personal properties to enable the company to obtain cash credit facilities/term loans from banks and financial institutions; this process continued from the inception; the directors desired to change this process, and decided to transfer their personal assets in favour of the company to obviate such a situation in future; the company had faced serious problems when they had earlier applied for loan....
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....arlier; it is in such circumstances that they had decided to transfer their personal assets to the company, and had entered into an agreement of sale; it is only if there is a beneficial transfer to the shareholders/directors, can a loan or advance be considered as deemed dividend; in the present case, the advance paid was not for the benefit of the shareholders; and as it was a non-gratuitous advance, for the purpose of the company's business, it could not be treated as deemed dividend. Sri J.V. Prasad, learned Senior Standing Counsel for Income Tax, would submit that any advance by the company, in which the public has no substantial interest, to a shareholder, being a person who is the beneficial owner of the shares, would fall within ....
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.... 476 (DELHI). In Creative Dyeing and Printing P. Ltd. (2009) 318 ITR 476 (DELHI), a Division Bench of the Delhi High Court held that Section 2(22)(e) of the Act can be applied to 'loans' or 'advances' simpliciter, and not to those transactions carried out in the course of business as such; in the course of business transactions between a company and a stockholder, the company may be required to give advance in mutual interest; there is no legal bar in having such transactions; what is to be ascertained is the purpose of such a transaction; if the amount is given as an advance simpliciter, without any further obligation behind receiving such an advance, it may be treated as 'deemed dividend'; if it is otherwise, the amount given cannot be....
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....ee-director, to the company was to enable the latter to secure loans from banks. It is evident from the material placed on record that even earlier the assessee, as a director of the Company, had mortgaged their personal property to enable the company to obtain loans from banks/financial institutions. It is evident, therefore, that the advance received by the assessee, for sale of the subject property in favour of the company, was in the normal course of business; and it was a transaction in the interests of the company to enable it to offer the said building as security for the loan to be obtained from banks/financial institutions. As held by the Delhi High Court, in Creative Dyeing and Printing P. Ltd. (2009) 318 ITR 476 (DELHI), it is....