TaxTMI 
TaxTMI 
1997 (12) TMI 1
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....lant had a running account with the company. At the material time she did not have any credit balance in her account with the company. This excess withdrawal was treated by the Income-tax Officer as deemed dividend under section 2(22)(e) of the Income-tax Act on two grounds : (1) The assessee had no credit balance in her account with the said company at the material time ; and (2) that there was sufficient accumulated profits of the company from which the excess withdrawal was made by the assessee. The Income-tax Officer included this amount of Rs. 93,027 in the computation of the appellant's income. The assessee's appeal to the Appellate Assistant Commissioner was dismissed. However, on further appeal, the Tribunal upheld the case of the a....
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....the accounting period for the relevant assessment year 1973-74 was April 1, 1972, to March 31, 1973. The assessee was a substantial shareholder of the company and was drawing funds from the company till March 22, 1973. As a result of various withdrawals made by the assessee, her credit balance had been entirely wiped out and in fact her account with the company showed excess withdrawal of a sum of Rs. 1,831.14 as on March 22, 1973. In spite of this debit balance, the assessee between July 3, 1972, and March 22, 1973, on fourteen different dates withdrew a total sum of Rs. 93,027. The particulars of the withdrawals are as under : (Rs.) " 3-7-1972 1,831.14 (excess withdrawal) 3-8-1972 5,000.00 2-9-1972 5,000.00 12-9-1972 7,99....
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....here is no dispute that the appellant had a substantial interest in the company. The nature of the company is also not in dispute. From the facts as stated hereinabove, it appears that the withdrawals made by the appellant from the company amounted to grant of loan or advance by the company to the shareholder. The legal fiction came into play as soon as the monies were paid by the company to the appellant. The assessee must be deemed to have received dividends on the dates on which she withdrew the aforesaid amounts of money from the company. The loan or advance taken from the company may have been ultimately repaid or adjusted, but that will not alter the fact that the assessee, in the eye of law, had received dividend from the company du....