TaxTMI 
TaxTMI 
2018 (6) TMI 1235
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....on. The assessee was successful in having this part of the assessment order upturned by the C.I.T. (Appeals). Stand of the assessee is that the said sum did not represent any loan or advance so as to attract the provisions pertaining to deemed dividend. It is the assessee's case that the same formed part of transactions in mutual or current account. Further appeal of the Revenue before the Income Tax Appellate Tribunal was also dismissed. The underlying reason for the decisions of the two statutory appellate fora in favour of the assessee was that the sum received by the assessee was part of transactions recorded in mutual running current account. Both the C.I.T. (Appeals) and Tribunal found that the said sum received by the assessee could not constitute loan attracting the deeming provision contained in Section 2(22)(e) of the 1961 Act. These two appellate authorities thus accepted the stand of the assessee. This Court had admitted the appeal of the Revenue on the following point :- Whether the Tribunal in the decision under appeal, had rightly come to the conclusion that the transactions between the Assessee and the company in which she had 25.24% equity stake were part of a ....
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....oncluded that the payment routed through MKF and MKI was for the benefit of the assessee. This was a finding of fact. It was not perverse. Therefore, the High Court should not have interfered with the said finding. Further, the above two judgments lay down that the concept of deemed dividend under Section 2(22)(e) of the Act postulates two factors, namely, whether payment is a loan and whether on the date of payment there existed "accumulated profits". These two factors have to be correlated. This correlation has been done by the Tribunal coupled with the fact that all withdrawals were debited in the capital account of the firm leading to the debit balance of Rs. 8.18 crores. The High Court has erred in disturbing the findings of fact." The two judgements referred to in this authority are a decision of this Court in the case of Nandalal Kanoria -Vs.- C.I.T. ([1980] 122 I.T.R. (405) and C.I.T. -Vs.- P. K. Badiani ([1970] 76 I.T.R. 369), the latter being a decision of the Bomany High Court. Mr. Bhowmick wants us to invalidate the decision of the Tribunal as well as that of the Commissioner of Income-tax and restore the order of the assessing officer by which the said sum of Rs. 3,....
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....rom such a shareholder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. Thus, for gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of s. 2(22) but not to the cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. " The C.I.T. (Appeals) found the transaction between the assessee and the company to be of the genre dealt with in the case of Pradip Kumar Malhotra (supra) which would not come within the purview of the aforesaid provision. It was held by the C.I. T. (Appeals). "8. I have gone through the submission of the A.R. and the judicial decisions referred to by him. It appears to me that the sum of Rs. 15,76,77,411/- paid by the company to the appellant cannot be considered as distribution of dividend in the form of loans which was the intention of the Legislature behind enacting Sec.2(22)(e) of the I.T.Act. Secondly, it is now well established that the deeming provision should be construed strictly and the meaning of the words "loans or advances" used in Sec.2(22)(e) cannot be extended to other transactio....
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....utual. " [quoted verbatim] In the case of Miss P. Sarada (supra), it has been recorded in the judgement that because of various withdrawals made by the assessee, her credit balance in the company's books had been entirely wiped out and her account with the company showed excess withdrawal. In that perspective, the Hon'ble Supreme Court observed and held :- "In the instant case, excess withdrawals were made by the assessee on various dates between 3.7.1972 to 22.3.1973 when the account of Mahesh has not been debited. The assessee's account was consequently overdrawn. On the very last day of accounting year some adjustment was made but that will not alter the position that the assessee had drawn a total amount of Rs. 93,027 between 3.7.1972 to 22.3.1973 from the company when her account with the company did not have any credit balance at all. That means these advances made by the company to the assessee will have to be treated as deemed dividends paid on the dates when the withdrawals were allowed to be mad. Subsequent adjustment of the account made on the very last day of the accounting year will not alter the position that the assessee had received notional dividends on the....