AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 840
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....itions so made on account deemed dividend under clause e of sub section 22 of section 02 amounting to Rs. 76,73,718/- is unjust and inappropriate. The additions so made be deleted. Just and proper relief be granted. 2. Without prejudice to ground no. 1 the additions so made on account of deemed dividend under clause e of sub-section 22 of section 02 be calculated on the net debit balance which should be done after cumulatively taking into consideration the implied daily interest on the daily balances of current account maintained with the company - AEPL. 3. The appellant prays to be allowed to add, amend, modify, rectify, delete, and raise any grounds of appeal at the time of hearing." 5. Facts of the case, in brief, are that the assessee is an individual and director of M/s. Ajinkya Electromelt Private Limited, M/s Shraddha Ispat Private Limited, M/s. Indrayani Ferrocost Private Limited and M/s. 'C' Cure Building Products Pvt. Ltd. The assessee is deriving income as salary from above companies, income from partnership firm, income from capital gains and income from other sources. Return of income was furnished u/s 139(1) of the IT act on 08.03.2022 declari....
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....ny and was advancing money to the company as and when required by the company. The appellant has stated that on most of the days of the year, there was a net credit balance and it is only for few days, the said debit balance occurred. The appellant has further stated that during the covid pandemic, there was a disruption in the business operation of the company and it was not getting new orders from the customers. As a result, the company had unutilized surplus funds which were temporarily given to the appellant for a short period. The appellant has not been benefitted from said transaction, Since the net debit balance in the appellant's account maintained by the company was only for a short period, no income u/s. 2(22)(e) is taxable as held by Hon'ble ITAT, Chennai Bench in the case of Venkatachalam Mohan 155 taxmann.com 648 (Chennai Trib.). 7. A perusal of the said decision of the Hon'ble ITAT, Chennai Bench suggests that in this case, the debit balance occurred due to inadvertent errors and the said payment to the assessee was on account of debt owed to assessee's mother, showing a credit balance in her ledger account. However, in the present case, there....
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....he factual conditions for raising the statutory fiction created by sections 2(6A)(e) and 12(1B) of 1922 Act appeared to have been satisfied in the instant case. As the taxability of an income is related to its receipt or accrual in the previous year, the moment a dividend is received, whether it is actual dividend declared by the company or is a deemed dividend, income taxable under the residuary head, 'income from other sources', arises. The charge being on accrual or receipt the statutory fiction created by section 2(6A)(e) of 1922 Act and section 12(1B) of 1922 Act would come into operation at the time of the payment by way of advance or loan, provided the other conditions are satisfied. For the foregoing reasons, it could be said that payment by a company not being a company in which the public were substantially interested within the meaning of section 23A of 1922 Act, of any sum by way of advance or loan to a shareholder, not exceeding the accumulated profits possessed by the company was to be deemed as his dividend under section 2(6A)(e) read with section 12(1B) of the 1922 Act, even if that advance or loan was subsequently repaid in its entirety du....
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....rew the aforesaid amounts from the company. 9. Further, the Hon'ble Supreme Court in the case of Smt. Tarulata Shyam vs. CIT 108 ITR 345 (SC) has observed as under:- Firstly, it is important to note that the Parliament has itself in the exercise of its legislative judgment raised a conclusive presumption, that in all cases where loans are advanced to a shareholder in a private limited company having accumulated profits, the advances should be deemed to be the dividend income of the shareholder. It is this presumption juris et 10. The above discussion suggests that if other conditions as provided u/s. 2(22)(e) of the Act are satisfied and the money withdrawn by the shareholder is in the nature of loan or advance, the provisions of section 2(22)(e) kicks in as soon as the money is withdrawn by the shareholder from the company. The duration for which the money remains with the shareholder is immaterial. Further, it is also immaterial whether the shareholder derived any profit from the said money withdrawn from the company. Considering the facts of the case and the above judgements of Hon'ble Supreme Court, it is held that the provisions of section 2(....
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....o confirmed by Ld. CIT(A). 9. With regard to two grounds raised by the assessee before the bench, we find that similar grounds were raised before Ld. CIT(A) & regarding ground no.1 the order passed by Ld. CIT(A) is justified and we do not find any error in the above order passed by Ld. CIT(A), accordingly the same is confirmed and ground no.1 raised by the assessee is dismissed. However, we find that with regard to ground no.2, the finding given by Ld. CIT(A) does not appear to be correct. Ld. CIT(A) rejected the above ground on the basis that TDS on interest payment was made in the last Quarter of the year, therefore the benefit of accrued interest cannot be allowed for any earlier period. We do not find favour with the above finding given by Ld. CIT(A) since it was the alternate contention of Ld. counsel of the assessee in ground no.2 that there was net debit balance of Rs. 76,73,718/- only for a period of 8 days and for remaining period there was always credit balance in the name of the assessee in the books of M/s Ajinkya Electromelt Pvt. Ltd. on which the assessee was paid interest by the above company. In this regard, it was contended that the benefit of accrued interest o....