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Issues:
Interpretation of section 2(6A)(e) of the Indian Income-tax Act, 1922 regarding advances made by a company to a shareholder, determination of whether the advances constitute dividend income or a loan, consideration of whether the company's business activities primarily involved money-lending. Analysis: The case involved the interpretation of section 2(6A)(e) of the Indian Income-tax Act, 1922, regarding advances made by a company to a shareholder. The Tribunal referred three questions for the opinion of the High Court, including whether the advances made by the company to the assessee should be treated as dividend income or a loan. The company in question transitioned from running a knitting factory to solely engaging in money-lending activities. The assessee, a shareholder in the company, claimed that the advances should be considered a loan from accumulated profits, not dividend income. The Income-tax Officer and the Appellate Assistant Commissioner deemed the advances as dividend income, while the Appellate Tribunal considered them as a loan. The High Court examined the facts and determined that the company had accumulated profits and primarily engaged in money-lending activities during the relevant assessment year. The Tribunal concluded that the advances to the assessee should be treated as a loan, not dividend income, in accordance with section 2(6A)(e)(iii) of the Act. The Tribunal's decision was based on the company's business activities and the available records. As a result, the High Court answered the first question in favor of the assessee and against the Department. The second question did not arise from the Tribunal's order, and the third question was also answered against the Department. No costs were awarded in the judgment.
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