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Interpretation of the definition of "dividend" under section 2(6A)(e) of the Act in a case involving a private limited company receiving funds from another company, determination of whether a temporary advance or loan can be considered as dividend, and application of exceptions under the definition. Analysis: The judgment pertains to the assessment year 1957-58 involving an assessee, a private limited company managing other companies, receiving funds from a trust company. The key question was whether the received amount could be treated as a dividend under section 2(6A)(e) of the Act. The Income-tax Officer initially treated the outstanding amount as dividend, a decision upheld by the Appellate Assistant Commissioner and the Tribunal. The definition of "dividend" under section 2(6A)(e) includes payments by a company to a shareholder by way of advance or loan, subject to certain conditions. The court analyzed the nature of the transactions between the assessee and the trust company, focusing on the temporary nature of the funds received and repaid within a short period. The court considered whether a temporary advance or loan could fall within the definition of "dividend" and examined the legislative intent behind the inclusion of such transactions. The court also discussed the exceptions under the definition, particularly sub-clause (ii), which exempts loans made in the ordinary course of business where money-lending is a substantial part of the company's activities. In this case, it was found that the trust company's lending activities were not established as a substantial part of its business, disqualifying the assessee from claiming the exception. Ultimately, the court affirmed the Tribunal's decision, holding that the sum received by the assessee should be treated as dividend income for the relevant assessment year. The judgment emphasized the legislative intent behind the definition of "dividend" and the specific conditions that need to be met for transactions to qualify as such. The assessee was directed to bear the costs of the revenue, and the question was answered in the affirmative.
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