1981 (1) TMI 46 - HC - Income Tax

Summary

Issues:
1. Assessment of deemed dividend income under section 2(22)(e) of the Income-tax Act, 1961 in the hands of the assessee-Hindu undivided family for assessment years 1964-65 and 1966-67.
2. Determination of deemed dividend under section 2(22)(e) in the accounting year of the Hindu undivided family versus the company's accounting year.

Analysis:
The High Court of Rajasthan addressed two key questions referred by the Income-tax Appellate Tribunal regarding the assessment of deemed dividend income under section 2(22)(e) of the Income-tax Act, 1961. The first issue revolved around whether the sums of Rs. 50,293 and Rs. 97,077 were correctly held as assessable in the hands of the assessee-Hindu undivided family for the assessment years 1964-65 and 1966-67, respectively. The Tribunal based its decision on the fact that the amounts were received by the Hindu undivided family from companies where the shares were registered in the name of the karta, Shri Harish Chandra Golecha. The court considered relevant precedents and ultimately ruled in favor of the assessee, stating that the provisions of section 2(22)(e) were not applicable to the loans advanced to the Hindu undivided family.

Regarding the second issue, the Tribunal had to determine whether the accounting year of the Hindu undivided family or the company should be considered to ascertain the deemed dividend under section 2(22)(e). The court cited authoritative pronouncements by the Supreme Court, emphasizing that the loan advanced by the companies to the Hindu undivided family did not fall within the scope of section 2(22)(e) based on the legal interpretation provided by the Supreme Court in previous cases. Consequently, the court ruled against the department's contentions and held that the provisions of section 2(22)(e) were not applicable to the transactions in question.

In conclusion, the High Court's judgment clarified the application of section 2(22)(e) of the Income-tax Act, 1961 in the context of deemed dividend income received by a Hindu undivided family. By referencing relevant legal precedents and the Supreme Court's interpretations, the court determined that the loans received by the family from the companies did not constitute deemed dividends under the law. The judgment provided a definitive answer to the questions raised by the Tribunal, resolving the matter in favor of the assessee.