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TMI Blog2006 (4) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 82,300 under s. 80HHC. M/s Ariel Exports (p) Ltd. advanced money to the assessee and there was credit balance in the account of M/s Ariel Exports (P) Ltd. in the books of M/s Lakra Bros., i.e., the assessee, for the substantial period. The details of advance and the account of M/s Ariel Exports (P) Ltd. in the books of assessee-firm is as under: Date Particulars Debit Credit Balance 1-4-2000 To balance b/f: 10,000 Dr. 10,000 4-8-2000 To Cheque No. 054517 paid to Satyam Infoways 5,000 Dr. 15,000 12-9-2000 To Cheque No. 54687 for Adv. Tax 12,000 Dr. 27,000 13-9-2000 To Cheque No. 54687 dt. 13-9-2000 50,000 Dr. 77,000 25-9-2000 By Cheque No. 54688 dt. 13-9-2000 7,00,000 Cr. 6,23,000 30-9-2000 To Cheque No. 103855 dt. 30-9-2000 3,00,000 Cr. 9,23,000 4-10-2000 To Bill No. 929 dt. 4-10-2000 Wt. 665-630 1,06,501 Cr. 8,16,499 4-10-2000 To Bill No. 930 dt. 4-10-2000 Wt. 661-230 1,05,797 Cr. 7,10,702 9-10-2000 By Cheque No. 103558 dt. 9-10-2000 2,48,000 Cr. 8,98,702 16-10-2000 To Draft No. 025789 to Taj Hotel 60,000 Cr. 8,98,702 17-10-2000 To Bill No. 981 dt. 17-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in appeal before the Tribunal. 5. During arguments, we have heard Smt. Sukhwinder Khanna, learned senior Departmental Representative and Shri Sudhir Sehgal, learned counsel for the assessee. The major plea of the learned Departmental Representative is that M/s Ariel Exports (P) Ltd. is the sister-concern of the assessee and dividend includes "any payment by a company, not being a company in which the public are substantially interested or any sum made after 31st of May, 1997 by way of advance or loan to a shareholder being a person who is the beneficial owner of shares". Our attention was also invited to the conditions laid down under s. 2(22)(e) of the Act. In nutshell, the order of the learned AO was supported. On the other hand, the major plea of the learned counsel for the assessee is that no discrepancy whatsoever was found by the Revenue in books of account of the assessee. Our attention was invited to various pages of the paper book by contending that in the end of the year there is a debit balance. Both the learned counsel relied upon certain judicial pronouncements which we will discuss while concluding the issue. It was also contended by the learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits." 7. Sub-cl. (e) of s. 2(22) shows that for the purpose of the Act any payment made by a company of any sum of money by way of advance or loan to its shareholder is deemed to be a dividend since the Act has not provided for any other definition of the word "dividend" except the words enumerated in s. 2(22), it should be construed that this definition would be applicable to all provisions which contains the term dividend in the Act. Distribution can be physical or constructive. The expression accumulated profits occurring in sub-cl. (e) of s. 2(6A) of 1922 Act [corresponding to s. 2(22)(e) of 1961 Act] was or for the manner in any other clause means profit in the commercial sense and not assessable or taxable profits liable to tax as income under the Act. Sec. 2(22)(e) creates a fiction bringing in amounts paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. 12 of the paper book. In the next para of the said letter, there is a mention of certain payments like Rs. 2 lakhs as security with M/s Ariel Exports (P) Ltd. on 7th Feb., 2001 vide Cheque No. 873038, Rs. 1.60 lakhs vide Cheque No. 017549 on 14th Feb., 2001 and Rs. 3.40 lakhs vide Cheque No. 873039 on 15th Feb., 2001. Our attention was also invited to the account of M/s Ariel Exports (P) Ltd. which is available at pp. 15 and 16 of the paper book and on 1st April, 2001 the opening balance was Rs. 5,99,383. The assessee also furnished the photocopies of certain photographs in the paper book which are available at pp. 26 to 31 in which there is a mention of demand of C&F agents and distributors in India. 11. The Hon'ble apex Court in the case of Bombay Steam Navigation Company (P) Ltd. vs. CIT (1965) 56 ITR 52 (SC) wherein the company taking over asset holding shares for part of price, it was held that the expression "capital" used in s. 10(2)(iii) in the context in which it had occurred meant money and not any other asset. The agreement to pay the balance of consideration due by the purchaser contain any truth give rise to a loan. The Hon'ble Madras High Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the loan must not have been advanced by the company in the ordinary course of its business. The learned CIT(A) concluded that the AO stretched the definition of s. 2(22)(e) to include even legitimate transactions carried out in the ordinary course of business where the intention is neither to give a loan or advance or to confer some individual benefit on the shareholders. The important words in the section are loan or advance and for the individual benefit of such shareholders. The loan is something different from debt. For a loan there must be a lender, borrower as well as a contract/agreement between the parties for the return of the loan amount. Every sale of goods on credit does not amount to a transaction of loan. Reliance can be placed on the decision of Hon'ble High Court of Madhya Pradesh pronounced in the case of Lakhmichand Muchhal vs. CIT (1961) 43 ITR 315 (MP) and also CIT vs. Saurashtra Cement & Chemical Industries Ltd. (1975) 101 ITR 502 (Guj). In the case of assessee, there was a debit balance on account of the advance paid by M/s Ariel Exports (P) Ltd. and this was purely advance during the ordinary course of business for business expediencies. It cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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