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TMI Blog2012 (8) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... rements. By virtue of offering personal guarantee and collateral security for the benefit of the company, the liquidity position of the assessee had gone down, thus if it is to be construed the amount forwarded by the company to the assessee was not in the shape of advances or loans. The arrangement between the assessee and the company was merely for the sake of convenience arising out of business expediency. In the facts and circumstances of the case, it is not appropriate to hold that the amount withdrawn by the assessee partakes the character of deemed dividend under the provisions of section 2(22)(e) - in favour of assessee. - ITA No. 1270/Mds/2011 - - - Dated:- 28-6-2012 - N. S. Saini And Vikas Awasthy , JJ. Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as additions made under other heads. 3. The present appeal has been filed by the Revenue assailing order of the CIT(A) only on the ground that CIT(A) has erred in deleting the addition of ₹ 17,65,517/- made by the Assessing Officer as deemed dividend under section 2(22)(e) of the Act. 4. Mr. Shaji P.Jacaob, DR appearing on behalf of the Revenue vehemently opposed the order of the CIT(A). He submitted that the loan was granted by RSPL to the assessee who is having substantial interest in the company having more than 10% voting power. The amount advanced by the company to the assessee falls within the ambit of definition of deemed dividend under section 2(22)(e) of the Act as the company was having accumulated profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and when required by her for personal purposes. It was thus in this background, the assessee had withdrawn certain amount from the company and had also repaid the amounts withdrawn periodically. Therefore, the transaction between the assessee and the company was purely out of business consideration. The counsel further contended that if the assessee would not have given bank guarantee and collateral security, the operations of the company would have come to a standstill. The counsel submitted that the amount was advanced by the company to the assessee purely on the terms of commercial expediency. In order to support her contentions the counsel relied on the judgement of the Hon ble Calcutta High Court in the case of Pradip Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in accordance with subclause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ; [(ia) a distribution made in accordance with subclause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, [and before the 1st day of April, 1965] ;] (ii) any advance or loan made to a shareholder [or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. 7. In order to attract the provisions of section 2(22)(e), the important consideration is that there should be loan/advance by a company to its shareholder. Every amount paid must make the company a creditor of the shareholder of that amount. At the same time, it is to be borne in mind that every payment by a company to its shareholders may not be loan/advance. In the present case, the amount was withdrawn by the assessee from the company only to meet her short term cash requirements. By virtue of offering personal guarantee and collateral security for the benefit of the company, the liquidity position of the assessee had gone down. In the strict sense if it is to be construed the amount forwarded by the company to the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business interest of the company. The sum of ₹ 20,75,000/- could not be treated as deemed dividend. The Division Bench of the Hon ble Calcutta High Court followed the decision of the Hon ble Delhi High Court in the case of CIT Vs. Creative Dyeing Printing P.Ltd. reported as 318 ITR 476(Del). In the instant case also the assessee was allowed to withdraw funds from the company as per requirement for personal purposes against the personal guarantee and the collateral security given by her to facilitate her availing of credit facility of the company. 9. It is a well settled law that loan or advance given to a shareholder by a company in which public is not substantially interested and which had accumulated profits, the amount adv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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