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TMI Blog2014 (4) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting the transactions properly - the factual position also shows that there was no intention to avoid payment of taxes by distributing money in the form of loan or dividend instead of distributing the same as dividend. Relying upon M.D. Jindal Vs. CIT [1986 (4) TMI 17 - CALCUTTA High Court] - the company only possesses the funds belonging to the assessee, if both the Running account and Share application money contributed by the assessee is taken together - the amounts debited to the Running account of the assessee cannot be considered as deemed dividend in terms of the provisions of sec. 2(22)(e) of the Act - they represents money refunded out of the contribution made by the assessee towards Share Application account – thus, the order of the CIT(A) set aside – Decided in favour of Assessee. - ITA. No. 220/Hyd/2013 - - - Dated:- 17-4-2014 - Shri B. R. Baskaran And Shri Saktijit Dey,JJ. For the Petitioner : Mr. S. Rama Rao For the Respondent : Mr. Solgy Jose T. Kottaram ORDER Per B. R. Baskaran, A. M. The appeal filed by the assessee is directed against the order dated 06.11.2012 passed by Ld CIT(A)-II, Hyderabad and it relates to the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether any withdrawal was made by the assessee from the company over and above the balance available in his account. The Ld A.R, inviting our attention to page 19 of the paper book, submitted that the authorized capital of the company as on 31.3.2009 was only Rs.2.00 crores and the same was increased to Rs.3.50 crores in the succeeding year. The subscribed capital and the share application money put together stood at Rs.3.44 crores as on 31.3.2009 and the shares were allotted only in the succeeding year. Accordingly, the Ld A.R submitted that the company, as on 31.3.2009, could not have allotted shares on the entire share application money without increasing its authorized share capital. Accordingly he submitted that the amount withdrawn by the assessee was related to the Share application money only. Accordingly he submitted that the AO was not correct in ignoring the contribution made by the assessee towards Share application. The Ld A.R further submitted that the entries made in the books of account maintained by the company is not determinative of true nature of transaction and hence the assessee should not be penalized for the mistake committed by the company in debiting the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of debiting the same to the Share Application account. The ld A.R substantiated the said claim by stating the amount available in the Share Application account is more than the amount that can be allotted as Shares, i.e., as on 31.3.2009, the combined amount of Share capital account and the Share Application account was in excess of the authorized share capital. 8. We have perused the copy of Share Application Money account placed at page 29 of the paper book. The said account shows a credit balance of Rs.1,21,63,960/- as on 01.4.2008. There were additions as well as withdrawals from the said account and the balance as on 31.3.2009 stood at Rs.1,69,22,931/-. Thus, we notice that the amount refunded to the assessee was not a solitary transaction of refund, but the Share Application Money reveals that there was frequent receipts of money as well as refunds of money in that account. Hence, in our view, the contentions of the assessee that the refunds made by the company to the assessee represents Share Application money cannot be rejected without bringing any material to the contrary. In the instant case, no material was brought on record to disprove the said contentions. Hence, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout the purpose of enactment of sec. 2(22)(e) of the Act as under:- Therefore, if the said background is kept in mind, it is clear that Sub-clause (e) of Section 2(22) of the Act, which is parimateria with Clause (e) of Section2(6A) of the 1922 Act, plainly seeks to bring within the tax net accumulated profits which are distributed by closely held companies to its share holders in the form of loans. The purpose being that persons who manage such closely held companies should not arrange their affairs in a manner that they assist the shareholders in avoiding the payment of taxes by having these companies pay or distribute, what would legitimately be dividend in the hands of the shareholders, money in the form of an advance or loan. 11. In the instant case, the assessee has also prepared combined ledger account combining both his Running account and the balance available in the Share Application account. The said statement is placed at pages 30-31 of the paper book. A perusal of the same would show that the assessee s account was always having credit balances, meaning thereby; the assessee has not withdrawn any money over and above the money already contributed by him. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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