9911796707
TMI Blog2014 (10) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee was incurring heavy losses. On the other hand, the sister concern was unable to utilise the natural gas that was being supplied by M/s Gas Authority of India Limited (hereinafter referred to as "GAIL") under a contract wherein the sister concern was under an obligation to obtain 80% of the quantity of gas as a minimum guarantee. The assessee had generators worth Rs. 93 lacs for the purpose of generating power, but had no gas. Accordingly, an agreement was executed between the assessee and its sister concern whereby generators were supplied by the assessee for which a floating security deposit of Rs. 80 lacs was given by the sister concern. In this agreement, the sister concern was to use the generators and generate electricit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, namely- (I) "Whether Hon'ble Tribunal was justified in law holding that the security deposit of Rs. 80,00,000/- received through mutual agreement by the assessee with its sister concern cannot be assessed u/s 2(22)(e) of the Act, ignoring that the said agreement is nothing but a colourable device adopted to avoid the incidence of tax ?" (II) Whether Hon'ble Tribunal was justified in law in differentiating the security deposit from loan/advance ?" The Tribunal held, that the amount given by the sister concern to the assessee was not a loan or an advance, but was a security deposit. Further, the amount given by the sister concern to the assessee was given in the course of business and was not given to a shareholder and, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of the company; From a perusal of the aforesaid provision "dividend" includes any payment by a Company by way of advance or loan to a shareholder or to any concern in which such holder is a member or a partner and in which he has a substantial interest would be a deemed dividend, but such dividend would not include any advance or loan made to a shareholder by a Company in the ordinary course of its business. The essential ingredient is a "loan" or an "advance" to a shareholder or to a concern in which such shareholder has a substantial interest. Under this provision a deemed fiction is created whereby the scope and ambit of dividend has been enlarged to cover "loan" and "advance" granted by closely held Companies to their shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on account of this commercial transaction the sister concern had paid Rs. 80 lacs to the assessee as interest free refundable security deposit, which was subsequently refunded by the assessee to the sister concern and, consequently, held that the said amount given by the sister concern was a security deposit and not a loan or an advance. The finding arrived at by the Tribunal is a finding of fact based on appreciation of evidence, which has not been doubted by the appellant. The only ground urged that since the partners of the assessee firm had worked as shareholders in the Company and had a substantial interest, such deposit of loan was by way of diversion of the profits of the Company and, therefore, such deposit has to be treated as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010. The said decision is squarely applicable in the instant case. Apart from the aforesaid, the word "loan" means anything lent, especially money on interest. On the other hand, "deposit" means something which is deposited or put down, namely, a sum of money paid to secure an article, service, etc. The legislature has made a conscious distinction between the expression "loan' and "deposit". The two are not identical in meaning. In the case of a deposit the delivery of money is usually at the instance of the giver and it is for the benefit of the person who deposits the money. The benefit normally being earning of interest from the party who accepts the deposit. The deposit could also be for safe keeping or as a security for the perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
