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TMI Blog2021 (7) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... NGOUDAR APPELLANTS (BY SRI. K.V. ARAVIND, ADV.) RESPONDENT (BY SRI. S. ANNAMALAI, ADV., FOR SRI. M. LAVA, ADV.,) JUDGMENT ALOK ARADHE J., This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as the Act , for short) has been filed by the revenue. The subject matter of the appeal pertains to the Assessment Year 2009-10. The appeal was admitted by a Bench of this Court on the following substantial questions of law: a) Whether the Tribunal was correct in deleting the entire addition made when the assessee is an employee of the company and is not carrying on any business of his own and therefore, there cannot be any chance of any credit balance due on account of the business dealings between the assessee and the company? b) Whether the Tribunal is correct in deleting the additions made by the assessing officer without appreciating the fact that the assessee has purchased a flat in Embassy Crown, Aga Abbas Ali Road, Bangalore, from the housing loan and advances given by the company, which cannot be treated as business purpose for the company? 2. Facts leading to filing of this appeal briefly stated are that asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of dividend and therefore, the Assessing Officer has rightly held that ingredients of Section 2(22)(e) of the Act are attracted to the fact situation of the case. It is further submitted that no material was produced before the Commissioner of Income Tax (Appeals) and before the Tribunal, by the assessee and therefore, the Commissioner of Income Tax (Appeals) as well as the Tribunal grossly erred in holding that payments received by the assessee from the Company cannot be treated as loan or as advance under Section 2(22)(e) of the Act. It is further submitted that copy of the resolutions were also not placed on record and therefore, the finding recorded by the Commissioner of Income Tax (Appeals) as well as the Tribunal is without any basis. Alternatively, it is urged that the matter be remitted to the Assessing Officer for examination of the issue afresh. 5. On the other hand, learned counsel for the assessee submitted that since the assessee has provided the collateral to the Banks / financial institutions, the Company was able to borrow the loan and to conduct its business and earn profits. It is also submitted that Company derived substantial benefits due to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... older, to the extent to which the company in either case possesses accumulated profits ; but dividend does not include- (i) a distribution made in accordance with sub-clause (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 sub clause (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 ; (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off; (iv) any payment made by a company on purchase of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticipate in profits) holding not less than ten per cent of the voting power; but if such loan or advance is given to such shareholder as a consequence of any further consideration which is beneficial to the company received from such a shareholder, in such case, such advance or loan cannot be said to a deemed dividend without the meaning of the Act. Thus, for gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of s. 2(22) but not to the cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. A similar view has been taken in 'JAMUNA VERNEKAR Vs. DCIT', 'CIT Vs. CREATIVE DYEING AND PRINTING P. LTD.' and 'BAGMANE CONTRUCTIONS PRIVATE LIMITED Vs. CIT', supra. 8. In the instant case, the Commissioner of Income Tax (Appeals) has held that the loan was not advanced to the assessee by the Company merely because he was a shareholder with substantial interest, but the Company allowed the assessee to avail the advance / loan as it wanted to obtain the loan from the Bank for business purpose. Thus, the Company derived the benefit of getting a loan / ..... X X X X Extracts X X X X X X X X Extracts X X X X
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