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TMI Blog2015 (6) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... we do not see any reason to interfere in the finding of ld. Commissioner of Income Tax (Appeals). - Decided against revenue. - ITA No. 1730/Ahd/2011 - - - Dated:- 24-6-2015 - Shri G. D. Agrawal, Vice President and Shri Rajpal Yadav, Judicial Member Revenue by: Shri Vimlendu Verma, CIT-D.R. Assessee by: Shri R.N. Vepari, A.R. ORDER PER : RAJPAL YADAV, JUDICIAL MEMBER:- The present appeal is directed at the instance of revenue against the order of ld. Commissioner of Income Tax (Appeals) dated 17th March, 2011 passed for Assessment Year 2008-09. 2. The solitary substantial ground of appeal raised by the revenue is that ld. Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs. 18,45,25,001/- which was added by the Assessing Officer with the aid of section 2(21)(e) of the Income Tax Act as deemed dividend. 3. The brief facts of the case are that assessee is an individual. He has filed his return of income electronically on 31st March, 2009 declaring a total income of Rs. 3,42,49,460/-. The case of the assessee was selected for scrutiny assessment and a notice u/s. 143(2) was issued and served upon the assessee. 4. On s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness 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 its own shares from a shareholder in accordance with the provisions of section 77 A of the Companies Act, 1956 (1 of 1956); (v) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company). Explanation 1.- The expression accumulated profits , wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956. Explanation 2.- The expression accumulated profits in sub-clauses (a), (b), (d), and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause(c) shall include all profits of the company up to the date of liquidation, but shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -clauses and in sub-clause (e) it shall include all profits of the company up to the date of liquidation. 14.3] Therefore following conditions must be satisfied before invoking section 2(22) (e) in any case 1. The company in question must be one in which the public are not substantially interested. 2. The borrower must be a shareholder at the date when the loan was advanced i.e. being a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in the profits holding not less than 10 per cent of the voting power. 3. The third condition is that the loan is advanced to such shareholder by such a company during the year. 4. The company possessed accumulated profit at the date of the loan. 5. The loan must not have been advanced by the company in the ordinary course of its business. In oilier words, this provision would not apply to cases where the lending of money is a substantial part of the business of the company and such advance or loan made by the company in the ordinary course of its business. 6. The advance must not be trade advance as held by judicial authorities includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other hand was unable to controvert the contention of the learned counsel for the assessee. 8. The question framed by the Hon ble High Court reads as under: Whether on the facts and in the circumstance of the case in law, the Hon'ble ITAT is right in deleting the addition made on account of deemed dividend u/s 2(22)(e) of the Income-tax Act, by holding that after merging all accounts, the final position is zero in the balance sheet in the name of the assessee in the books of accounts of the company as on 31.03.2008, whereas all the accounts of the assessee were of different nature? 9. The Hon ble High Court has answered this question in favour of the assessee. The finding recorded by the Hon ble High Court reads as under:- Having heard the learned counsel for the parties and having perused the documents on record, it clearly emerges that though the said Company did advance loan to the assessee in different accounts, it is also an established fact that in two separate accounts, the assessee was the creditor of the company to the tune of Rs. 14,26,15,000/-. At the end of the year, this exactly is the amount which is in net the assessee withdrew from the company, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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