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TMI Blog1974 (12) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ting as follows : Figures for Loan and Figures for the the previous Advances current year. year Advance to director Rs. Rs. Rs. Head Office 61,702 14,556.14 16,315.69 457 Branch 62,159 1,759.55 (The maximum due at any time during the year at head office is Rs. 1,50,000 and at branch Rs. 1,759.55). Out of the above figures the amount outstanding from the assessee was rupees 13,385. The Income-tax Officer considered the applicability of section 2(6A)(e) of the Indian Income-tax Act, 1922, under which any payment by a company in which the public were not substantially interested within the meaning of section 23A of any sum by way of advance or loan to a shareholder to the extent to which the company possesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal held that the view taken by the Appellate Assistant Commissioner was more equitable and as such confirmed the order of the Appellate Assistant Commissioner on this aspect. In the aforesaid circumstances of the case under section 66(1) of the Indian Income-tax Act, 1922, the following question has been referred: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the loan advanced to the assessee by S. B. Electric Mart Private Ltd. was assessable as dividend under section 2(6A)(e) of the Indian Income-tax Act, 1922, only to the extent of 19/40 of the accumulated profits of the said company and not to the extent of the whole of the said profits ? " In this reference we are concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets of the company or otherwise) by way of advance or loan to a shareholder or any payment by any such company on behalf or for the individual benefit of a shareholder, to the extent to which the company in either case possesses accumulated profits, but 'dividend' does not include-....... (ii) any advance or loan made to a shareholder 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 clause (e), to the extent to which it is so set off ; Explanation.-The expression 'ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would be limited to the extent of the accumulated profit. If, on the other hand, a shareholder takes advances or loan or the company advances loan to the shareholder less than the accumulated profit then the entirety of the loan to the extent the company has accumulated profit would be treated as dividend in the hands of the shareholder. In support of the view we have taken, reliance may be placed on the observations of the Madras High Court in the case of K. M. S. Lakshmana Aiyar v. Additional Income-tax Officer and the observations of the Bombay High Court in the case of Commissioner of Income-tax v. P. K. Badiani and the observations of the Gujarat High Court in the case of Commissioner of Income-tax v. Mayur Madhukant Mehta . Our atte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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