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TMI Blog1982 (4) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... 22)(e) of the IT Act, 1961, or not. The assessee late Sri. P.N. Talukdar was the Managing Director of M/s Talukdar Law Co. (P) Ltd. and held 8900 shares. The ITO assessed the loan of Rs. 44,805 advanced by the said company to the assessee as dividend under s. 2(22)(e) of the IT Act, 1961 (hereinafter called the Act). On appeal, it was contended by the assessee that accumulated profit of the company brought forward on the first day of the previous year relevant for the asst. yr. 1962-63 was only Rs. 39,386 and it was washed out by the total expenditure of Rs. 79,941 incurred by the company and even the managing agency commission of Rs. 2,46,967 was credited to the accounts of the company only at the end of the accounting year, i.e., on 30t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 39,865 and there was provision for taxation of Rs. 1,70,529 and this would amply cover the loan to the extent of Rs. 44,805 advanced to the assessee by the said company. Therefore, both in terms of legal provision as well as on merits the CIT(A) upheld the decision of the ITO and confirmed the assessment of dividend under s. 2(22)(e) of the Act. Hence, the appeal by the assessee before the Tribunal. 4. The assessee has taken several grounds which converged on the legality and the merit of assessment of Rs. 44,805 as dividend. At the time of hearing the ld. Counsel for the assessee has been heard at length. He has reiterated all the contentions that were raised before the CIT(A) in this regard. Finally, he urged that the matter should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a conduit pipe for passing on the advance taken from the company with intent and purposes of avoiding the legal hurdle of dividend under s. 2(22)(e) of the Act. At any rate, the account of the company, especially the list of sundry advances of the company as on 30th Sept., 1961, reveals the assessee as a debtor and not M/s N.R. Sarkar Co. (P) Ltd. On this premise we proceed to decide the point at issue and scale the reasons for our decision. Sec. 2(22)(e) contemplates artificial dividend and the basis is payment. Admittedly there has been payment of Rs. 44,805 to the assessee as per accounts of the company as stated supra. The assessee held 8,900 shares in the company and was the Managing Director thereof and, therefore, he was a pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. Counsel for the assessee was not in a position to specify the exact basis on which the managing agency commission was payable to the company. Further, the right to receive commission accrues as soon as the services are rendered periodically but not the quantum is postponed for ascertainment or determination and that too in accordance with the special provisions of the Companies Act for payment of managing agency commission. This does not mean that the managing agency commission had been earned or accrued only on 30th Sept., 1961 as this proposition would be wholly contrary to commercial principles of accounting and the method of accounting followed. Further, we find that the opening balance in the profits loss account brought forwar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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