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2015 (3) TMI 812 - MADRAS HIGH COURTDeemed dividend - all the payments made by KIPL to the assessee upto 31.3.09 by way of loans and advances should be treated as "deemed dividend" as per AO - According to the CIT (Appeals)and also confirmed by Tribunal, the provisions of Section 2 (22) (e) stand attracted, however, in calculating the dividend amount, the Assessing Officer had erred in not taking into consideration the amount that has been repaid by the assessee to KIPL - Held that:- There is no dispute that the company is a controlled (private limited) company in which the public are not substantially interested. Further, the assessee is admittedly a shareholder and Director of KIPL. It is also beyond controversy that at all material times, the company possessed "accumulated profits" in excess of the amount which the assesseeshareholder was paid during the previous year. The Income-tax Officer found that surplus reserve of the company for the year ending 31.3.09 stood at ₹ 10,26,62,126/-. The assessee drew money for the purpose of making payments, which were personal in nature, aggregating ₹ 76,86,829/-, which amount was shown as loan or advance in the books of accounts of KIPL. The company's business is not money-lending and it could not be said that the loans had been advanced by the company in the ordinary course of its business. In such circumstances, in the instant case, all the amounts advanced to the assessee/appellant under the head loans and advances fall squarely within the ambit of Section 2 (22) (e) of the Income Tax Act Assessing Officer has taken the entire amount of ₹ 76,86,829/- received by the assessee from the company as dividend, while computing the income, but has lost sight of the payment made. In such circumstances, this Court is of the considered opinion that the CIT (Appeals) has rightly come to the conclusion that "the position as regards each debit will have to be individually considered, because it may or may not be a loan. The AO is, therefore, directed to verify each debit entry on the aforesaid line and treat only the excess amount as deemed dividend u/s 2 (22) (e) of the Act". We find such a direction issued by the CIT (Appeals), as upheld by the Tribunal is in consonance with the provision of Section 2 (22) (e) of the Act, and only those amounts, which reflect in the debit side of the books of accounts of the company falling under the definition of loans and advances, with regard to the shareholder, in the relevant year will be entitled to be taken as deemed dividend. - Decided in favour of the Revenue
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