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2019 (9) TMI 971 - AT - Income TaxDeemed dividend addition u/s (2)(22)(e) - subsequent repayment (of loan/advance) relevant, i.e., in determining if the amount received from the payer-company is to be, or is not to be, considered as dividend u/s. 2(22)(e)? - length of the period over which the credit obtains, being at 45 days (i.e., from 15.10.2013 to 29.11.2013) in the instant case - HELD THAT:- The exclusion of a business advance, referred to earlier, i.e., even as the provision speaks of any payment by way of a loan or advance, covering therefore advances of all types, is only on the premise that the said word, read conjunctively with the word ‘loan’, applying the principle of ejusdem generis, should only include payments in the nature of loans, excluding business transactions, which have, as a matter of course, if not necessarily, to be settled by remitting funds; the provision in no manner seeking to impinge on genuine business transactions. Finally, it is stated that the entries in the books of account are not determinative. The same seeks to perhaps meet the reflection of the outstanding sum (as at the year-end) as a loan or advance in the balance-sheet of the lender or the borrower company. It is nobody's case that the provision stands invoked on account of such reflection, which has not been shown to be incorrect, so that there is no factual basis to the argument. The provision would in fact apply even if the shareholder does not, as is usually the case for an individual shareholder, maintain books of account, and which is so in the present case only because of it being a corporate entity. On the contrary, it is the assessee who draws on the accounts, stating it to be a running account and, further, a ‘low’ retention period, and on that basis plead that the provision shall not apply. The provision is applicable qua any payment and, therefore, would (or would not) apply with reference to each specific sum. It is immaterial whether such payment/s is recorded in the books of account or not, and the only thing relevant is if it is in the nature of a loan/s or advance/s. The assessee’s argument, which is even otherwise not backed by any material and only in the nature of a bald statement, is therefore without merit. Chargeability of the dividend under section 2(22)(e) as ‘income from other sources’ u/s. 56 - HELD THAT:- Only the dividend declared, distributed or paid by a company, on which tax u/s. 115-O has been suffered, that falls u/s. 10(34), and would therefore not stand to be assessed u/s. 2(24)(ii) r/w s. 56 of the Act. The said dividend would only be that envisaged u/s. 2(22)(a), i.e., as declared observing the required procedure in its respect under the Companies Act, 1956 (or, as the case may be, Companies Act, 2013), to all the shareholders, i.e., in proportion to their shareholding. This would certainly not cover dividend which gets included within its definition under the Act in view of the extended meaning of the term ‘dividend’ by virtue of a legal fiction. The dividend deemed as such u/s. 2(22)(e) would, therefore, stand to be assessed and, accordingly, has been rightly brought to tax, u/s. 56 Being not a regular dividend, declared and paid by company, the same does not fall to be covered u/s. 10(34) and, thus, is not excepted u/s. 56. The same has, accordingly, been rightly brought to tax u/s. 2(24)(ii) r/w ss. 2(22)(e) and 56 of the Act by the Revenue, whose action is upheld. The assessee, in this view of the matter, fails. We decide accordingly.
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