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TMI Blog2015 (7) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer has observed that from the balance sheet of M/s. PKPN Spinning Mills (P) Ltd. a sum of Rs. 79,08,532/- was shown as loans and advances to the assessee Shri P.K. Jayagopal. The assessee is a Director of M/s. PKPN Spinning Mills (P) Ltd. and holding substantial interest in the company. Since the transaction hit by the provisions of section 2(22)(e) of the Income Tax Act, the assessee was asked to give explanation with regard to application of section 2(22)(e) of the Act. The CA appeared before the Assessing Officer and certified that the transactions are in the nature of loans and advances. The assessee has also not disputed that the amount taken as loans and there was no interest charged by the company. The assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 550/- as on 31.03.2011, which represents contra entries relating to Shri J. Lakshmidharan and Shri J. Thiruvadhanan and the corresponding entries find place in the ledger extracts. He further submitted that as the above sum of .34,01,550/- did not involve outgoing or flow of money from the company to the assessee share holder so as to attract the said provision and having regard to the said section 2(22)(e) of the Act. He has also submitted that the share holding pattern as on 31.03.2010 and 31.03.2011 and return of allotment in Form No.2 proves that the assessee did not have the required percentage of voting power till 11.11.2010 meaning thereby that the transactions between the assessee and M/s. PKPN Spinning Mills (P) Ltd. from 01.04.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial transaction was done for the purpose of smooth conduct of business. The assessee has not produced any evidence before the Assessing Officer the actual purpose for which the amount was received and how the transaction helps PKPN Spinning Mills (P) Ltd. for smooth functioning. In so far as application of section 2(22)(e) is concerned, the ld. Counsel for the assessee appeared before us has not disputed. He has only submitted that the amount of .34,01,550/- did not involve outgoing or flow of money from the company to the assessee. This argument of the ld. Counsel for the assessee is an afterthought and it cannot be accepted for the reason that in the balance sheet of M/s. PKPN Spinning Mills (P) Ltd., a sum of Rs. 79,08,532/- was sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied on by the ld. Counsel for the assessee is concerned, in the case of CIT v. Smt. Parvathavarthini Ammal 219 ITR 661, the Hon'ble Kerala High Court has considered section 2(22)(e) and observed that gift of shares even found to be genuine and shares also registered in the names of donee. The transfer of shares has to be taken on the date of transfer forms and not on the date of company registered the shares in the names of done. Shares having been gifted to the assessee and found to be genuine and the deemed dividend could not assessed in her hands. In his case, the above decision of the Hon'ble Kerala High Court relating to assessment year 1979-80. The proviso to Explanation 3(b) to section 2(22)(e) was inserted by the Finance Act, 1987. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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