TMI Blog2011 (1) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer on account of deemed dividend u/s.2(22)(e) of the Income tax Act, 1961 holding that the transactions between the assessee company and M/s. Gujarat Insecticides Ltd (GIL) (a subsidiary of the assessee company wherein the assessee company holds 66.66% of shares) were normal business transactions not covered by the provisions of section 2(22)(e) of the Income tax Act, 1961. 2. While deleting the said addition, the ld CIT (A) failed to appreciate that lending of money being not the business of M/s. GIL, the said transactions are not covered by the exclusions provided in section 2(22)(e) of the Income tax Act, 1961. 3. The ld CIT (A) further failed to appreciate that advance for the purpose of section 2(22)(e) may be even by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance had been availed from M/s GIL and the amount shown at ₹ 31,53,86,000 is on account of regular trade transactions. The AO rejected the above submissions, inter alia, holding that all the conditions as mentioned in section 2(22)(e) are satisfied as the assessee is not a company in which public are substantially interest that the assessee posses accumulated profits to the extent of these transactions, and that as thee is always a huge credit balance, these transactions are not ordinary business transactions. Accordingly, the AO brought to tax the outstanding shown as due and payable as deemed dividend under section 2(22)(e) of the Act. Aggrieved, the assessee carried the matter in appeal before the CIT(A). 3. The CIT (A) dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey should be paid by the company to a shareholder holding not less than ten per cent. of the voting power of the company. It would make no difference if the payment was out of the assets of the company or otherwise ; (iii) the money should be paid either by way of an advance or loan or it may be any payment which the company may make on behalf of or for the individual benefit of any shareholder or also to concern in which such shareholder is a member or a partner and in which he is substantially interested ; and (iv) the limiting factor being that these payments must be to the extent of accumulated profits, possessed by such a company. The immediate precursor to section 2(22)(e) is found in section 2(6A) of the Indian Income-tax Act, 1922 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m advance . The rule of construction which answers this conundrum is noscitur a socis. The rule has been explained both by the Privy Council in the case of Angus Robertson v. George Day [1879] 5 AC 63 by observing it is legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them and the Supreme Court in the case of Rohit Pulp and Paper Mills Ltd. v. Collector of Central Excise, AIR 1991 SC 754 and State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610. The principles with regard to the applicability of the rule of construction are briefly as follows : (i) does the term in issue have more than one meaning attributed to it, i.e., based on the setting or the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the opinion that the money received by the assessee was in the nature of a loan given by C to the assessee who admittedly held more than 10 per cent. of the shares in C. The Assessing Officer concluded that the money received by the assessee was deemed dividend within the meaning of the provisions of section 2(22)(e). The Commissioner (Appeals) reversed the order of the Assessing Officer. The Tribunal sustained the decision of the Commissioner (Appeals). On appeal : Held, that the trade advances given to the assessee by C could not be treated as deemed dividend under section 2(22)(e). 12. The Hon'ble Delhi High Court in fact followed the principles established by the jurisdictional High Court in the case of CIT vs Nagindas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of loans or advances, it cannot be considered as deemed dividend under section 2(220(e). Upon this fact being pointed out to the learned D.R., he did not have much to say except to nevertheless place his reliance of Hon'ble High Court judgement. In view of these facts, and bearing in mind the law laid down by the Hon'ble Bombay High Court, we see no merits in the objection raised by learned D.R. to the issue being covered by the Tribunal's decision in assessee's own case for the assessment year 2002-03(supra). In our considered view, the issue, which is agitated in this appeal, is squarely covered by the Tribunal's decision for the assessment year 2002-03 and we respectfully concur with the views of our distinguished ..... X X X X Extracts X X X X X X X X Extracts X X X X
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