TMI Blog1997 (9) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... rplus in the profit and loss account 19,865 Proposed dividends 48,480 Total 3,68,345." For the assessment year 1962-63, a sum of Rs. 1,95,550 was assessed in the hands of her husband as deemed dividend by invoking the provisions of section 2(22)(e) of the Income-tax Act. Deducting this amount of Rs. 1,95,550 from the reserves of Rs. 3,68,345 the balance of Rs. 1,72,795 was treated as deemed dividend and brought to tax in the hands of the assessee for the assessment year 1962-63. The relevant previous year for the assessment year 1962-63 is the year ended on March 31, 1962. As on December 31, 1961, there was a debit balance of Rs. 4,73,241 in the estate of late G. N. Sam. This amount was transferred to the account of the assessee in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the scope of section 2(22)(e) the relevant portion of the section may be extracted : "2(22) 'dividend' includes-. (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder, being a person who has a substantial interest in the company, or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits." The Tribunal while considering the application of section 2(22)(e) says that the first step is to ascertain the loan taken by the shareholder. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and the loan was treated as a dividend income and brought to tax. The Division Bench on the above facts held as follows : 'It is urged on behalf of the assessees that the loans were advanced by the companies only to Visalakshi Achi and that there was no payment 'by the companies to the assessees, and that section 12(1B) is, therefore, inapplicable. It is not disputed-and indeed it cannot be disputed-that had Visalakshi Achi been alive in the year of assessment and if she was the assessee in that year, transactions between her and the companies would fall quite clearly within the ambit of the taxing provision. The crucial question, therefore, is was there a payment 'by the companies to the assessees' ? As stated already the assessees t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r exercise was undertaken. In the assessment years 1957-58 and 1958-59, the development rebate reserve amounted to Rs. 3,58,212. After eliminating the opening debit balance and the interest amount, the advances received by the assessee-family during the year amounted to Rs. 7,111.52. The Income-tax Officer considered this amount as dividend under section 2(6A)(e), as according to him, the company had accumulated profits of over Rs. 1,50,000 in the shape of development rebate reserve. Similarly, for the year ending March 31, 1959, a sum of Rs. 1,46,728 was assessed as dividend under section 2(6A)(e) for the same reason. The sum of Rs. 1,46,728 was arrived at by adding up the withdrawals during the year and the amount of first and second call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, therefore, inclined to follow the observation of, the Division Bench mentioned above. That apart, the provision of law, namely, section 2(22)(e), which we have already extracted above, says that by a fiction dividend is made to include any payment by a company, etc. Therefore, it is difficult for us to introduce another fiction in respect of the words "payment by the company" by construing even a transfer entry as amounting to payment. In other words, when section 2(22)(e) itself introduces a fiction, it is improper for us to introduce another fiction and construe a payment as equivalent to a constructive payment. In this view of the matter, we are not inclined to accept the arguments advanced on behalf of the Revenue and following the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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