TMI Blog1993 (2) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... 75 shares of the face value of Rs. 1,000 each. The assessee-company held at the material time 772 shares of the said company. It also held the remaining three shares of the said company in the name of other persons who were the nominees of the assessee-company. Hence, Nestler Boilers Pvt. Ltd. was a 100 per cent. subsidiary of the assessee-company. The assessee-company had borrowed loans from its subsidiary company as follows : --------------------------------------------------------------------------------------------------------------------------------------------------- Assessment year Loan Interest ---------------------------------------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---- Being aggrieved by the assessment order of the Income-tax Officer, the assessee-company appealed to the Appellate Assistant Commissioner who rejected the contention of the assessee. The assessee-company, there fore, came in appeal before the Tribunal. The Tribunal while applying the provisions of section 2(22)(e) of the Income-tax Act upheld the contention of the assessee that for the assessment year 1971-72 the entire accumulated loan of Rs. 26,64,856 over the assessment years 1969-70, 1970-71 and 1971-72 could not be taken into account for applying the provisions of section 2(22)(e). The Tribunal held that only the loan received by the assessee during the assessment year 1971-72 should be taken into account for the purposes of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time gives the definition of "dividend". It states that: " '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 : . Explanation 1.-The expression 'accumulated profits', wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the affirmative and in favour of the assessee because what we have to take into account for the purposes of section 2(22)(e) for inclusion as dividend income of the assessee is the amount received by the assessee-company as a loan of the kind set out in section 2(22)(e) in the assessment year 1971-72. In this connection, we agree with the reasons of the Tribunal given in para 11 of its order. It is urged by the assessee-company that the provision of section 2(22) cannot apply to a company which has a substantial interest in another company, i.e., the provisions cannot apply to a holding company or subsidiary company but can only apply to an individual or a person who has a substantial interest in the company. This submission has to be rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not be allowed unless an amount equal to 75% of the development rebate to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during the period of 8 years next following for the purposes of the business of the undertaking, other than for distribution by way of dividends or profits. In view of this restriction placed on the development rebate reserve, the assessee contends that this amount should not be considered as forming part of the accumulated profits of the assessee-company for the purposes of section 2(22)(e) since this amount is not available for distribution as dividend. The Explanation to section 2(22)(e), however, which expla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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