TMI Blog1976 (10) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... se? " The Income-tax Appellate Tribunal stated a case and referred only the first question of law to this court. In its view, the question as framed was comprehensive enough to include the second question of law raised by the revenue in the reference application. However, the revenue approached this court under section 66(2) of the Indian Income-tax Act, 1922, for a direction to the Tribunal to refer the second question also to this court. This court by its order dated February 8, 1973, directed the Tribunal to draw up a statement of the case and refer to this court the second question also. It is thereafter the Tribunal has referred the second question and this reference has been numbered as T.C. No. 221 of 1974, while the reference of the first question has been numbered as T.C. No. 418 of 197 1. The result is that both the tax cases are concerned with the same order of the Income- tax Appellate Tribunal and the two questions separately covered by the two cases also arise out of the same order of the Tribunal. The assessee in the present case was the managing director of M/s. Mahalakshmi Textile Mills Ltd., holding 750 shares out of a total of 5,984 shares. One, N. S. Karup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two questions extracted already. We may point out that if we answer the second question in favour of the revenue, it will necessarily follow that the first question also will have to be answered in favour of the revenue. Consequently, we shall take up the second question first. Section 2(6A)(e), so far as is relevant, is as follows : " 2. (6A) 'dividend' includes---..... (e) any payment by a company, not being a company, in which the public are substantially interested within the meaning of section 23A, 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 or any payment by any such company on behalf or for the individual benefit of a shareholder, to the extent to which the company in either case possesses accumulated profits. " There is no controversy that the company in question is a company in which the public are not substantially interested within the meaning of section 23A. Equally there is no controversy that the loans were advanced to Karuppiah Chettiar out of the accumulated profits of the company. It is against this background we shall have to examine whether the materials in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money to somebody else from whom the shareholder obtains a loan that will not be covered by section 2(6A)(e). The second aspect which seems to have weighed both with the Appellate Assistant Commissioner and with the Tribunal is that the word " payment " occurring in section 2(6A)(e) with regard to the second and third contingencies, contemplate payment of money in the discharge of a liability or a debt that the company owes to the payee and, therefore, will not take in payment of any money by way of loan or advance. According to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal the dictionary meaning of the word " payment " itself leads to such a conclusion. It is on the basis of these two reasonings only both the Appellate Assistant Commissioner and the Tribunal came to the conclusion that the present case will not fall within the scope of section 2(6A)(e) of the Indian Income-tax Act, 1922. We are of the opinion that the Tribunal committed a serious error of law in coming to such a conclusion because it completely overlooked the admission of the assessee himself and also wrongly interpreted the word "payment " occurring in section 2(6A)(e) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials available which had been ignored and which had not been taken into account by the Tribunal, are the very admissions of the assessee himself and, therefore, there is no question of our giving a further opportunity to the Tribunal to consider those materials along with the other materials that were considered, for recording a finding on the question in controversy. We shall now give the relevant questions and answers in the deposition of the assessee himself : " Q. What is the nature of your relationship with Karuppiah Chettiar ? A. Business relationship. Q. Can you give me some more details of the nature of this business relationship ? A. Whenever I required monies, I used to get from him and then repay him. Q. So, I am to take it that your business relationship with him consisted only in taking and giving loans to him ? A. So far as I am personally concerned, that is the only relationship. Q. You have told me earlier that you had taken loans from him. Is that correct ? A. Yes. Q. Did you give him any pro-notes while taking loans ? A. No. Q. Do you remember how much of loans you have taken from him ? A. No, but the accounts would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar? A. No motive at all. Q.Does it not appear strange to you, whereas you could have taken the loans directly ? A. It does not appear. Q. I put it to you that most of the loans taken from (mistake for "by") Karuppiah Chettiar from Mahalakshmi Textile Mills Ltd. were given almost immediately in toto? A. Yes, may be." These statements by way of answers to the questions put to him made by the assessee clearly and indisputably establish that whenever the assessee needed money he asked Karuppiah Chettiar to obtain loans from the mills and the amounts so obtained by Karuppiah Chettiar by way of loans from the mills were passed on by him to the assessee as loans. The Appellate Assistant Commissioner and the Tribunal have completely overlooked these vital admissions made by the assessee himself. It is true that the said Karuppiah Chettiar in his deposition admitted that he was paying an interest of 8% to the mills for the loans taken by him from the mills and in his turn he was charging 8 1/2% on the amounts advanced by him to the assessee. But that certainly would not constitute the transaction in question as commercial loan advanced by Karuppiah Chettiar to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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