S. 2(22)(e): “Trade Advances” are not “loans & advances”

 

CIT vs. Arvind Kumar Jain (Delhi High Court)

S. 2(22)(e): "Trade Advances" are not "loans & advances"

The assessee held 50% of the shares of a closely held company. The assessee's books showed that he had taken an "unsecured loan" of Rs. 47 lakhs from the company. The AO assessed the said amount as "deemed dividend" u/s 2(22)(e) though the CIT (A) & Tribunal deleted it on the ground that there was a running business relationship between the assessee and the company and the said amount was not a loan but was the result of those business transactions. The department filed an appeal before the High Court. HELD dismissing the appeal:

(i) S. 2(22)(e) provides that any "loan or advance" by a closely held company to a substantial shareholder shall be assessed as "deemed dividend". The purpose is to tax accumulated profits distributed in the form of loans. Bearing this purpose in mind, the word "advance" has to be read in conjunction with the word "loan". The attributes of a loan are that it involves a positive act of lending coupled with acceptance by the other side of the money as loan: it generally carries interest and there is an obligation of re-payment. The term "advance" may or may not include lending. The word "advance" if not found in conjunction with the word "loan" may or may not include the obligation of repayment. If it does then it would be a loan. Applying the doctrine of noscitur a sociis, the word "advance" means such advance which carries with it an obligation of repayment. Trade advance which are in the nature of money transacted to give effect to a commercial transactions do not fall within the ambit of s. 2(22)(e) (CIT Vs. Raj Kumar 318 ITR 462 followed);

(ii) The fact that the assessee has himself shown the amount in his books of accounts as "unsecured loan", is not determinative of the true nature of transaction. (India Discount Co Ltd 75 ITR 191 (SC) followed).

Related Judgements
CIT vs. Parle Plastics Ltd (Bombay High Court) S. 2(22)(ii) excludes loans and advances where (a) the loan or advance was made by the lending-company in the ordinary course of its business and (ii) lending of money is a "substantial part" of the business of the lending-company. The first condition was satisfied as the business of the…
CIT vs. Ankitech Pvt Ltd (Delhi High Court) U/s 2(22)(e), any payment by a closely-held company by way of advance or loan to a concern in which a substantial shareholder is a member holding a substantial interest is deemed to be "dividend" on the presumption that the loans or advances would ultimately be made available to the…
CIT vs. M/s Khemchand Motilal Jain (Madhya Pradesh High Court) While kidnapping is an offense, paying ransom is not; Bar in Explanation 1 to s. 37(1) not attracted The assessee, engaged in manufacture and sale of bidis, sent its whole-time director to a forest area for purchase of tendu leaves. There, the director was kidnapped by dacoits and…

Delhi HC Applies Mischief Rule!

By Daksha Baxi, ED- Direct Taxation, Khaitan & Co
In a recent decision in case of National Travel Services, the Delhi High Court has ruled that a loan given to a partnership by a company, whose partners are the shareholders of the said company, is indeed deemed dividend under section 2(22)(e) of the Income Tax Act, 1961 (�IT Act�). National Travel Services (Assessee) was a partnership firm consisting of three partners: Naresh Goyal, Surinder Goyal and Jet Enterprises Private Limited. The Assessee had taken a loan of a certain amount from Jetair Private Limited (Jetair) in which it held 48.18% shares. Though the beneficial owner of the shares of Jetair was the Assessee they were held in the name of the Partners.
The Income Tax Authorities (Tax Authorities) assessed this loan as �deemed dividend� under section 2(22)(e)  of the IT Act and regarded it as taxable in the hands of the Assessee. The Commissioner of Income Tax Appeals (CIT (A)) upheld the order of the Tax Authorities.
The Assessee went in appeal before the Income Tax Appellate Tribunal which reversed the order of the CIT (A).
Being aggrieved by the order of the Tribunal, the Tax Authorities went in appeal before the High Court of Delhi (�HC�).
The HC was called upon to decide on the issue whether section 2(22)(e) applies to the Assessee even though the shares of Jetair were held in the name of the Partners.
The HC, inter alia, referred to the decision of the Supreme Court (�SC�) in the case of CP Sarathy Mudaliar wherein the SC observed that section 2(22)(e) consists of three limbs and explained the same as under:
"Any payment by a company, not being a company in which the public are substantially interested, of any sum � made after 31 May 1987 by way of advance or loan:
First limb:(a) to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than 10% of the voting power,
Second limb:
(b) or to any concern in which, such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)
Third limb:(c) 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 HC observed that for attracting the first limb, the requirement of the provision is that the loan is advance by a company �to a shareholder, being a person who is the beneficial owner of shares� i.e. it is necessary that both the conditions, that such a person to whom the advance is made should be a registered shareholder as well as a beneficial owner of the shares.
However, in the instant case, the HC noted that the shares of Jetair were in the name of the Partners though the beneficial owner was the partnership, i.e. the Assessee. This was because the Assessee, being a partnership firm, was unable to hold the shares in its own name due to the provisions contained in this regard in the Companies Act, 1956. Thus, it was due to a legal bar that the Assessee, though a beneficial owner of the shares, was not a shareholder. The HC opined that in essence the partnership was a shareholder as well as the beneficial holder of the shares, though the registered holders were the partners.
The HC rejected the argument that a partnership firm cannot be treated as a �shareholder� only because the shares are held in the name of its partners. It stated that if this contention is accepted, no partnership firm will ever come with within the mischief of section 2(22)(e).
The issue is that in case of a partnership, even the second limb would not bring the advance within the ambit of section 2(22)(e), since in that case the loan would need to be made to a partnership in which the shareholder � being legal and beneficial owner- has substantial interest. In the instant case, while the partners who held the shares legally in Jetair and had substantial interest in the Assessee, they did not have beneficial interest in the shares. The HC thus seems to have inserted and interpreted the provision by adding something to the provision to make it applicable. The two principles of interpretation involved here seem to be:
(i) Rule of Literal Interpretation - the intention of the legislature must be found in the words used by the legislature itself. The Supreme Court, in the case of Mohammad Ali Khan and Others v. CWT (224 ITR 672) has upheld this principle. The Court opined that �It is a cardinal principle of construction that the words of a statute are first understood in their natural, ordinary or popular sense and phrase and sentences are construed according to their grammatical meaning, unless that leads to some absurdity or unless there is something in the context or in the object of the statute to suggest the contrary. It has been often held that the intention of the Legislature is primarily to be gathered from the language used, which means that attention should be paid to what has been said, as also to what has not been said. As a consequence, a construction which requires for its support, addition or substitution of words or which results in rejection of words as meaningless, has to be avoided.�
(ii) Purposive Interpretation - the Courts adopt this rule where they go beyond the language of the statute so as to determine the real legislative intent behind the concerned provision.  If the literal interpretation of the taxing statute results in absurdity, meaninglessness or futility of the statute then the Court may apply the principle of purposive interpretation which takes two forms viz. Contextual Meaning and Mischief Rule. The Court seeks to determine the mischief that any statute was enacted to remedy and find the rationale for that remedy and then interpret the statute in such a manner that the remedy is implemented.
Clearly, the HC has favored the mischief rule of the second principle of interpretation in arriving at this ruling.  This is an interesting and important trend to note.
1. This provision creates a fiction providing certain circumstances under which certain kinds of payments made to the persons specified therein are to be treated as dividend income of the recipient.

INCOME TAX REPORTS (ITR) Volume 337 : Part 4 Issue dated 3-10-2011 :- SUBJECT INDEX

INCOME TAX REPORTS (ITR)

Volume 337 : Part 4 (Issue dated 3-10-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Advance tax :-- Failure to pay advance tax--Deferment of advance tax--Interest under sections 234B and 234C--Condition precedent--Liability to pay advance tax on last day of accounting year--Liability arising due to subsequent amendment of provision with retrospective effect--Interest could not be levied--Income-tax Act, 1961, ss. 234B, 234C-- Emami Ltd. v. CIT (Cal) . . . 470

Appeal to Appellate Tribunal: - Merger of order of Assessing Officer in appellate order--Issue not dealt with by Tribunal--No merger of order--Rectification of mistake with regard to such issue--Valid--Income-tax Act, 1961, ss. 154, 254-- Mitsubishi Corporation v. CIT (Delhi) . . . 498

Appeal to High Court: - Monetary limits for appeals by Department--Instructions of CBDT specifying limit--Exceptions--Substantial question of law likely to arise repeatedly--Assessability of wealth-tax on semi-constructed buildings on urban land--Exception clause (3) of Instruction No. 2 of 2005 applicable--Appeal maintainable--Wealth-tax Act, 1957, s. 27A-- CWT v. John L. Chackola (Ker) . . . 385

Business: - Income from other sources--Income from other sources or business income--Commission--Assessee carrying on business of distribution of computers--Transfer of business--Transferee paying commission to assessee--Commission allowed as business expenditure in hands of transferee--Commission assessable as business income of assessee--Income-tax Act, 1961 s. 28-- CIT v. FX Info Technologies P. Ltd . (Delhi) . . . 526

Business expenditure: - General principles--Resolution by company on account of pension--Liability worked out on actuarial basis--Not deductible--Income-tax Act, 1961, ss. 36, 37-- Brooke Bond India Ltd . v. Joint CIT (Cal) . . . 482

Capital gains: - Slump sale--Meaning of--Sale of undertaking as a going concern for a lump sum--Sale was a slump sale--Income-tax Act, 1961, s. 50B-- CIT v. Accelerated Freeze Drying Co. Ltd . (Ker) . . . 440

Deemed dividend: - Advance on salary and commission received by managing director--Advance on salary not assessable as deemed dividend--Advance on commission assessable as deemed dividend--Income-tax Act, 1961, s. 2(22)(e)-- Shyama Charan Gupta v. CIT (All) . . . 511

Income from other sources: - Business income--Assessee establishing to set up power plant--Delay in remitting security deposit by investing company resulting rejection of bid of assessee--Disputes before arbitration tribunal and High Court--Deposit returned kept as fixed deposits--Interest on fixed deposits--Assessable as income from other sources--Income-tax Act, 1961, ss. 28, 56-- CIT v. Madhya Bharat Energy Corporation Ltd . (Delhi) . . . 389

Industrial undertaking: - Special deduction under sections 80HH and 80-I--Condition precedent--Income should be derived from industrial undertaking--Interest on fixed deposits--Not entitled to special deduction--Income-tax Act, 1961, ss. 80HH, 80-I-- CIT v. Navbharat Explosives Co. P. Ltd. (Chhattisgarh) . . . 515

Interpretation of taxing statutes: - Reasonable interpretation-- Rai Bahadur G. V. Swaika Estates P. Ltd . v. Chief CIT (Cal) . . . 425

Loss: - Speculation--Carry forward and set off--Loss on purchase and sale of shares--Effect of Explanation to section 73--Finding that principal business of assessee was granting of loans--Loss from share dealing could be carried forward and set off against business income--Income-tax Act, 1961, ss. 72, 73-- PCBL Industrial Ltd . v. CIT (Cal) . . . 536

Offences and prosecution: - Fabricating false evidence--Assessee a tax practitioner, submitted return and certificate of tax deduction at source on behalf of client--Refund granted on basis thereof--Certificate found bogus and consequential refund obtained by fraud--Prosecution of assessee--No evidence to show assessee fabricated bogus certificate--No investigation to show client was a fictitious person--Acquittal justified--Code of Criminal Procedure, 1973, ss. 193, 196, 420, 468, 471--Income-tax Act, 1961, s. 277-- ITO v. R. Soundararajan (Mad) . . . 531

Purchase of immovable property by Central Government: - Tendering of apparent consideration--Scope of section 269UG--Amount can be tendered through Appropriate Authority--Income-tax Act, 1961, ss. 269UF, 269UG-- Rai Bahadur G. V. Swaika Estates P. Ltd . v. Chief CIT (Cal) . . . 425

Reassessment: - Notice--Validity--Effect of Explanation 2(b) to section 147--Return submitted but no assessment made--Discovery of understatement of income--Notice under section 148--Valid--Income-tax Act, 1961, ss. 147, 148-- CIT v. Madhya Bharat Energy Corporation Ltd . (Delhi) . . . 389

Notice after four years--No Failure to disclose material facts necessary for assessment--Notice based on subsequent decision of High Court--Not valid--Income-tax Act, 1961 s. 148-- Gujarat State Co-op. Agri. and Rural Develop. Bank Ltd. v. Deputy CIT (Guj) . . . 447

Rectification of mistake: - Mistake apparent from record--Bad debts--Provision that after 1-4-1989 assessee need not establish that debt had become irrecoverable--Failure to apply correct law--Deduction under section 36(1)(vii) a debatable issue--Rectification not permissible--Income-tax Act, 1961, ss. 36(1)(vii), 154-- CIT v. Jindal Stainless Ltd . (Delhi) . . . 495

Mistake apparent from record: - Failure to treat tax paid by employer on behalf of employees as salary for purposes of rule 3--Mistake which could be corrected --Income-tax Act, 1961, ss. 15, 16, 17, 154--Income-tax Rules, 1962, r. 3-- Mitsubishi Corporation v. CIT (Delhi) . . . 498

Reference: - Appeal to High Court--Competency of appeal or reference--Monetary limits laid down in circulars--Competency to be decided on basis of circular in force on date of appeal or reference--Income-tax Act, 1961, ss. 256, 260A-- CIT v. Navbharat Explosives Co. P. Ltd. (Chhattisgarh) . . . 515

Salary: - Perquisites--Tax paid by employer on behalf of employee--Part of salary--Income-tax Act, 1961, ss. 15, 16, 17--Income-tax Rules, 1962, r. 3-- Mitsubishi Corporation v. CIT (Delhi) . . . 498

Search and seizure: - Assessment in search cases--Notice under section 153A and questionnaires calling for details sent--Whether further notice under section 143(2) should be sent--Not necessary--Income-tax Act, 1961, ss. 143(2), 153A-- Ashok Chaddha v. ITO (Delhi) . . . 399

Block assessment: - Undisclosed income--Additions made not based on material discovered during search--Not valid--Income-tax Act, 1961, s. 158BB-- CIT v. Templeton Asset Management (India) P. Ltd. (Bom) . . . 541

Block assessment: - Undisclosed income--Debentures shown in books of account--Interest on debentures whether includible on accrual--Question to be decided in regular assessment and not in block assessment--Income-tax Act, 1961, s. 158BB-- CIT v. Templeton Asset Management (India) P. Ltd . (Bom) . . . 541

Speculative transaction: - Law applicable--Effect of amendment of proviso to section 43(5) w.e.f. 1-4-2006--Amendment not retrospective--Derivative transaction carried on in accounting year relevant to assessment year 2003-04--Speculative transaction--Loss incurred not a business loss--Income-tax Act, 1961, s. 43(5)-- CIT v. Bharat R. Ruia (HUF) (Bom) . . . 452

AUTHORITY FOR ADVANCE RULINGS

Non-resident: - India liaison office engaged in purchase of goods and also carrying out vendor identification and recommendation, review of costing data, quality control and uploading of material prices into internal product data management system--Activities not confined to purchase of goods for export alone--Liaison office is permanent establishment and income attributable to it assessable in India--Income-tax Act, 1961, ss. 5(2), 9(1)(i), Explns. 1(b), 2--Double Taxation Avoidance Agreement between India and U. S. A., arts. 5, 7(1)-- Columbia Sportswear Company, In re . . . 407

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Code of Criminal Procedure, 1973 :

Ss. 193, 196, 420, 468, 471: - Offences and prosecution--Fabricating false evidence--Assessee a tax practitioner, submitted return and certificate of tax deduction at source on behalf of client--Refund granted on basis thereof--Certificate found bogus and consequential refund obtained by fraud--Prosecution of assessee--No evidence to show assessee fabricated bogus certificate--No investigation to show client was a fictitious person--Acquittal justified-- ITO v. R. Soundararajan (Mad) . . . 531

Double Taxation Avoidance Agreement between India and U. S. A. :

Arts. 5, 7(1): - Non-resident--India liaison office engaged in purchase of goods and also carrying out vendor identification and recommendation, review of costing data, quality control and uploading of material prices into internal product data management system--Activities not confined to purchase of goods for export alone--Liaison office is permanent establishment and income attributable to it assessable in India-- Columbia Sportswear Company, In re (AAR) . . . 407

Income-tax Act, 1961 :

S. 2(22)(e): - Deemed dividend--Advance on salary and commission received by managing director--Advance on salary not assessable as deemed dividend--Advance on commission assessable as deemed dividend-- Shyama Charan Gupta v. CIT (All) . . . 511

S. 5(2): - Non-resident--India liaison office engaged in purchase of goods and also carrying out vendor identification and recommendation, review of costing data, quality control and uploading of material prices into internal product data management system--Activities not confined to purchase of goods for export alone--Liaison office is permanent establishment and income attributable to it assessable in India-- Columbia Sportswear Company, In re (AAR) . . . 407

S. 9(1)(i), Explns. 1(b), 2: - Non-resident--India liaison office engaged in purchase of goods and also carrying out vendor identification and recommendation, review of costing data, quality control and uploading of material prices into internal product data management system--Activities not confined to purchase of goods for export alone--Liaison office is permanent establishment and income attributable to it assessable in India-- Columbia Sportswear Company, In re (AAR) . . . 407

S. 15: - Rectification of mistake--Mistake apparent from record--Failure to treat tax paid by employer on behalf of employees as salary for purposes of rule 3--Mistake which could be corrected -- Mitsubishi Corporation v. CIT (Delhi) . . . 498

Salary :-- Perquisites--Tax paid by employer on behalf of employee--Part of salary-- Mitsubishi Corporation v. CIT (Delhi) . . . 498

S. 16: - Rectification of mistake--Mistake apparent from record--Failure to treat tax paid by employer on behalf of employees as salary for purposes of rule 3--Mistake which could be corrected -- Mitsubishi Corporation v. CIT (Delhi) . . . 498

Salary--Perquisites--Tax paid by employer on behalf of employee--Part of salary-- Mitsubishi Corporation v. CIT (Delhi) . . . 498

S. 17: - Rectification of mistake--Mistake apparent from record--Failure to treat tax paid by employer on behalf of employees as salary for purposes of rule 3--Mistake which could be corrected -- Mitsubishi Corporation v. CIT (Delhi) . . . 498

Salary: - Perquisites--Tax paid by employer on behalf of employee--Part of salary-- Mitsubishi Corporation v. CIT (Delhi) . . . 498

S. 28: - Business--Income from other sources--Income from other sources or business income--Commission--Assessee carrying on business of distribution of computers--Transfer of business--Transferee paying commission to assessee--Commission allowed as business expenditure in hands of transferee--Commission assessable as business income of assessee-- CIT v. FX Info Technologies P. Ltd . (Delhi) . . . 526

Income from other sources: - Business income--Assessee establishing to set up power plant--Delay in remitting security deposit by investing company resulting rejection of bid of assessee--Disputes before arbitration tribunal and High Court--Deposit returned kept as fixed deposits--Interest on fixed deposits--Assessable as income from other sources-- CIT v. Madhya Bharat Energy Corporation Ltd . (Delhi) . . . 389

S. 36: - Business expenditure--General principles--Resolution by company on account of pension--Liability worked out on actuarial basis--Not deductible-- Brooke Bond India Ltd . v. Joint CIT (Cal) . . . 482

S. 36(1)(vii): - Rectification of mistake--Mistake apparent from record--Bad debts--Provision that after 1-4-1989 assessee need not establish that debt had become irrecoverable--Failure to apply correct law--Deduction under section 36(1)(vii) a debatable issue--Rectification not permissible-- CIT v. Jindal Stainless Ltd . (Delhi) . . . 495

S. 37: - Business expenditure--General principles--Resolution by company on account of pension--Liability worked out on actuarial basis--Not deductible-- Brooke Bond India Ltd . v. Joint CIT (Cal) . . . 482

S. 43(5): - Speculative transaction--Law applicable--Effect of amendment of proviso to section 43(5) w.e.f. 1-4-2006--Amendment not retrospective--Derivative transaction carried on in accounting year relevant to assessment year 2003-04--Speculative transaction--Loss incurred not a business loss-- CIT v. Bharat R. Ruia (HUF) (Bom) . . . 452

S. 50B: - Capital gains--Slump sale--Meaning of--Sale of undertaking as a going concern for a lump sum--Sale was a slump sale-- CIT v. Accelerated Freeze Drying Co. Ltd . (Ker) . . . 440

S. 56: - Income from other sources--Business income--Assessee establishing to set up power plant--Delay in remitting security deposit by investing company resulting rejection of bid of assessee--Disputes before arbitration tribunal and High Court--Deposit returned kept as fixed deposits--Interest on fixed deposits--Assessable as income from other sources-- CIT v. Madhya Bharat Energy Corporation Ltd . (Delhi) . . . 389

S. 72: - Loss--Speculation--Carry forward and set off--Loss on purchase and sale of shares--Effect of Explanation to section 73--Finding that principal business of assessee was granting of loans--Loss from share dealing could be carried forward and set off against business income-- PCBL Industrial Ltd . v. CIT (Cal) . . . 536

S. 73: - Loss--Speculation--Carry forward and set off--Loss on purchase and sale of shares--Effect of Explanation to section 73--Finding that principal business of assessee was granting of loans--Loss from share dealing could be carried forward and set off against business income-- PCBL Industrial Ltd . v. CIT (Cal) . . . 536

S. 80-I: - Industrial undertaking--Special deduction under sections 80HH and 80-I--Condition precedent--Income should be derived from industrial undertaking--Interest on fixed deposits--Not entitled to special deduction-- CIT v. Navbharat Explosives Co. P. Ltd. (Chhattisgarh) . . . 515

S. 80HH: - Industrial undertaking--Special deduction under sections 80HH and 80-I --Condition precedent--Income should be derived from industrial undertaking--Interest on fixed deposits--Not entitled to special deduction-- CIT v. Navbharat Explosives Co. P. Ltd. (Chhattisgarh) . . . 515

S. 143(2): - Search and seizure--Assessment in search cases--Notice under section 153A and questionnaires calling for details sent--Whether further notice under section 143(2) should be sent--Not necessary-- Ashok Chaddha v. ITO (Delhi) . . . 399

S. 147: - Reassessment--Notice--Validity--Effect of Explanation 2(b) to section 147--Return submitted but no assessment made--Discovery of understatement of income--Notice under section 148--Valid-- CIT v. Madhya Bharat Energy Corporation Ltd . (Delhi) . . . 389

S. 148: - Reassessment--Notice after four years--No Failure to disclose material facts necessary for assessment--Notice based on subsequent decision of High Court--Not valid-- Gujarat State Co-op. Agri. and Rural Develop. Bank Ltd. v. Deputy CIT (Guj) . . . 447

Reassessment: - Notice--Validity--Effect of Explanation 2(b) to section 147--Return submitted but no assessment made--Discovery of understatement of income--Notice under section 148--Valid-- CIT v. Madhya Bharat Energy Corporation Ltd . (Delhi) . . . 389

S. 153A: - Search and seizure--Assessment in search cases--Notice under section 153A and questionnaires calling for details sent--Whether further notice under section 143(2) should be sent--Not necessary-- Ashok Chaddha v. ITO (Delhi) . . . 399

S. 154: - Appeal to Appellate Tribunal--Merger of order of Assessing Officer in appellate order--Issue not dealt with by Tribunal--No merger of order--Rectification of mistake with regard to such issue--Valid-- Mitsubishi Corporation v. CIT (Delhi) . . . 498

Rectification of mistake: - Mistake apparent from record--Bad debts--Provision that after 1-4-1989 assessee need not establish that debt had become irrecoverable--Failure to apply correct law--Deduction under section 36(1)(vii) a debatable issue--Rectification not permissible-- CIT v. Jindal Stainless Ltd . (Delhi) . . . 495

Rectification of mistake: - Mistake apparent from record--Failure to treat tax paid by employer on behalf of employees as salary for purposes of rule 3--Mistake which could be corrected -- Mitsubishi Corporation v. CIT (Delhi) . . . 498

S. 158BB: - Search and seizure--Block assessment--Undisclosed income--Additions made not based on material discovered during search--Not valid-- CIT v. Templeton Asset Management (India) P. Ltd. (Bom) . . . 541

Search and seizure--Block assessment--Undisclosed income--Debentures shown in books of account--Interest on debentures whether includible on accrual--Question to be decided in regular assessment and not in block assessment-- CIT v. Templeton Asset Management (India) P. Ltd . (Bom) . . . 541

S. 234B: - Advance tax--Failure to pay advance tax--Deferment of advance tax--Interest under sections 234B and 234C--Condition precedent--Liability to pay advance tax on last day of accounting year--Liability arising due to subsequent amendment of provision with retrospective effect--Interest could not be levied-- Emami Ltd. v. CIT (Cal) . . . 470

S. 234C: - Advance tax--Failure to pay advance tax--Deferment of advance tax--Interest under sections 234B and 234C--Condition precedent--Liability to pay advance tax on last day of accounting year--Liability arising due to subsequent amendment of provision with retrospective effect--Interest could not be levied-- Emami Ltd. v. CIT (Cal) . . . 470

S. 254: - Appeal to Appellate Tribunal--Merger of order of Assessing Officer in appellate order--Issue not dealt with by Tribunal--No merger of order--Rectification of mistake with regard to such issue--Valid-- Mitsubishi Corporation v. CIT (Delhi) . . . 498

S. 256: - Reference--Appeal to High Court--Competency of appeal or reference--Monetary limits laid down in circulars--Competency to be decided on basis of circular in force on date of appeal or reference-- CIT v. Navbharat Explosives Co. P. Ltd. (Chhattisgarh) . . . 515

S. 260A: - Reference--Appeal to High Court--Competency of appeal or reference--Monetary limits laid down in circulars--Competency to be decided on basis of circular in force on date of appeal or reference-- CIT v. Navbharat Explosives Co. P. Ltd. (Chhattisgarh) . . . 515

S. 269UF: - Purchase of immovable property by Central Government--Tendering of apparent consideration--Scope of section 269UG--Amount can be tendered through Appropriate Authority-- Rai Bahadur G. V. Swaika Estates P. Ltd . v. Chief CIT (Cal) . . . 425

S. 269UG: - Purchase of immovable property by Central Government--Tendering of apparent consideration--Scope of section 269UG--Amount can be tendered through Appropriate Authority-- Rai Bahadur G. V. Swaika Estates P. Ltd . v. Chief CIT (Cal) . . . 425

S. 277: - Offences and prosecution--Fabricating false evidence--Assessee a tax practitioner, submitted return and certificate of tax deduction at source on behalf of client--Refund granted on basis thereof--Certificate found bogus and consequential refund obtained by fraud--Prosecution of assessee--No evidence to show assessee fabricated bogus certificate--No investigation to show client was a fictitious person--Acquittal justified-- ITO v. R. Soundararajan (Mad) . . . 531

Income-tax Rules, 1962 :

r. 3: - Rectification of mistake--Mistake apparent from record--Failure to treat tax paid by employer on behalf of employees as salary for purposes of rule 3--Mistake which could be corrected -- Mitsubishi Corporation v. CIT (Delhi) . . . 498

Salary: - Perquisites--Tax paid by employer on behalf of employee--Part of salary -- Mitsubishi Corporation v. CIT (Delhi) . . . 498

Wealth-tax Act, 1957 :

S. 27A: - Appeal to High Court--Monetary limits for appeals by Department--Instructions of CBDT specifying limit--Exceptions--Substantial question of law likely to arise repeatedly--Assessability of wealth-tax on semi-constructed buildings on urban land--Exception clause (3) of Instruction No. 2 of 2005 applicable--Appeal maintainable-- CWT v. John L. Chackola (Ker) . . . 385

Security deposit given by a company to its sister concern, a firm, cannot b

Security deposit given by a company to its sister concern, a firm, cannot be regarded as deemed dividend u/s 2(22)(e).

Income-tax : Where the assessee-firm was not the shareholder of the lender company the amount received by the assessee as security deposit under an agreement coupled with certain obligations to be complied with could not be regarded to be the payment by the company by way of advance or loan to a shareholder and therefore, could not be assessed to tax in the hands of the assessee u/s 2(22)(e) [Section 2(22) - Deemed dividend] - [2011] 10 taxmann.com 162 (Agra - ITAT)

Corporat Loans/advances, can't be treated as deemed dividend

Loans/advances given by a company to another company, which is not a shareholder of lender company, can't be treated as deemed dividend

Income-tax : Deeming fiction of s. 2(22)(e) can be applied only in the hands of the shareholder and not the non-shareholder [Section 2(22) of the Income-tax Act, 1961 - Deemed dividend] - [2011] 10 taxmann.com 122 (Indore - ITAT)