Sunil Kapoor v. Commissioner Of Income Taxtamil Nadu – I121, Uttamar Gandhi Salainungambakkam, Chennai 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 25.02.2015 CORAM THE HONOURABLE MR. JUSTICE R.SUDHAKARANDTHE HONOURABLE MR. JUSTICE R.KARUPPIAH T.C.A. NO. 809 OF 2014 Sunil Kapoor.. Appellant/Appellant - Vs - Commissioner of Income TaxTamil Nadu – I121, Uttamar Gandhi SalaiNungambakkam, Chennai 600 034. .. Respondent/Respondent Appeal filed under Section 260-A of the Income Tax Act againstthe order dated 25.6.2013 passed by the Income Tax AppellateTribunal, Madras 'D' Bench, Chennai, made in ITA No.2215/Mds/2012. against the order of the Commissioner of Income Tax(Appeals III)121, Mahatma Gandhi Road, Chennai - 600034, dated 12.09.2012 and madein ITA No.127/11-12/A-111 which was preferred. against the Order of the Assistant Commissioner of Income TaxCampany Circle -II(4) Room No.514, New Block, 121, M.G.Road,Nungambakkam, Chennai 34 dated 31.10.2011 and made in PAN GIRNO. . For Appellant: Ms. K.Aparna Devi For Respondents: Mr. T.Ravikumar Aggrieved by the order of the Tribunal in dismissing the appealfiled by him, the appellant/assessee is before this Court by filingthe present appeal raising the following questions of law :- “1) Whether in the facts and circumstances of thecase, the Tribunal was right in differentiating thetwo accounts of the appellant in the books ofM/s.Kapoor Imaging Private Ltd., ignoring the factthat they relate to one and the same individual?https://hcservices.ecourts.gov.in/hcservices/ 2) Whether in the facts and circumstances of thecase, the Tribunal was right in considering only the'Sunil Kapoor' account leaving aside the 'SunilKapoor-Loan' account for the purpose of ascertainingthe deemed income during the relevant period? 3) Whether in the facts and circumstances of thecase, the Tribunal was right in not taking intoconsideration the opening balance of Rs.42,55,699/=in 'Sunil Kapoor-Loan' account as the starting pointof the transactions carried during the year? 4) Whether in the facts and circumstances of thecase, the Tribunal was right in not considering boththe accounts of the appellant which were maintainedonly separately for the purpose of convenience in thebooks of M/s.Kapoor Imaging Private Ltd., for thepurpose of determining the deemed dividend? 5) Whether in the facts and circumstances of thecase, the Tribunal was right in not considering thefact that the interest paid to the appellant was onthe outstanding balance taking into considerationboth the ledgers (Sunil Kapoor and Sunil Kapoor-Loan)in the books of Kapoor Imaging Limited and not onSunil Kapoor-Loan account alone? 6) Whether in the facts and circumstances of thecase, the Tribunal was right in not considering thefact that the salary of Rs.1,50,000/= per monthreceived by the appellant from the company should bedeemed to have been received every month though theledger shows only two entries – Rs.6,00,000/= on 31[st]July, 2008 and Rs.12,00,000/= on 31[st] March, 2009?” 2. The facts, in a nutshell, are as hereunder :- The appellant/assessee, in his return of income for theassessment year 2009-2010, on 12.8.10, declared an income ofRs.24.33,877/=, which was processed under Section 143 (1) of theIncome Tax Act. The case was selected for scrutiny and a noticeunder Section 143 (2) of the Income Tax Act was issued on theassessee on 25.8.10. The assessee responded to the said notice andappeared before the Assessing Officer. In the course of scrutinyproceedings, the assessee was asked to file the financial statementof M/s.Kapoor Imaging Pvt., Ltd. (for short 'KIPL') for theassessment year 2009-2010. On perusal of the same, the AssessingOfficer came to hold that the assessee had taken loans and advanceson various dates from the company in a total sum of Rs.76,86,829/=.The Assessing Officer also noticed that there were certain paymentsas on 31.3.09 and the balance due to the company was Rs.39,32,345/=.https://hcservices.ecourts.gov.in/hcservices/ It is also recorded by the Assessing Officer that the assessee ishaving more than 60% of the shares in KIPL. Therefore, the AssessingOfficer was of the view that the provisions of Section 2 (22) (e) ofthe Income Tax Act stood attracted in respect of the loans andadvances taken by the present appellant/assessee from KIPL. Thestand of the assessee is that in the books of accounts of thecompany, there was credit balance in favour of the appellant/assesseein a sum of Rs.45,44,303/=, while there is a debit balance ofRs.39,32,345/=. It is the further stand of the assessee that if thepayments made by the appellant/assessee to KIPL is given credit toand after taking note of the credit balance of Rs.45,44,303/= and thedebit balance of Rs.39,32,345/=, the company itself has to payRs.6,11,957/=. The ledger extract and the adjustment as pleaded bythe assessee, which are found in para-2 of the assessment order, areextracted hereinbelow for better clarity :- 3. The Assessing Officer, taking note of the fact that the loanoutstanding in the books of accounts of the company in favour of theappellant as on 31.3.09 is Rs.45,44,303/=, held that the amount ofRs.76,86,829/= received by the assessee from KIPL has not been repaidas on that date and, therefore, all the payments made by KIPL to theassessee upto 31.3.09 by way of loans and advances should be treatedhttps://hcservices.ecourts.gov.in/hcservices/ as “deemed dividend” in terms of Section 2 (22) (e) of the Income TaxAct because the conditions required to hold the transaction as'deemed dividend' have been satisfied. The Assessing Officer heldthat the four basic requirements for construing a transaction as'deemed dividend' are fulfilled in the present case. For betterclarity, the said portion of the order is extracted hereinbelow:- “(i) A shareholder, who is the beneficial owner ofshares with not less than 10% voting power. (ii) Any concern in which such shareholder is amember or partner, having beneficial entitlement ofnot less than 20% of such concern's income. (iii) Any payment on behalf, or for the individualbenefit of such shareholder. (iv) The company has surplus reserve ofRs.10,26,62,126/= for the year ending 31.03.2009.” 4. The Assessing Officer also held that in the books ofaccounts, the assessee has shown two separate accounts, one for loantaken from the company, viz., KIPL and one for loan given.Accordingly, the Assessing Officer held that irrespective of theamount paid by the assessee to KIPL, the entire amount received bythe assessee from KIPL under the head loans and advances amounting toRs.76,86,829/= is to be treated as 'deemed dividend' under Section 2(22) (e) of the Act. 5. Aggrieved by the said order of the Assessing Officer, theassessee preferred appeale before the CIT (Appeals), who, takingnote of the entire transaction, came to hold as follows :- “5.1 In the present case, there is no disputeregarding the fact that appellant was holding morethan 60 percent of shares in KIPL in which public arenot substantially interested. It is seen from thedetails submitted by the ld. AR that KIPL hadmaintained two separate accounts, i.e., (i) 'SunilKapoor – Loan' account and (ii) 'Sunil Kapoor'account. The two accounts are separate and distinctwhich is clear from the fact that interest ofRs.2,12,782/= has been paid to 'Sunil Kapoor-Loan'account on which TDS of Rs.24,108/= has also beendeducted/paid. Hence, the appellant cannot take aplea that both the accounts should be consideredtogether and the opening balance of Rs.42,55,629/= inthe 'Sunil Kapoor – Loan' account should be thestarting point of the transactions carried on duringthe year. Credit of Rs.42,55,629/= cannot be givenwhile considering the issue of deemed dividend u/s 2https://hcservices.ecourts.gov.in/hcservices/ (22)(e) since it pertained to a distinct and separateaccount. Hence, only the individual account, i.e.,'Sunil Kapoor' account has to be considered fordetermining and quantifying deemed dividend u/s 2 (22)(e). 5.2 The A.O. has considered all payments made byKIPL on behalf of the appellant amounting toRs.76,86,829/= as the deemed dividend ignoring thepayment made by the assessee to KIPL or received byKIPL on behalf of the assessee. In my view, such aninterpretation is not proper. Only that amount ofloand and advances, which is actually received by theassessee shareholder from the company during therelevant assessment year would fall within theinclusive sub-clause (e) of definition of 'dividend'appearing in Section 2 (22) (e). The Hon'ble BombayHigh Court in the case of CIT v. P.K. Badiani, 76 ITR369 (Bom.) has held that in case of a mutual, open andcurrent account which a shareholder has with acompany, every debit, i.e., every payment by thecompany to the shareholder may not be a loan. To betreated as a loan, every amount paid must make companya creditor of the shareholder for that amount. If,however, at the time when the payment is made, thecompany is already a debtor of the shareholder, thepayment would be merely a repayment by the companytowards its existing debt. It would be a loan by thecompany only if the payment exceeds the amount of itsalready existing debt and that too only to the extentof the excess. Therefore, the position as regardseach debit will have to be individually considered,because it may or may not be a loan. The AO is,therefore, directed to verify each debit entry on theaforesaid line and treat only the excess amount asdeemed dividend u/s 2 (22) (e) of the Act. The groundis partly allowed for statistical purpose.” 6. According to the CIT (Appeals), the provisions of Section 2(22) (e) of the Act stand attracted. However, in calculating thedividend amount, the Assessing Officer had erred in not taking intoconsideration the amount that has been repaid by the assessee toKIPL. Therefore, the Assessing Officer was directed to verify eachand every transaction and, accordingly, was directed to redeterminethe dividend amount. 7. Against the said order, the assessee pursued the matterbefore the Tribunal and in the light of the finding of CIT (Appeals)in para 5.1 and 5.2, which have already been extracted above, theTribunal came to hold that on a reading of Section 2 (22) (e) of theAct, the reasoning given by the CIT (Appeals) is wholly justified andhttps://hcservices.ecourts.gov.in/hcservices/ there is no reason to interfere with the said order. Aggrieved bythe said order of the Tribunal, the assessee has preferred thepresent appeal. 8. The contention of the learned counsel for theappellant/assessee is that the two transactions, one is advance bythe assessee to the company in a sum of Rs.45,44,303/= and other is areceipt of Rs.76,86,829/=, should be taken as one component as itemanates from one and the same person and, therefore, thereconciliation should be done on that basis and not separately asdone by the Assessing Officer and confirmed by the appellateauthorities. The said exercise, as done by the authorities below, isbad in law and, therefore, the order of the Tribunal deserves to beset aside and the appeal has to be allowed. 9. Heard the learned counsel appearing for the appellant and thelearned standing counsel appearing for the respondent and perused thematerials available on record. 10. The issue that requires determination in this case iswhether the Tribunal was justified in holding that the transaction inthe present case would fall under the definition of “Deemed Dividend”under Section 2 (22) (e) of the Income Tax Act. 9. Heard the learned counsel appearing for the appellant and thelearned standing counsel appearing for the respondent and perused thematerials available on record. 10. The issue that requires determination in this case iswhether the Tribunal was justified in holding that the transaction inthe present case would fall under the definition of “Deemed Dividend”under Section 2 (22) (e) of the Income Tax Act. 11. On a perusal of the documents available on record, it is tobe pointed out here that the contention of the learned counsel forthe appellant that the two transactions are done by a single entity,viz., the appellant/assessee and, therefore, the same has to betreated as a single transaction, is per se, not correct. The saidissue has been dealt with more clarity by the CIT (Appeals), where ithas been clearly held that there are two separate accounts, one asSunil Kapoor loan account, which is in a sum of Rs.45,44,303/= forwhich interest of Rs.2,12,783/= has been paid and TDS of Rs.24,108/=has been deducted and paid over to the department and the otheraccount is a running account, which has been reconciled as on 31.3.09at a sum of Rs.76,86,829/= and after giving credit to the variousamounts, balance due was determined as Rs.39,32,345/=. This findingof the CIT (Appeals) was upheld by the Tribunal stating that the twoaccounts are distinct and separate, which, this Court is of theconsidered opinion, on the facts of the present case, appears to becorrect and justified, warranting no interference. 12. However, at the present time, the larger issue before thisCourt is with regard to the interpretation of Section 2 (22) (e) ofthe Act on which much reliance has been placed by the Department tohold that the amount pending in the books of accounts of KIPL underthe head loans and advances to the assessee is to be construed as'deemed dividend'. For better clarity, Section 2 (22) (e) of theIncome Tax Act is extracted hereinbelow :- (e) any payment by a company, not being a company inwhich the public are substantially interested, of anysum (whether as representing a part of the assets ofthe company or otherwise) [made after the 31[st] day ofMay, 1987, by way of advance or loan to a shareholder,being a person who is the beneficial owner of shares(not being shares entitled to a fixed rate of dividendwhether with or without a right to participate inprofits) holding not less than ten per cent of thevoting power, or to any concern in which suchshareholder is a member or a partner and in which hehas a substantial interest (hereafter in this clausereferred to as the said concern)] or any payment byany such company on behalf, or for the individualbenefit, of any such shareholder, to the extent towhich the company in either case possesses accumulatedprofits.” 13. Before deciding the issue as raised in the case on hand, itwould be useful to look at the law on this subject, as dealt with bythe various Courts and the Supreme Court. 14. The Supreme Court in the case of Navnit Lal C.Javeri – Vs –K.K.Sen, Appellate Assistant Commissioner of Income Tax, Bombay (1965(56) ITR 198 (SC)) while upholding the constitutional validity ofSection 2 (6A) (e) of the Income Tax Act, as it stood then, which ispari materia with the present Section 2 (22) (e) of the Act, observedthat if the legislature realises that private controlled companiesgenerally adopt the device of making advances or giving loans totheir shareholders with the object of evading payment of tax, it canstep in to meet this mischief and create a fiction by which theamount ostensibly and nominally advanced to a shareholder as a loanis treated in reality for tax purposes as the payment of dividend tohim, such a fiction created cannot be said to be beyond the scope oflegislative competence. The relevant portion of the order, is quotedhereinbelow for better clarity :- The companies to which the impugned section appliesare companies in which at least 75 per cent. of thevoting power lies in the hands of persons other thanthe public, and that means that the companies arecontrolled by a group of persons allied together andhaving the same interest. In the case of suchcompanies, the controlling group can do what it likeswith the management of the company, its affairs andits profits within the limits of the Companies Act.https://hcservices.ecourts.gov.in/hcservices/ It is for this group to determine whether the profitsmade by the company should be distributed asdividends or not. The declaration of dividend isentirely within the discretion of this group. Whenthe legislature realised that though money wasreasonably available with the company in the form ofprofits, those in charge of the company deliberatelyrefused to distribute it as dividends to theshareholders, but adopted the device of advancing thesaid accumulated profits by way of loan or advance toone of its shareholders, it was plain that the objectof such a loan or advance was to evade the payment oftax on accumulated profits under section 23A. It willbe remembered that an advance or loan which fallswithin the mischief of the impugned section isadvance or loan made by a company which does notnormally deal in money-lending, and it is made withthe full knowledge of the provisions contained in theimpugned section. The object of keeping accumulatedprofits without distributing them obviously is totake the benefit of the lower rate of super-taxprescribed for companies. This object was defeated bysection 23A which provides that in the case ofundistributed profits, tax would be levied on theshareholders on the basis that the accumulatedprofits will be deemed to have been distributedamongst them. Similarly, section 12(1B) provides thatif a controlled company adopts the device of making aloan or advance to one of its shareholders, suchshareholders will be deemed to have received the saidamount out of the accumulated profits and would beliable to pay tax on the basis that he has receivedthe said loan by way of dividend. It is clear thatwhen such a device is adopted by a controlledcompany, the controlling group consisting ofshareholders have deliberately decided to adopt thedevice of making a loan or advance. Such anarrangement is intended to evade the application ofsection 23A. The loan may carry interest and the saidinterest may be received by the company; but the mainobject underlying the loan is to avoid payment oftax. It may ultimately be repaid to the company andwhen it is so repaid, it may or may not be treated aspart of accumulated profits. It is this kind of awell-planned device which section 12(1B) intends toreach for the purpose of taxation. It appears that such a device is adopted by privatecompanies in many countries. Simon has referred tothis device in these words: https://hcservices.ecourts.gov.in/hcservices/ It appears that such a device is adopted by privatecompanies in many countries. Simon has referred tothis device in these words: https://hcservices.ecourts.gov.in/hcservices/ "Generally speaking, sur-tax is charged only onindividuals, not on companies or other bodiescorporate. Various devices have been adopted fromtime to time to enable the individual to avoidsurtax on his real total income or on a portion ofit, and one method involved the formation of whatis popularly called a 'one-man company'. Theindividual transferred his assets, in exchange forshares, to a limited company, specially registeredfor the purpose, which thereafter received theincome from the assets concerned. The individual'stotal income for tax purposes was then limited tothe amount of the dividends distributed to him aspracticallytheonlyshareholder,whichdistribution was in his own control. The balanceof the income, which was not so distributed,remained with the company to form, in effect, afund of savings accumulated from income which hadnot immediately attracted surtax. Should theindividual wish to avail himself of the use of anypart of these savings he could effect this byborrowing from the company, any interest payableby him going to swell the savings fund; and at anytime the individual could acquire the wholebalance of the fund in the character of capital byputting the company into liquidation". What Simon says about one-man company can be equallytrue about the controlled company whose affairs arecontrolled by a group of persons closely knit andhaving the same interest.” 15. Following the view of the Supreme Court in Navnit LalJaveri's case (supra), the Calcutta High Court, in the case of Smt.Tarulata Shyam & Ors. – Vs - Commissioner of Income Tax, West BengalII, Calcutta (1971 (82) ITR 485 (Cal)), held that tax is attracted atthe point when the loan is borrowed by the member/shareholder. Forbetter clarity, the relevant portion of the order is quoted hereunder:- “It is clear from the above cited passage that if acontrolled company adopted a device of making a loanor advance to one of its shareholders such ashareholder would be deemed to have received the saidamount out of the accumulated profits and would beliable to pay tax on the basis that he had receivedthe said loan by way of dividend. Whether the loan isultimately repaid to the company or not ishttps://hcservices.ecourts.gov.in/hcservices/ immaterial. This decision would seem to answer allthe contentions raised by Mr. Choudhury against theassessment of the amount as dividend. Further, aspointed out by both the Accountant Member and thePresident of the Income-tax Appellate Tribunal,neither the Bombay High Court nor the Madras HighCourt, who had also an occasion to consider thisquestion, had any doubts that the liability to taxattached as soon as the loan was taken from thecompany. For instance, in the Madras case of K. M. S.Lakshmana Aiyar v. Additional Income-tax Officer, itwas observed that under section 2(6A)(e) a loan oradvance by a controlled company to its shareholderwould attract tax liability though such a loan mightbe repaid subsequently even during that year. Again,the Bombay High Court in Navnit Lal C. Javeri v. K.K. Sen, from which the aforesaid appeal was taken tothe Supreme Court, has observed as follows : "The tax is attracted at the point of time whenthe said loan is borrowed by the members." We have, therefore, no hesitation in holding thatthe liability to be taxed attaches to any amounttaken as a loan by a shareholder from the company atthe moment the loan is borrowed and it is immaterialwhether the loan is repaid before the end of theaccounting year or not. The answer to the questionreferred must, therefore, be in the affirmative andin favour of the department.” 16. The Supreme Court in the case of Smt. Tarulata Shyam & Ors.– Vs - Commissioner of Income Tax, West Bengal (1977 (108) ITR 345(SC)), which appeal is a product of the above referred to decisionfrom the Calcutta High Court, has culled out the situation in whichthe payments made to a shareholder are to be treated as taxabledividend, wherein five conditions have been laid down for the purposeof determination of the head on which the amount is to be taxed. Forbetter clarity, the said portion of the order is extractedhereinbelow :- “From the above discussion it emerges clear that thefiction created by section 2(6A)(e) read with section12(1B) of the Act is inexorably attracted as soon asall the conditions necessary for its application existin a case. In Navnit Lal's case [1965]56 ITR 198, 202(SC) this court, after an analysis of theseprovisions, listed these conditions, as follows https://hcservices.ecourts.gov.in/hcservices/ " . . . . . the combined effect of these twoprovisions is that three kinds of payments madeto the shareholder of a company to which the saidprovisions apply, are treated as taxable dividendto the extent of the accumulated profits held bythe company. There three kinds of payments are:(1) payments made to the shareholder by way ofadvance or loan; (2) payments made on his behalf;and (3) payments made for his individual benefit.There are five conditions which must be satisfiedbefore section 12(1B) can be invoked against ashareholder. The first condition is that thecompany in question must be one in which thepublic are not substantially interested withinthe meaning of section 23A as it stood in theyear in which the loan was advanced. The secondcondition is that the borrower must be ashareholder at the date when the loan wasadvanced ; it is immaterial what the extent ofhis shareholding is. The third condition is thatthe loan advanced to a shareholder by such acompany can be deemed to be dividend only to theextent to which it is shown that the companypossessed accumulated profit at the date of theloan. This is an important limit prescribed bythe relevant section. The fourth condition isthat the loan must not have been advanced by thecompany in the ordinary course of its business.In other words, this provision would not apply tocases where the company which advances a loan toits shareholder carries on the business of moneylending itself ; and the last condition is thatthe loan must have remained outstanding at thecommencement of the shareholder's previous yearin relation to the assessment year 1955-56.(Emphasis supplied). The first four conditions factually exist in theinstant case. The last condition is not applicablebecause it was a transitory provision applicable tothe assessment year 1955-56 only, while we areconcerned with the assessment year 1957-58, and theprevious year is the calendar year 1956.” 17. Keeping the above guidelines, as postulated by the SupremeCourt in mind, a cursory look into the facts of the present casewould disclose that there is no dispute that the company is acontrolled (private limited) company in which the public are notsubstantially interested. Further, the assessee is admittedly ashareholder and Director of KIPL. It is also beyond controversy thathttps://hcservices.ecourts.gov.in/hcservices/ The first four conditions factually exist in theinstant case. The last condition is not applicablebecause it was a transitory provision applicable tothe assessment year 1955-56 only, while we areconcerned with the assessment year 1957-58, and theprevious year is the calendar year 1956.” 17. Keeping the above guidelines, as postulated by the SupremeCourt in mind, a cursory look into the facts of the present casewould disclose that there is no dispute that the company is acontrolled (private limited) company in which the public are notsubstantially interested. Further, the assessee is admittedly ashareholder and Director of KIPL. It is also beyond controversy thathttps://hcservices.ecourts.gov.in/hcservices/ at all material times, the company possessed "accumulated profits" inexcess of the amount which the assessee-shareholder was paid duringthe previous year. The Income-tax Officer found that surplus reserveof the company for the year ending 31.3.09 stood atRs.10,26,62,126/=. The assessee drew money for the purpose of makingpayments, which were personal in nature, aggregating Rs. 76,86,829/=,which amount was shown as loan or advance in the books of accounts ofKIPL. The company's business is not money-lending and it could not besaid that the loans had been advanced by the company in the ordinarycourse of its business. In such circumstances, in the instant case,all the amounts advanced to the assessee/appellant under the headloans and advances fall squarely within the ambit of Section 2 (22)(e) of the Income Tax Act. 18. The object of the Legislature in enacting section 2 (22) (e)is to prevent the escapement of tax by some shareholders. Undersection 2 (22) (e) of the Act, by a deeming provision, theLegislature has made payment of any advance or loan to a shareholdera deemed dividend so as to subject such payments to the levy of taxin the hands of the receiver of the said amount. It should be notedthat pari materia provision, viz., clause (e) of section 2(6A) of theAct was substituted for the original provision by the Finance Act,1955, with effect from 1[st] April, 1955. The object of the provision isto prevent avoidance of tax by the shareholders of a closely-heldcompany. In such a company, a few shareholders, who effectivelycontrol it, can easily exploit its juristic personality, byrestraining it from distributing its yearly dividends and therebyaccumulating its profits, and thus saving themselves from a highertax incidence resulting from the distribution of dividend. 19. In such a backdrop, the above provision came to be insertedso as to make any payment made by the company by way of advances andloans to shareholders, who satisfy certain conditions, as enumeratedabove, to fall under the head “dividend” as defined under Section 2(22) (e) of the Income Tax Act. In the case on hand, theassessee/appellant having received the above amount from KIPL underthe head loans and advances as shown in the books of accounts ofKIPL, the five ingredients, as propounded by the Supreme Court inTarulata Shyam's case (supra) to bring the said amount under theambit of dividend are wholly satisfied in the present case and thefour parameters, as enumerated by the Assessing Officer, are alsosquarely attracted to the case of the assessee herein. Therefore,any amount paid to the assessee by the company during the relevantyear, less the amount repaid by the assessee in the same year, shouldbe deemed to be construed as “dividend” for all purposes. 20. However, in the case on hand, the Assessing Officer hastaken the entire amount of Rs.76,86,829/= received by the assesseefrom the company as dividend, while computing the income, but hashttps://hcservices.ecourts.gov.in/hcservices/ 20. However, in the case on hand, the Assessing Officer hastaken the entire amount of Rs.76,86,829/= received by the assesseefrom the company as dividend, while computing the income, but hashttps://hcservices.ecourts.gov.in/hcservices/ lost sight of the payment made. In such circumstances, this Court isof the considered opinion that the CIT (Appeals) has rightly come tothe conclusion that “the position as regards each debit will have tobe individually considered, because it may or may not be a loan. TheAO is, therefore, directed to verify each debit entry on theaforesaid line and treat only the excess amount as deemed dividendu/s 2 (22) (e) of the Act”. We find such a direction issued by theCIT (Appeals), as upheld by the Tribunal is in consonance with theprovision of Section 2 (22) (e) of the Act, and only those amounts,which reflect in the debit side of the books of accounts of thecompany falling under the definition of loans and advances, withregard to the shareholder, in the relevant year will be entitled tobe taken as deemed dividend. GLNTo 1. The Commissioner of Income Tax Tamil Nadu – I 121, Uttamar Gandhi Salai Nungambakkam, Chennai 600 034. 2. The Assistant Registrar, III Floor, Rajaji Bhavan, Besant Nagar, Chennai - 600 090.The Income Tax Appellate Tribunal Madras 'D' Bench, Chennai. 3.The Assistant Commissioner of Income Tax, Company Circle -II94)Room No.514, New Block, 121, M.G.Road, Nungambakkam, Chennai -34. 1 cc to Mr.N.Muralidhara Reddy ,Advocate, SR.No.103391 cc to Mr. T.Ravi Kumar,Advocate, SR.No.10269 T.C.A. NO. 809 OF 2014 ug(co)pmk.10.4.2015