M/S G G OILS & FATS PVT.LTD , BATHINDA V. DEPUTY COMMISSIONER OF INCOME TAX, BATHINDA

ITA 508/ASR/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8781 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-04-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 31-07-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA; PARSHOTAM K SINGLA
• Keywords: Unexplained cash credit; Peak credit; Rule of consistency; Source of fund; Question of law; Deemed dividend; Capital expenditure; TDS
• Section: 143(3); 2(22)(e); 260A; 32; 68; 56

Judgement Text

CORRECTED COPY IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NO. 508/ASR/2017 ASSES SMENT YEAR: 2014-15 G. G. OILS & FATS PVT. LTD., 2301, BHUPINDRA FLOUR MILLS, AMRIK SINGH ROAD, BATHINDA [PAN: AADCG 8857 H] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA & SH. PARSHOTAM K . SINGLA (ADV.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 11.04.2019 DATE OF PRONOUNCEMENT: 05.07.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), BATHINDA (CI T(A) FOR SHORT) DATED 21.6.2017, DISMISSING THE ASSESSEES APPEAL CONTEST ING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREI NAFTER) FOR ASSESSMENT YEAR (AY) 2014-15 VIDE ORDER DATED 16.12.2016. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE -COMPANY, A DEALER IN EDIBLE/NON-EDIBLE OILS, WAS FOUND DURING THE ASSESS MENT PROCEEDINGS TO HAVE RECEIVED UNSECURED LOAN/S DURING THE RELEVANT PREVI OUS YEAR, I.E., F.Y. 2013-14, FROM ANOTHER COMPANY, NAMELY, GURDAS AGRO PVT. LTD. (GAPL), IN WHICH IT HELD SHARES WITH 34.40% VOTING POWER. THE LOAN, WHI CH WAS INTEREST-BEARING, ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 2 WAS NOT FOR ANY PARTICULAR AMOUNT, BUT IN THE FORM OF AN OPEN CURRENT ACCOUNT WITH REGULAR DEBITS AND CREDITS DURING THE YEAR; TH E OPENING BALANCE (AS ON 01.4.2013) BEING IN FACT AT A DEBIT (I.E., RECEIVAB LE) OF RS.279.48 LACS, WHICH THOUGH STOOD LIQUIDATED BY 15.4.2013, TURNING INTO A CREDIT (PAYABLE) BALANCE OF RS.304.91 LACS ON THAT DATE. THE PEAK BALANCE FOR T HE YEAR WAS AT RS. 3266.12 LACS ON 06.11.2013. GAPL WAS A COMPANY IN WHICH PUB LIC IS NOT SUBSTANTIALLY INTERESTED, I.E., IS COMPANY OTHER THAN THAT DEFINE D U/S. 2(18) OF THE ACT. TO THE EXTENT OF ITS ACCUMULATED PROFIT, THEREFORE, THE L OAN OR ADVANCE TO THE ASSESSEE WAS LIABLE TO THE ASSESSED IN ITS HANDS AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. THE ACCUMULATED PROFIT UP TO 31.3.2013, I.E., IMMEDIATELY PRIOR TO THE CURRENT YEAR, STOOD AT RS. 67.36 LACS. THE PROFIT F OR THE YEAR, AS PER THE AUDITED ACCOUNTS, WAS AT RS. 150.00 LACS, SO THAT, ON A PRO -RATA BASIS (I.E., UP TO 06/11/2013), IT WORKED TO RS. 49.81 LACS. THE TOTAL ACCUMULATED PROFIT UP TO THAT DATE, I.E., RS.117.17 LACS, WAS ACCORDINGLY, AFTER SHOW CAUSING THE ASSESSEE, BROUGHT TO TAX U/S. 2(22)(E) R/W S. 56 OF THE ACT I N ASSESSMENT. IN APPEAL, THE ASSESSEE RAISED SEVERAL CONTENTIONS, EACH OF WHICH WAS MET BY THE LD. CIT(A). THE FINANCIAL STATEMENTS DID NOT REFLECT ANY TRADIN G TRANSACTION OR BUSINESS RELATIONSHIP BETWEEN THE TW O, I.E., THE PAYER (GAPL) AND THE PAYEE (ASSESSEE) COMPANIES , WITH IN FACT THE BALANCE AS ON 31.3.2014 (RS. 14.48 LACS) BEING REFLECTED AS AN UNSECURED L OAN IN THE ASSESSEES BALANCE- SHEET AS AT THE YEAR-END. THE ASSESSEE HAD SUBSCRIB ED TO 40 LAKH SHARES IN GAPL DURING THE YEAR, WHICH WORKED TO 34.40% SHARE-HOLDI NG THEREIN, SO THAT THERE WAS NO MERIT IN INVOKING THE RULE OF CONSISTENCY; T HE PROVISION BECOMING ACCORDINGLY APPLICABLE FOR THE FIRST TIME ONLY FOR THE CURRENT YEAR. THE ASSESSEE HAVING RECEIVED RS. 4267.01 LACS DURING THE CURRENT YEAR, THE ASSESSING OFFICER (AO) HAD, IN FACT, BEEN REASONABLE IN WORKING THE S UM ASSESSABLE U/S. 2(22)(E) U/S. 56 AT RS.117.17 LACS, WHICH WAS ACCORDINGLY CO NFIRMED BY THE FIRST APPELLATE AUTHORITY, PLACING RELIANCE ON TARULATA SHYAM V. CIT [1997] 108 ITR 345 (SC) AND SARADA (P.) V. CIT [1998] 229 ITR 444 (SC). ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 3 AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL, RAISIN G THE FOLLOWING GROUNDS: 1. THAT THE ORDER OF COMMISSIONER OF INCOME TAX (AP PEALS) AND DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1 BATHINDA IS AGA INST LAW & FACTS. 2. THAT COMMISSIONER OF INCOME TAX (APPEALS) WAS ER RED IN LAW TO SUSTAIN THE AMOUNT TO ASSESS AS 'DEEMED DIVIDEND' OF RS. 1,17,1 7,142.00 IN ABSENCE OF ANY ADVERSE FINDING WITH REGARD TO BUSINESS LOANS & ADVANCES. T HE ADDITION MADE BY ASSESSING OFFICER U/S. 2(22)(E) OF INCOME TAX ACT 1961 IS HIG HLY UNJUSTIFIED IN EYES OF LAW AS THE SAID SECTION HAS BEEN WRONGLY INVOKED. 3. THAT CIT (APPEALS) WAS NOT JUSTIFIED TO SUSTAIN THE ADDITION OF RS. 1,17,17,142.00 U/S. 56 ON ACCOUNT OF DEEMED DIVIDEND WITHOUT CON SIDERING THE FACTS AND WRITTEN SUBMISSION FILED DURING COURSE OF APPELLANT PROCEED INGS. 3. BEFORE US, THE ASSESSEES PRIME CONTENTION WAS O F HAVING MAINTAINED A RUNNING ACCOUNT WITH GAPL. THE TRANSFER OF FUNDS FR OM ONE COMPANY TO ANOTHER WAS ON NEED BASIS. WHILE THE ASSESSE-COMPAN Y WAS THE BENEFICIARY OF THE SUMS RECEIVED THEREFROM, GAPL, THE PAYER COMPAN Y, WAS THE BENEFICIARY OF THE SUMS PAID BY THE ASSESSEE THERETO. THE SAME THE REFORE COULD NOT BE REGARDED AS EITHER A LOAN OR AN ADVANCE, FOR S. 2(22)(E) TO APPLY, BUT ONLY AS AN OPEN, MUTUAL AND CURRENT ACCOUNT. THE CREDIT OBTAINED ONL Y FOR A PERIOD OF 82 DAYS DURING THE RELEVANT YEAR. IT WAS UNDER THESE CIRCUM STANCES THAT THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V. SURAJ DEV DADA [2014] 367 ITR 78 (P&H), WHERE THE CREDIT WAS FOR 55 DAYS ONLY, HELD THAT TH E PROVISION OF S. 2(22)(E), WHICH WAS TO STOP THE MISUSE BY TAKING FUNDS OUT OF THE COMPANY BY WAY OF A LOAN OR ADVANCE INSTEAD OF DIVIDEND AND, THEREBY, A VOID TAX, COULD BE INVOKED. SIMILAR VIEW, IT WAS SUBMITTED, WAS EXPRESSED BY TH E HON'BLE CALCUTTA HIGH COURT IN CIT V. GAYATRI CHAKRABORTY [2018] 407 ITR 730 (CAL), RENDERED AFTER CONSIDERING THE DECISIONS BY THE APEX COURT IN SARDA (P.) (SUPRA) AND CIT V. MUKUNDRAY K. SHAH [2007] 290 ITR 433 (SC). THE DECISIONS IN TARULATA SHYAM (SUPRA) AND SARDA (P.) , IT WAS ARGUED, ARE DISTINGUISHABLE INASMUCH AS TH ERE WERE NO MUTUAL BENEFITS AND OBLIGATIONS IN THE FACT S OF THE SAID CASES. IN BOTH THESE CASES THERE WERE ONLY ONE-WAY TRANSACTIONS DU RING THE YEAR, I.E., PAYMENT ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 4 BY THE PAYER-COMPANY TO THE ASSESSEE-SHAREHOLDER, W HILE IN THE INSTANT CASE THERE ARE TRANSACTIONS BOTH WAYS; THE ASSESSEE-COMP ANY ALSO MAKING PAYMENT/S TO THE PAYER-COMPANY (GAPL). THIS IS PARTICULARLY S O AS THE TWO COMPANIES ARE IN THE SAME LINE OF BUSINESS. ON A QUERY BY THE BEN CH AS TO IF THE PROVISION OF INTEREST, CHARGED (TO THE ASSESSEE-COMPANY BY GAPL) AT RS. 5.19 LACS FOR THE YEAR ON THE OVERDRAFT ACCOUNT, WOULD TAKE THE SUM B ORROWED BY THE ASSESSEE DURING THE YEAR (AT A MAXIMUM OF RS.3266.12 LACS) O UT OF THE PURVIEW S. 2(22)(E), THE LD. COUNSEL FOR THE ASSESSEE, SH. ARO RA, DID NOT OFFER ANY DEFINITE ANSWER, WITH THE BENCH OBSERVING THAT THESE ASPECTS OF THE MATTER HAVE UNDERSTANDABLY BEEN CONSIDERED BY THE HON'BLE APEX COURT PER ITS DECISIONS IN THE MATTER. THE LD. SR. DEPARTMENTAL REPRESENTATIVE (DR) WOULD RELY ON THE IMPUGNED ORDER, STATING THAT NEITHER THE PRIMARY FA CTS OF THE CASE ARE IN DISPUTE NOR IN FACT THE LAW IN THE MATTER, EXPLAINED BY THE APEX COURT PER ITS SEVERAL DECISIONS, TO SOME OF WHICH REFERENCE STANDS MADE B Y THE LD. CIT(A). 4. WE HAVE HEARD THE PARTIES, PERUSED THE MATERIAL ON RECORD, AND GIVEN OUR CAREFUL CONSIDERATION TO THE MATTER. THE EDIFICE OF THE ASSESSEES CASE IS THAT IT HAS BOTH, GIVEN, AS WELL AS RECEIVED, AMOUNTS TO/FR OM GAPL, I.E., TO MUTUAL BENEFIT AND, THEREFORE, S. 2(22) (E) OF THE ACT SHA LL NOT APPLY EVEN AS HELD BY THE HON'BLE COURTS, REFERENCE TO WHICH, INCLUDING BY TH E HON'BLE JURISDICTIONAL HIGH COURT, STANDS MADE. THE MATTER, AS WE FIND, IS NO L ONGER RES INTEGRA , HAVING BEEN ABUNDANTLY CLARIFIED, AND IN ALL ITS ASPECTS, BY THE HON'BLE COURTS, INCLUDING BY THE LARGER BENCHES OF THE APEX COURT, ALL UNANIMOUS IN THEIR VERDICT . THE ASSESSEES CLAIM (REFER ITS GD. 2) IS ALSO N OT TENABLE ON FACTS. IT IS RATHER SURPRISING THAT DESPITE SUCH CLEAR ENUNCIATION OF LAW PER BINDING J UDICIAL PRECEDENTS, SUCH MATTERS CONTINUE TO BE LITIGATED B EFORE THE APPELLATE FORUMS. IT IS THE LAW AS ELUCIDATED AND THE PRIMARY FACTS OF T HE CASE, ON BOTH OF WHICH THERE IS NO DISPUTE, OR EVEN SCOPE FOR, THAT SHALL ACCORD INGLY INFORM OUR ORDER. ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 5 4.1 WE MAY BEGIN BY REPRODUCING THE RELEVANT PROVIS ION, AS UNDER: DEFINITIONS 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES ,- (1) (21) . (22) DIVIDEND INCLUDES- (A) (D) .. (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS RE PRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MA Y, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFIC IAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH O R WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING PO WER, OR TO ANY CONCERN, IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN) 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 PROFIT S; BUT 'DIVIDEND' DOES NOT INCLUDE (I) . (IA) (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER OR T HE SAID CONCERN BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY; (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET O FF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TR EATED AS A DIVIDEND WITHIN THE MEANING OF SUB- CLAUSE (E), TO THE EXTENT TO WHICH IT IS SO SET OFF. AS A MERE READING OF THE PROVISION, LANGUAGE OF WHI CH IS CLEAR AND UNAMBIGUOUS, SUGGESTS AND, IN ANY CASE, UPON A FAIR LOOK AND READING THEREOF, THE PROVISION IS TRIGGERED WHERE: A) A LOAN OR ADVANCE IS GIVEN BY A COMPANY (IN WHIC H THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED) TO A SHAREHOLDER WHO BENE FICIALLY OWNS SHARES THEREIN TO THE EXTENT NOT LESS THAN 10% OF THE VOTING POWER THEREIN; OR B) A LOAN OR ADVANCE IS GIVEN BY SUCH A COMPANY TO ANY CONCERN IN WHICH SUCH SHAREHOLDER HAS SUBSTANTIAL INTEREST (EXPLAINE D AS ENTITLING HIM TO A BENEFICIAL INTEREST IN 20% OF ITS INCOME); OR C) ANY PAYMENT IS MADE BY SUCH A COMPANY ON BEHALF OF, OR FOR THE BENEFIT OF, SUCH A SHAREHOLDER. ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 6 THE LOAN OR ADVANCE OR PAYMENT IS, UNDER SUCH CIRCU MSTANCES, TO BE DEEMED AS DIVIDEND TO THE EXTENT THE PAYING COMPANY HAS ACCUM ULATED PROFITS, THE EXCEPTION BEING WHERE THE LENDING COMPANY IS IN THE BUSINESS OF MONEY LENDING. 4.2 WE MAY AT THIS STAGE ADVERT TO THE RELEVANT TRA NSACTIONS COMPRISING THE IMPUGNED CREDIT OF RS. 3266.12 LACS, DEEMED AS DIVIDEND TO THE EXTE NT OF THE ACCUMULATED PROFIT (OF GAPL), ON THE BASIS OF THE L EDGER ACCOUNT OF GAPL IN THE BOOKS OF THE ASSESSEE-COMPANY (PB PGS. 3-4): ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 7 DATE PARTICULARS NARRATION DEBIT CREDIT CLOSING BALANCE 01/04/2013 OPENING BALANCE 27947593 27947593.00 DR 09/04/2013 HDFC BANK CH. NO. : XXX 15/04/2013 HDFC BANK CH. NO. : XXX 04/05/2013 HDFC BANK CH. NO.: XXX 08/05/2013 HDFC BANK CH. NO.: XXX 13/05/2013 HDFC BANK CH. NO.: XXX 0.00 23/05/2013 FLC INSURANCE EXP POLICY NO. XXX 29/06/2013 HDFC BANK CH. NO.: XXX 12/07/2013 HDFC BANK CH. NO. : XXX 0.00 ' 29/07/2013 FLC INSURANCE EXP POLICY NO. XXX 31/07/2013 FLC INSURANCE EXP POLICY NO. XXX 769144.00 CR 15/10/2013 FLC INSURANCE EXP POLICY NO. 247482.00 1016626.00 CR 15/10/2013 FLC INSURANCE EXP POLICY NO. 124491.00 1141117.00 CR 16/10/2013 HDFCBANK CH. NO: 769144.00 371973.00 CR 17/10/2013 FLC INSURANCE EXP POLICY NO. 250482.00 622455.00 CR 05/11/2013 HDFC BANK CH. NO. 54400000.00 55022455.00 CR 05/11/2013 HDFC BANK CH. NO. 54045000.00 109067455.00 CR 05/1 1/2013 HDFC BANK CH. NO. 54000000.00 163067455.00 CR 05/11/2013 HDFC BANK CH. NO. 53945000.00 217012455.00 CR 06/11/2013 HDFC BANK CH. NO. 54000000.00 271012455.00 CR 06/11/2013 HDFC BANK CH. NO. 55600000.00 326612455.00 CR 13/11/2013 TO 29/11/2013 HDFC BANK CH. NO. XXX 2121455,00 CR 29/11/2013 HDFC BANK CH. NO. 10000000.00 7878545.00 DR 29/11/2013 TO 08/01/2014 HDFC BANK CH. NO. XXX XXX 1349481.00 CR 05/02/2014 TO 03/03/2014 HDFC BANK CH. NO. XXX XXX 981313.00 CR 31 /03/2014 INT E REST PAID INTEREST 518665.00 1499978.00 CR 31/03/2014 TDS INT E REST TDS ON INTEREST 51867 1448111.00 CR (PAY A BLE) ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 8 THE PAYMENT OF RS. 6.22 LACS (ON OCTOBER 15 & 17, 2 013) IS ON ACCOUNT OF INSURANCE IN RESPECT OF FOREIGN LETTER OF CREDIT (F LC) BY GAPL FOR AN ON BEHALF OF THE ASSESSEE-COMPANY, CLAIMED BY THE LATTER AS A N INSURANCE EXPENSE. THE BALANCE PAYMENT OF RS. 3259.90 LACS (ON NOVEMBER 5 & 6, 2013) IS BY WAY OF DIRECT PAYMENTS, CREDITED TO THE ASSESSEES BANK AC COUNT WITH HDFC BANK. THE SAME THUS FALLS UNDER LIMB (C) AND, AS THE CASE MAY BE, LIMB (A), AFORE-STATED (PARA 4.1). THE REQUIREMENT OF THE PAYMENT BEING FO R THE BENEFIT OF THE PAYEE- SHAREHOLDER IS ATTACHED ONLY TO PAYMENT/S MADE INDI RECTLY, I.E., TO RS.6.22 LACS IN THE INSTANT CASE. THE SAID BENEFIT IS IMPLICIT IN T HE VERY CREDIT OF THE SAME BY THE ASSESSEE TO THE ACCOUNT OF GAPL (AND THE CORRESPOND ING DEBIT BY GAPL IN ITS ACCOUNTS TO THE ASSESSEES ACCOUNT) AND, FURTHER, I TS CLAIM AS AN EXPENDITURE BY THE ASSESSEE, I.E., AS AN EXPENSE OF ITS BUSINESS, BEING INCURRED FOR ITS PURPOSE/S. THERE IS NO DISPUTE AND, IN FACT, A CLAI M TO THAT EFFECT, I.E., OF THE PAYMENT RECEIVED BEING FOR THE ASSESSEES BENEFIT ( AND VICE-VERSA)(REFER PARA 3). RATHER, THE AMOUNT RECEIVED (RS.3266.12 LACS) BEING , ON ACCOUNT OF A LOWER AMOUNT OF ACCUMULATED PROFIT, FAR IN EXCESS OF THE SUM DEEMED AS DIVIDEND (RS. 117.17 LACS), THE INDIRECT RECEIPT (RS.6.22 LACS) C OULD EASILY BE IGNORED OR OVERLOOKED AS BEING RECEIVED, BY IMPLICATION, OUT O F OTHER THAN THE PROFIT OF GAPL, THE PAYER-COMPANY AND, THUS, NOT COVERED U/S. 2(22)(E), FOR IT TO BE REGARDED AS DIVIDEND THERE-UNDER. THE ONLY AMOUNT REPAID BY THE ASSESSEE TO GAPL DU RING THIS PERIOD (I.E., FROM 15.10.2013 TO 06.11.2013) IS RS. 7,69,1 44 (ON 16.10.2013), WHICH IS IN RESPECT OF CREDITS (DATED 29.07.2013 & 31.07.201 3) TOWARD INSURANCE PAYMENT. THE SAME, THOUGH LIABLE TO BE CONSTRUED AS DIVIDEND U/S. 2(22)(E), DO NOT FORM PART OF THE QUALIFYING SUM OF RS. 3266.12 LACS FOR US TO DILATE THEREON. CONTINUING FURTHER, THE ENTIRE CREDIT OF RS. 3266.1 2 LACS STANDS REPAID FROM 13/11/2013 TO 29/11/2013, ON WHICH (LATER) DATE THE ASSESSEE HAD IN FACT PAID IN EXCESS BY RS. 78.79 LACS. THE LOAN/ADVANCE BY THE A SSESSEE SWELLED TO RS. 284.29 LACS (BY 04.12.2013), ALL THROUGH DIRECT PAY MENTS, ONLY TO BE RECEIVED ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 9 BACK, IN FULL, BEFORE THE YEAR-END, ON WHICH DATE T HE CREDIT BALANCE OF GAPL STOOD AT RS. 14.48 LACS (INCLUDING A CREDIT ON ACCO UNT OF INTEREST, NET OF TDS, AT RS. 4.67 LACS). 4.3 THE QUESTION THAT THEREFORE ASSUMES SIGNIFICANC E IS IF THE FACT OF THE SUBSEQUENT REPAYMENT (OF LOAN/ADVANCE) RELEVANT, I. E., IN DETERMINING IF THE AMOUNT RECEIVED FROM THE PAYER-COMPANY IS TO BE, OR IS NOT TO BE, CONSIDERED AS DIVIDEND U/S. 2(22)(E)? THIS IS AS DE HORS THE AMOUNTS PAID BY THE ASSESSEE TO GAPL, WHICH ARE AGAIN, AS WE SHALL PRESENTLY SEE, O NLY IN THE NATURE OF LOANS/ ADVANCES, EITHER PRIOR TO 15/10/2013, OR SUBSEQUENT TO 28/11/2013, THE SUMS RECEIVED BY IT FROM GAPL ARE ONLY IN THE NATURE OF LOANS/ADVANCES, ON WHICH IN FACT EVEN INTEREST STANDS CHARGED. THE SECOND QUESTION THAT WOULD FOLLOW, I.E., WHERE THE ANSWER TO THE FIRST QUESTION IS IN THE AFFIRMATIVE, IS THE LENGTH OF T HE PERIOD OVER WHICH THE CREDIT OBTAINS, BEING AT 45 D AYS (I.E., FROM 15.10.2013 TO 29.11.2013) IN THE INSTANT CASE? THE THIRD QUESTION IN THIS REGARD THAT WOULD NEED TO BE ADDRESSED, IS IF THE SUBSEQUENT, OR EVEN THE PRIOR CONDUCT OF THE ACCOUNT, RELEVANT? AS WHERE, FOR EXAMPLE, THE ASSES SEE HAS, PRIOR OR SUBSEQUENT TO THE RECEIPT OF LOAN OR ADVANCE, GIVEN LOAN/ADVAN CE TO THE PAYER-COMPANY, WHICH MAY OR MAY NOT BE IN THE CURRENT YEAR. 4.4 THE ISSUE OF REPAYMENT OF THE AMOUNT RECEIVED C AME UP BEFORE THE TRIBUNAL IN TARULATA SHYAM (SUPRA) IN THE CONTEXT OF S. 2(6A)(E), THE ANALOGO US PROVISION UNDER THE 1922 ACT, INTRODUCED, ALONG WIT H S.12(1B), BY FINANCE ACT, 1955 W.E.F. 01.4.1955. THERE AROSE A DIFFERENCE BET WEEN THE MEMBERS OF THE TRIBUNAL. THE AM TOOK THE VIEW THAT THE MOMENT A PA YMENT AS ENVISAGED U/S. 2(6A)(E) IS RECEIVED, IT GETS CLOTHED WITH THE CHAR ACTER OF DIVIDEND, AND IS TO BE REGARDED AS THE INCOME OF THE ASSESSEE-SHAREHOLDER, AND THAT THERE-FORE, THE SUBSEQUENT ACTION OR REPAYMENT BY THE SHARE-HOLDER CANNOT TAKE IT OUT OF THE MISCHIEF OF THE PROVISION. THE JM EXPRESSED A CONTR ARY OPINION. IF THE AMOUNT ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 10 HAD BEEN RETURNED BEFORE THE END OF THE YEAR, NO LO AN OR ADVANCE FROM THE SECTION 23A COMPANY (I.E., A COMPANY IN WHICH THE P UBLIC IS NOT SUBSTANTIALLY INTERESTED) CAN BE SAID TO HAVE BEEN AVAILED OF FOR HIS BENEFIT BY THE SHAREHOLDER. THE MATTER WAS REFERRED TO THE PRESIDENT OF THE TRI BUNAL, WHO AGREED WITH THE VIEW BY THE AM. A LOAN OR ADVANCE RECEIVED BY A SHA RE-HOLDER ASSUMED THE CHARACTER OF DIVIDEND AND BECOMES HIS INCOME BY THE FICTION OF S. 2(6A)(E), I.E., ON ITS RECEIPT. IT CEASES TO BE THE LIABILITY OF T HE SHAREHOLDER, I.E., FOR THE PURPOSE OF TAXATION, ALTHOUGH HE MAY IN FACT OR IN LAW REMAIN LIABLE TO THE PAYER- COMPANY FOR IT . IF IT IS REPAID, THE SAME SHALL NOT LIQUIDATE OR REDUCE THE QUANTUM OF INCOME, WHICH HAD ALREADY ACCRUED, AND SUCH REPA YMENT IS NOT A PERMISSIBLE DEDUCTION U/S. 12(2). THE MAJORITY OPINION WAS CHAL LENGED BEFORE THE HON'BLE HIGH COURT, WHICH HELD IN FAVOR OF THE REVENUE, STA TING THAT THE REPAYMENT BEFORE THE END OF THE YEAR WAS IMMATERIAL. THIS IS PRECISELY WHAT HAD EARLIER BEEN HELD IN K.M.S. LAKSHMANA AIYER V. ITO (ADDL.) [1960] 40 ITR 469 (MAD). THE MATTER WAS CARRIED TO THE APEX COURT, WHICH AFF IRMED THE DECISION BY THE HIGH COURT PER ITS LARGER BENCH DECISION IN TARULATA SHYAM (SUPRA). SECTION 2(22)(E), IT WAS ARGUED THEREIN, SHOULD BE READ DOW N INASMUCH AS IT CARRIED AN IRREBUTTABLE PRESUMPTION OF A LOAN OR ADVANCE TO A SUBSTANTIAL SHAREHOLDER BEING A DISTRIBUTION OF PROFIT AND, THUS, DIVIDEND THERET O, BY DEFINITION, BY A COMPANY (IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED). IT WORKED UNFAIRLY ON THOSE REPAYING THE LOAN AS AGAINST THOSE RETAINING IT. BE SIDES, IT MAY LEAD TO DOUBLE TAX, AS WHERE THE REPAID AMOUNT IS AGAIN LENT TO TH E SHAREHOLDER DURING THE YEAR INASMUCH AS THE SAME AMOUNT IS LIABLE TO BE REGARDE D AS DIVIDEND. THE APEX COURT AGREED THAT THE PROVISION WAS HARSHER THAN SE C. 108 OF THE COMMONWEALTH INCOME-TAX ACT, WHICH WAS ITS INSPIRATION. HOWEVER , THE PARLIAMENT HAD ITSELF EXERCISED ITS LEGISLATIVE JUDGMENT, RAISING A CONC LUSIVE PRESUMPTION THAT IN ALL CASES WHERE LOANS ARE ADVANCED TO A SHAREHOLDER IN A PRIVATE LIMITED COMPANY HAVING ACCUMULATED PROFITS, THE ADVANCE SHOULD BE D EEMED TO BE THE DIVIDEND INCOME OF SUCH SHAREHOLDER. IT IS THIS PRESUMPTION, IT EXPLAINED, WHICH IS THE ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 11 FOUNDATION OF THE STATUTORY FICTION INCORPORATED IN S. 2(6A)(E). THUS, S. 108 OF THE COMMONWEALTH ACT APPEARS TO BE MORE REASONABLE AND LESS HARSH THAN ITS INDIAN COUNTERPART. THE LANGUAGE OF THE PROVISION W AS CLEAR AND UNAMBIGUOUS, AND THERE WAS NO SCOPE FOR IMPORTING INTO THE STATU TE WORDS THAT WERE NOT THERE. THAT WOULD, IT STATED, BE NOT TO CONSTRUE, BUT TO A MEND THE STATUTE. THERE WAS, IT EXPLAINED, NO JUSTIFICATION TO DEPART FROM THE NORM AL RULE OF CONSTRUCTION ACCORDING TO WHICH THE INTENTION OF THE LEGISLATURE IS TO BE PRIMARILY GATHERED FROM THE WORDS USED IN THE STATUTE. EVEN IF THERE B E A CASUS OMISSUS , IT CLARIFIED, THE DEFECT CAN BE REMEDIED ONLY BY LEGISLATION AND NOT BY JUDICIAL INTERPRETATION. REFERRING TO CAPE BRANDY SYNDICATE V. IRS [1921] 1 KB 64 (KB), IT RECALLED THE WORDS OF ROWALTT J., THAT: (AT PG. 71) '...... IN A TAXING ACT ONE HAS TO LOOK MERELY AT W HAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THE RE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED.' FURTHER, ONCE AN ASSESSEE COMES WITHIN THE LETTER O F LAW, HE HAD TO BE TAXED, HOWEVER GREAT THE HARDSHIP MAY APPEAR TO BE TO THE JUDICIAL MIND. NOTING THE SATISFACTION OF THE CONDITIONS OF THE PROVISION, IT CONCLUDED AS UNDER: (PGS. 357 & 358) 17THIS HIGHLIGHTS THE FACT THAT THE LEGISLATURE HAS DELIBERATELY NOT MADE THE SUBSISTENCE OF THE LOAN OR ADVANCE, OR ITS BEING OU TSTANDING NO THE LAST DATE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, A PR E- REQUISITE FOR RAISING THE STATUTORY FICTION. IN OTHER WORDS, EVEN IF THE LOAN OR ADVANC E CEASES TO BE OUTSTANDING AT THE END OF THE PREVIOUS YEAR, IT CAN STILL BE DEEMED AS A 'DIV IDEND' IF THE OTHER FOUR CONDITIONS FACTUALLY EXIST, TO THE EXTENT OF THE ACCUMULATED P ROFITS POSSESSED BY THE COMPANY. 18. AT THE COMMENCEMENT OF THIS JUDGMENT WE HAVE NO TICED SOME GENERAL PRINCIPLES, ONE OF WHICH IS, THAT THE PREVIOUS YEAR IS THE UNIT OF TIME ON WHICH THE ASSESSMENT IS BASED (S. 3). AS THE TAXABILITY OF AN INCOME IS RELATED TO IT S RECEIPT OR ACCRUAL IN THE PREVIOUS YEAR, THE MOMENT A DIVIDEND IS RECEIVED, WHETHER IT IS AC TUAL DIVIDEND DECLARED BY THE COMPANY OR IS A DEEMED DIVIDEND, INCOME TAXABLE UNDER THE R ESIDUARY HEAD, 'INCOME FROM OTHER SOURCES', ARISES. THE CHARGE BEING ON ACCRUAL OR RE CEIPT THE STATUTORY FICTION CREATED BY S. 2(6A)(E) AND S. 12(1B) WOULD COME INTO OPERATION AT THE TIME OF THE PAYMENT BY WAY OF ADVANCE OR LOAN, PROVIDED THE OTHER CONDITIONS ARE SATISFIED. ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 12 19. WE DO NOT PROPOSE TO EXAMINE THE SOUNDNESS OR O THERWISE OF THE ILLUSTRATIONS GIVEN BY MR. SHARMA SINCE THEY ARE FOUNDED ON ASSUMED FACTS WHICH DO NOT EXIST IN THE PRESENT CASE. 20. FOR THE FOREGOING REASONS WE WOULD ANSWER THE Q UESTION PROPOSED IN FAVOUR OF THE REVENUE AND DISMISS THIS APPEAL WITH COSTS . THE CONSISTENT VIEW, THEREFORE, RIGHT FROM THE STAG E OF THE ASSESSING AUTHORITY, TO THE APEX COURT, WAS THE SAME, I.E., THE REPAYMENT O F A LOAN/S OR ADVANCE/S WAS INCONSEQUENTIAL FOR THE PURPOSE OF APPLICATION OF T HE FICTION OF THE PROVISION OF DEEMED DIVIDED, INTRODUCED ON THE STATUTE BOOK FROM AY 1955-56 ONWARDS. WHY, IN A GIVEN CASE, THE REPAYMENT MAY BE AFTER TH E CLOSE OF THE RELEVANT YEAR, AND WHICH WOULD THEREFORE HAVE LITTLE BEARING IN TH E MATTER, WHILE OUGHT TO BE GIVEN REGARD TO IF THE FACT OF THE REPAYMENT IS REL EVANT? HOW SHOULD, ONE MAY ASK, IT MATTER THAT THE REPAYMENT IS AFTER X DAYS O R Y DAYS OR ANY OTHER ? IN A GIVEN CASE THE PAYMENT MAY BE RECEIVED AT THE FAG-E ND OF THE YEAR, OR ON THE LAST DATE ITSELF, SO THAT REPAYMENT, EVEN AFTER A FEW DA YS, FALLS IN THE FOLLOWING YEAR. A LOAN OR ADVANCE CARRIES WITH IT, BY DEFINITION, A N OBLIGATION FOR REPAYMENT (RETURN OF VALUE), SO THAT THE FACT OF REPAYMENT - WHETHER DURING OR SUBSEQUENT TO THE RELEVANT YEAR, WOULD BE, AS CLARIFIED, OF NO MO MENT. THE LENGTH OF THE TIME FOR WHICH THE LOAN OR ADVANCE OBTAINS WOULD ACCORDI NGLY BE OF NO SIGNIFICANCE, I.E., FOR TAXATION PURPOSES; THE AMOUNT HAVING BEEN REGARDED, ON ITS RECEIPT, AS THE INCOME OF THE PAYEE. THE ASSESSEES ARGUMENT OF HAVING RETAINED THE CREDIT (SUM BORROWED), WHICH IS ON INTEREST, FOR ONLY 82 D AYS DURING THE YEAR, WOULD THEREFORE BE OF NO ASSISTANCE THERETO, BEING AN IRR ELEVANT CONSIDERATION. COMPARISON MAY, FOR THE SAKE OF DISCUSSION, AS WELL AS FOR BETTER COMPREHENSION, ALSO BE MADE TO SEC. 68 OF THE ACT D EEMING A CREDIT AS THE INCOME OF THE DEBTOR WHERE THE SAME IS NOT SATISFAC TORILY EXPLAINED AS TO ITS NATURE AND SOURCE. THE SUBSEQUENT DISCHARGE OF THE CREDIT, AS BY REPAYMENT, WHERE IT IS DESCRIBED AS A LOAN OR ADVANCE, IS OF L ITTLE CONSEQUENCE, I.E., WHERE IT IS DEEMED AS AN UNEXPLAINED CREDIT U/S. 68. TEMPORA RY LOAN/ADVANCE(S) WERE, ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 13 ACCORDINGLY, EVEN PRIOR THERETO, HELD AS FALLING WI THIN THE MISCHIEF OF S. 2(22)(E). AS EXPLAINED IN WALCHAND & CO. LTD. V. CIT [1975] 100 ITR 598 (BOM), NOTED WITH APPROVAL IN TARULATA SHYAM (SUPRA), THE FACT THAT THE LOAN OR ADVANCE WAS FACTUALLY REPAID OR MADE GOOD WITHIN A SHORT PERIOD , IS NO DEFENCE TO THE ATTRACTION OF THE PROVISION. THOUGH STATED TO BE A CURRENT ACCOUNT, THE NATURE OF THE ACCOUNT SHOWED IT TO BE A LOAN, MADE FURTHER AM PLY CLEAR BY THE FACT OF CHARGE OF INTEREST AT THE END OF THE YEAR, EVEN THO UGH THE ACCOUNT HAD BEEN SQUARED OFF THEREBY. SUB-CLAUSE (E) (TO S. 2(6A), C ORRESPONDING TO S. 2(22)(E) OF THE ACT) WAS CONTRASTED BY THE HONBLE COURT WITH T HE PRECEDING SUB-CLAUSES, I.E., (A) TO (D), WHICH ADMITTEDLY ENVISAGED PERMAN ENT DISTRIBUTION OF THE AMOUNT REGARDED AS DIVIDEND. THE DURATION OF THE LOAN OR A DVANCE, WHICH WAS ONLY 23 DAYS , REGARDED AS IMMATERIAL FOR THE PURPOSE OF DIVIDEN D UNDER SUB-CLAUSE (E) (PGS. 602, 603). THE SIMILARITY WITH THE FACTS OF T HE INSTANT CASE IS STRIKING. THE REPAYMENT OF THE LOAN OR ADVANCE, WHICH GETS DEEMED, ON RECEIPT, ON ACCOUNT OF THE LEGAL FICTION, AS A DISTRIBUTION OF PROFIT AND, THUS, AS INCOME IN THE HANDS OF THE PAYEE SHARE-HOLDER, IS THEREFORE O F NO CONSEQUENCE. AS EXPLAINED BY THE APEX COURT IT IS THIS PRESUMPTION JURIS ET DE JURE WHICH FORMS THE FOUNDATION OF THE STATUTORY FICTION. THE DECISI ONS IN CIT V. K. SRINIVASAN [1963] 50 ITR 788 (MAD); CIT V. P.K. BADIANI [1970] 76 ITR 369 (BOM); AND WALCHAND & CO. LTD . (SUPRA) WERE, BESIDES K.M.S. LAKSHMANA AIYER (SUPRA), ALSO NOTED WITH APPROVAL IN TARULATA SHYAM (SUPRA). THE HONBLE COURT ALSO DREW ON ITS DECISION IN NAVNIT LAL C. JHAVERI V. AAC [1965] 56 ITR 198 (SC), ALSO RELIED UPON BEFORE IT. THE FIRST QUESTION AFORE-STATED (REFER PARA 4.3) IS, ACCORDI NGLY, ANSWERED IN THE NEGATIVE. THE SECOND QUESTION, I.E., AS REGARDS THE RELEVANCE OF THE RETENTION PERIOD, DOES NOT CONSEQUENTLY ARISE. 4.5 CONTINUING FURTHER, CLEARLY, THERE IS TWO-WAY T RAFFIC, I.E., RECEIPT OF LOAN OR ADVANCE, AS WELL AS ITS REPAYMENT, IN THE INSTANT CASE. THAT THE REPAYMENT WAS ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 14 IN EXCESS, CONSTITUTING A LOAN/ADVANCE BY THE SHARE -HOLDER TO THE PAYEE- COMPANY, WOULD, IN THE CONTEXT OF THE PROVISION, CA RRY NO SPECIAL SIGNIFICANCE. THE PLEA OF A MUTUAL, OPEN AND CURRENT ACCOUNT WAS ADOPTED IN P.K. BADIANI (SUPRA). THE APEX COURT CONSIDERED IT RELEVANT TO R EPRODUCE THE RELEVANT PART OF THE SAID DECISION IN MUKUNDRAY K. SHAH (SUPRA), REFERRED TO DURING HEARING BY THE LD. SR. DR, AS UNDER: (AT PG. 447) WE ALSO QUOTE HERE-IN-BELOW PARA 19 AND PARA 21 OF THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. P.K. BADIANI [1970] 76 ITR 369 (BOM) : ' 19. NOW, THE ASSESSEES ACCOUNT FOR 1ST APRIL, 1957 , TO 31ST MARCH, 1958, SHOWS THAT THERE ARE CREDITS AS WELL AS DEBITS. WHAT HAS TO BE ASCERTAINED IS WHETHER THE DEBITS ARE LOANS, SO THAT THEY CAN BE DEEMED AS DIVIDENDS. T HE ACCOUNT IS A MUTUAL, OPEN, AND CURRENT ACCOUNT. EVERY DEBIT, I.E., EVERY PAYMENT B Y THE COMPANY TO THE ASSESSEE, MAY NOT BE A LOAN. TO BE TREATED AS A LOAN, EVERY AMOUNT PA ID MUST MAKE THE COMPANY A CREDITOR OF THE ASSESSEE FOR THAT AMOUNT. IF, HOWEVER, AT TH E TIME WHEN THE PAYMENT IS MADE BY THE COMPANY IS ALREADY A DEBTOR OF THE ASSESSEE, THE PA YMENT WOULD BE MERELY A REPAYMENT BY THE COMPANY TOWARDS ITS ALREADY EXISTING DEBT. IT WOULD BE A LOAN BY THE COMPANY ONLY IF THE PAYMENT EXCEEDS THE AMOUNT OF ITS ALREADY EX ISTING DEBT AND THAT TOO ONLY TO THE EXTENT OF THE EXCESS. THEREFORE, THE POSITION AS REGARDS EACH DEBIT WILL HAVE TO BE INDIVIDUALLY CONSIDERED , BECAUSE IT MAY OR MAY NOT BE A LOAN. THE TWO BASI C PRINCIPLES ARE, THAT ONLY A LOAN, WHICH WOULD INCLUDE THE OTHE R PAYMENTS MENTIONED IN S. 2(6A)(E), CAN BE DEEMED TO BE DIVIDEND AND THAT TOO ONLY TO T HE EXTENT THAT THE COMPANY HAS AT THE DATE OF THE PAYMENT ACCUMULATED PROFITS AFTER DED UCTING THEREFROM ALL ITEMS LEGITIMATELY DEDUCTIBLE THEREFROM. XXXX 21. AS REGARDS QUESTION NOS. 3 AND 4, MR. RAJGOPAL CONTENDED THAT THE DEBIT BALANCE, IF ANY, AT THE LAST DATE OF THE ASSESSEES ACCOUNTING YEAR 1ST APRIL, 1957 TO 31ST MARCH, 1958, SHOULD BE TAKEN AS THE AMOUNT TO BE TREATED AS DIVI DEND AND AS THE ASSESSEES ACCOUNT IS ON THE LAST DAY TO HIS CREDIT, NO AMOUNT CAN BE DEE MED TO BE DIVIDEND. AS ALREADY POINTED OUT, THE POSITION HAS TO BE ASCERTAINED AT THE DATE OF EACH PAYMENT BY THE COMPANY TO THE ASSESSEE AND THIS CONTENTION MUST, THEREFORE, BE RE JECTED. IF MR. RAJGOPALS CONTENTION WAS TO BE ACCEPTED, THE RESULT WOULD BE THAT IF A SHARE HOLDER BORROWS A LARGE AMOUNT DURING THE YEAR, BUT REPAYS IT ON THE LAST DAY OF THE YEAR , IT WOULD NOT BE CONSIDERED TO BE A LOAN, THOUGH THE FACTS SHOW THAT HE DID BORROW A LOAN. SU CH A CONTRADICTION OF THE REAL FACT WOULD RESULT IF MR. RAJGOPALS CONTENTION WERE TO B E ACCEPTED. MR. RAJGOPAL FURTHER CONTENDED THAT IN ANY EVENT THE HIGHEST AMOUNT TO T HE ASSESSEES DEBIT ON ANY DAY OF THE YEAR SHOULD BE THE AMOUNT TO BE DEEMED TO BE DIVIDE ND. THIS ARGUMENT, AGAIN, IGNORES THE PRINCIPLE LAID DOWN BY US, THAT THE POSITION AT THE DATE OF EACH PAYMENT MUST BE CONSIDERED. MOREOVER, THERE IS ANOTHER REASON AND T HAT IS THAT IF IT WERE TO BE SO DONE, IT WOULD NOT ENABLE THE POSITION OF THE BALANCE OF THE ACCUMULATED PROFITS BEING TAKEN INTO ACCOUNT, AS MORE THAN ONE SHAREHOLDER MAY HAVE BORR OWED LOANS FROM THE COMPANY IN AN ACCOUNT SIMILAR TO THAT OF THE ASSESSEE. ALL THESE CONTENTIONS OF MR. RAJGOPAL IGNORE THE ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 15 BASIC FACT THAT S. 2(6A)(E) USES THE WORDS ANY PAY MENT WHICH MEANS, EVERY PAYMENT, AND S. 2(6A)(E) REQUIRES THE DETERMINATION OF TWO FACTO RS, VIZ., WHETHER THE PAYMENT IS A LOAN AND WHETHER AT THE DATE WHEN THE PAYMENT IS MADE TH ERE WERE ACCUMULATED PROFITS AND THAT THESE TWO FACTORS ARE TO BE CORRELATED AND THE RESULT MUST BE ASCERTAINED AT THE DATE OF EACH SUCH PAYMENT .' (EMPHASIS, ITALICISED IN PRINT, SUPPLIED) NEITHER, THEREFORE, THE FACT OF SUBSEQUENT REPAYMEN T, NOR OF THE PAYMENT FINDING REFLECTION IN A CURRENT ACCOUNT, WAS CONSIDERED AS OF ANY MOMENT; THE HONBLE COURT CLARIFYING THAT THE NATURE SHALL HAVE TO BE E XAMINED WITH REFERENCE TO EACH INDIVIDUAL PAYMENT, I.E., WHETHER IT CREATES A DEBT OR IS IN DISCHARGE OF AN EARLIER ONE. NO WONDER, THEN, THAT IN CIT V. NAGINDAS M. KAPADIA [1989] 177 ITR 393 (BOM), THE ADVANCES RECEIVED AGAINST PURCHASES BY T HE ASSESSEE SHARE-HOLDER WERE IGNORED FROM THE RUNNING ACCOUNT AND ONLY THE BALANCE AMOUNTS, NOT RELATABLE TO BUSINESS, REPRESENTING ONLY FINANCIAL TRANSACTIONS, SO ISOLATED, WERE REGARDED AS DIVIDEND U/S. 2(22)(E), UPHOLDING THE T RIBUNALS VIEW. A LOAN, ACCORDING TO BLACK'S LAW DICTIONARY, FIFTH EDITION, PAGE 844, MEANS 'A LENDING; DELIVERY BY ONE PARTY TO AND RECEIPT BY ANOTHER PAR TY OF SUM OF MONEY UPON AGREEMENT, EXPRESS OR IMPLIED, TO REPAY IT WITH OR WITHOUT INTEREST [ISAACSON V. HOUSE, 216, GA. 698; 119SE 2D 113,116]'. A LOAN IS SOMETHING QUITE DIFFERENT FROM A DEBT. FOR A LOAN, THERE MUST BE A LENDER, A BORROWER, A THING LOANED FOR USE, AS WELL AS A CONTRACT BETWEEN THE PARTIES FOR THE RETURN OF THE THING LOANED. A LOAN CONTRACTED NO DOUBT CREATES A DEBT BUT THERE MAY BE A DEBT WITHOUT CONTRACTING A LOAN. EVERY SALE OF GOODS ON CREDIT D OES NOT AMOUNT TO A TRANSACTION OF LOAN [ LAKHMICHAND MUCHHAL V. CIT [1961] 43 ITR 315,317-8 (MP); BOMBAY STEAM NAVIGATION CO. (1953) P. LTD. V. CIT [1965] 56 ITR 52, 57 (SC); CIT V. SAURASHRA CEMENT & CHEMICAL INDUSTRIES LTD . [1975] 101 ITR 502, 510 (GUJ)]. AN ADVANCE, ON OTHER HAND, MEANS SUMS PAID TO A PERSON AHEAD OF THE TIME WHEN IT IS DUE TO BE PAID ( K. SRINIVASAN (SUPRA)). THE TRANSACTIONS BETWEEN THE TWO COMPANIES IN THE I NSTANT CASE, IT NEEDS TO BE APPRECIATED, ARE PURELY FINANCIAL TRANSACTION S, I.E., RECEIPT AND PAYMENT OF MONEY, EITHER DIRECTLY OR INDIRECTLY (I.E., WHERE T HE AMOUNT IS PAID WHICH IS BY ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 16 THE PAYER-COMPANY, TO ANOTHER FOR AND ON BEHALF OF THE PAYEE AND, ACCORDINGLY, DEBITED TO ITS ACCOUNT OR, CORRESPONDINGLY, CREDIT ED TO THE ACCOUNT OF GAPL BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT). WHY, THE SA ME CARRIES INTEREST, IMPLYING THAT THE SAME IMPINGES ON EVERY AMOUNT RECEIVED AND REPAID, AS WELL AS PAID AND RECEIVED BACK, I.E., TO ALL THE DEBITS AND CRED ITS IN ACCOUNT, REPRESENTING FINANCIAL TRANSACTIONS. THAT THE SAME ARE IN THE NA TURE OF A FINANCIAL ACCOMMODATION IS NOT IN DISPUTE. MONEY RECEIVED ON ACCOUNT OF A BUSINESS TRANSACTION (VIZ. ADVANCE AGAINST PURCHASES), OR OT HERWISE RECEIVED IN THE COURSE OF MONEY LENDING BUSINESS, FROM THE PAYEE-COMPANY, ARE EXCLUDED, BY DEFINITION, FROM THE PURVIEW OF S. 2(22)(E), WHICH TARGETS ONLY A LOAN/S OR ADVANCE/S SIMPLICITER . IT IS ONLY IN THIS CONTEXT, I.E., WHERE THE AMOUN T ADVANCED IS FOR THE PURPOSE OF BUSINESS OF THE PAYEE-COMPANY , THAT THE SAME WOULD STAND EXCLUDED. NO BUSINESS PURPOSE OF GAPL, WHICH IS NOT IN THE BUSINESS OF MONEY LENDING, IS SHOWN. THE AMOUNTS PAID AND RECEIVED IN THE INSTANT CASE ARE CLEARLY IN THE NATURE OF A LOAN/S, I.E., SUMS BORROWED, WHI CH THOUGH IS NOT AT A FIXED AMOUNT OR FOR A FIXED PERIOD OF TIME. THIS VARIABIL ITY, THOUGH, WOULD NOT ALTER THE NATURE OF THE AMOUNTS AS LOAN (OR ADVANCE SIG NIFYING, HERE, A TEMPORARY LOAN). THE CHARGE OF INTEREST, CONFIRMS, IF ANY WAS REQUIRED, THE NATURE OF THE AMOUNT PAID AND RECEIVED AS LOAN/S, ADJUSTING THE A MOUNT RECEIVED FIRSTLY AGAINST THE LOAN/S ALREADY ADVANCED, AND VICE VERSA . WHY, IF THE INTEREST CHARGED IS AT 10 % P.A., AS FOR THE PRECEDING YEAR (BEING N OT MENTIONED IN THE NARRATION TO RELEVANT ENTRY IN ACCOUNTS), THE SAME, AT RS.5,1 8,665, IMPLIES AN AVERAGE LOAN OF RS. 51.87 LACS DURING THE YEAR. THIS THOUGH WOUL D BE OF NO CONSEQUENCE; IT HAVING BEEN SUFFICIENTLY CLARIFIED THAT A REDUCTION OR EVEN A CEASURE OF LIABILITY (ON ACCOUNT OF LOAN/ADVANCE) BY THE RELEVANT YEAR-E ND IS NOT RELEVANT. THIS, THEN, ANSWERS THE THIRD QUESTION SET UP BY US (REFER PARA 4.3), IN THAT THE MATTER IS FACTUAL AND, ACCORDINGLY, IN THE FACT S AND CIRCUMSTANCES OF THE CASE (ALSO REFER PARA 4.2), THE IMPUGNED SUM OF RS. 3266 .12 LACS REPRESENTS A LOAN, TEMPORARY IN NATURE, HAVING BEEN PAID IN FULL BY 29 /11/2013, I.E., WITHIN 45 ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 17 DAYS, EVEN AS THE FACT OF SUBSEQUENT REPAYMENT OR T HE LENGTH OF PERIOD OVER WHICH IT OBTAINS, IS OF NO CONSEQUENCE AS REGARDS T HE ATTRACTION OF THE PROVISION OF S. 2(22)(E). FURTHER , AS THE REPAYMENT DEPENDS ON THE AVAILABILITY OF S URPLUS FUNDS WITH THE ASSESSEE, BEING DEPLOYED IN ITS BUS INESS, TO SUB-SERVE THE INTEREST OF WHICH THE LOAN STANDS CONTRACTED, THERE COULD BE NO CERTAINTY AS TO THE LENGTH OF THE RETENTION PERIOD AND, THUS, THE NATURE OF A LOAN AS A TEMPORARY (ITSELF A RELATIVE TERM) LOAN, IS, IN THE FACTS AND CIRCUMSTA NCES OF THE CASE, SUSPECT. 4.6 WE MAY NEXT CONSIDER THE DECISION BY HON'BLE JU RISDICTIONAL HIGH COURT IN SURAJ DEV DADA (SUPRA). THE HON'BLE COURT, AFTER REPRODUCING THE ORDER BY THE TRIBUNAL (AT PAGES 83-84 OF THE REPORTS), STATE S AS UNDER: (PG. 84) 10. FROM THE ABOVE, IT EMERGES THAT CIT(A) AND THE TRIBUNAL HAD CONCURRENTLY RECORDED THAT THE ASSESSEE HAD RUNNING ACCOUNT WITH THE COMP ANY - M/S DADA MOTORS PVT. LIMITED AND HAD BEEN ADVANCING MONEY TO IT. IT WAS FURTHER OBSERVED THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT ATTRACTED IN T HE PRESENT CASE AS THIS PROVISION WAS INSERTED TO STOP THE MISUSE BY THE ASSESSEE BY TAKI NG THE FUNDS OUT OF THE COMPANY BY WAY OF LOAN ADVANCES INSTEAD OF DIVIDENDS AND THEREBY A VOID TAX. IN THE PRESENT CASE, THE ASSESSEE HAD INFACT ADVANCED MONEY TO THE COMPANY A ND THERE WAS CREDIT FOR ONLY 55 DAYS FOR WHICH PROVISIONS OF SECTION 2(22) (E) OF T HE ACT COULD NOT BE INVOKED. THESE FINDINGS WERE NOT SHOWN TO BE ERRONEOUS OR PERVERSE IN ANY MANNER. 11. IN VIEW OF THE ABOVE, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEA L . CONSEQUENTLY, FINDING NO MERIT IN THE APPEAL, THE S AME IS HEREBY DISMISSED. (EMPHASIS, SU PPLIED) THE ONLY FINDING RECORDED BY THE HON'BLE COURT IS T HAT THE FINDINGS BY THE FIRST AND THE SECOND APPELLATE AUTHORITY HAVE NOT BEEN SH OWN TO BE ERRONEOUS OR PERVERSE. HOW COULD THAT, BY ITSELF, ONE WONDERS, B E REGARDED AS A STATEMENT OF LAW BY IT; IT, IN FACT, CLEARLY HOLDING THAT IN ITS VIEW NO SUBSTANTIAL QUESTION/S OF LAW ARISES FOR ITS ADJUDICATION? HOW COULD THEN IT BE REGARDED AS HAVING EXPRESSED ANY VIEW OR ANSWERED THE SUBSTANTIAL QUES TION OF LAW RAISED BEFORE IT? RATHER, ITS OBSERVATION EVEN LEAVES THE SCOPE FOR THE HONBLE COURT, WHILE STATING ITS VIEW IN A LATER CASE ON A SUBSTANTIA L QUESTION OF LAW, EXPRESSING A DIFFERENT VIEW, I.E., BASED ON THE ARGUMENTS ADVANC ED AND THE POSITION OF LAW ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 18 URGED ON THE BASIS OF JUDICIAL PRECEDENTS. THE JURI SDICTION OF THE HIGH COURT UNDER THE ACT, WHICH IS THE THIRD APPELLATE AUTHORI TY THERE-UNDER, ARISES ONLY ON A POSITIVE FINDING ON A SUBSTANTIAL QUESTION OF LAW ARISING OUT OF THE ORDER BY THE TRIBUNAL, I.E., THE SECOND APPELLATE AUTHORITY UNDE R THE ACT. THIS IS PATENT FROM A MERE BROWSE OF SEC. 260A WHERE AN APPEAL IS PREFERR ED BEFORE THE HIGH COURT; IT READING AS UNDER: APPEAL TO HIGH COURT . 260A. (1) AN APPEAL SHALL LIE TO THE HIGH COURT FROM EVE RY ORDER PASSED IN APPEAL BY THE APPELLATE TRIBUNAL IF THE HIGH COURT IS SATISFIED THAT THE CASE INVOLV ES A SUBSTANTIAL QUESTION OF LAW . (2) THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMI SSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER] OR AN ASSESSEE AGGRIEVED BY ANY OR DER PASSED BY THE APPELLATE TRIBUNAL MAY FILE AN APPEAL TO THE HIGH COURT AND SUCH APPEA L UNDER THIS SUB-SECTION SHALL BE (A) FILED WITHIN ONE HUNDRED AND TWENTY DAYS FROM T HE DATE ON WHICH THE ORDER APPEALED AGAINST IS RECEIVED BY THE ASSESSEE OR THE PRINCIPA L CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIO NER; (B) (C) IN THE FORM OF A MEMORANDUM OF APPEAL PRECISELY STATING THEREIN THE SUBSTANTIAL QUESTION OF LAW INVOLVED . (2A) THE HIGH COURT MAY ADMIT AN APPEAL AFTER THE E XPIRY OF THE PERIOD OF ONE HUNDRED AND TWENTY DAYS REFERRED TO IN CLAUSE (A) OF SUB-SE CTION (2), IF IT IS SATISFIED THAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE SAME WITHIN THA T PERIOD. (3) WHERE THE HIGH COURT IS SATISFIED THAT A SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN ANY CASE, IT SHALL FORMULATE THAT QUESTION. (4) THE APPEAL SHALL BE HEARD ONLY ON THE QUESTION SO FORMULATED, AND THE RESPONDENTS SHALL AT THE HEARING OF THE APPEAL, BE ALLOWED TO A RGUE THAT THE CASE DOES NOT INVOLVE SUCH QUESTION: PROVIDED THAT NOTHING IN THIS SUB-SECTION SHALL BE DEEMED T O TAKE AWAY OR ABRIDGE THE POWER OF THE COURT TO HEAR, FOR REASONS TO BE RECOR DED, THE APPEAL ON ANY OTHER SUBSTANTIAL QUESTION OF LAW NOT FORMULATED BY IT, IF IT IS SATI SFIED THAT THE CASE INVOLVES SUCH QUESTION. (5) THE HIGH COURT SHALL DECIDE THE QUESTION OF LAW SO FORMULATED AND DELIVER SUCH JUDGMENT THEREON CONTAINING THE GROUNDS ON WHICH SU CH DECISION IS FOUNDED AND MAY AWARD SUCH COST AS IT DEEMS FIT. (6) THE HIGH COURT MAY DETERMINE ANY ISSUE WHICH ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 19 (A) HAS NOT BEEN DETERMINED BY THE APPELLATE TRIBUN AL; OR (B) HAS BEEN WRONGLY DETERMINED BY THE APPELLATE TR IBUNAL, BY REASON OF A DECISION ON SUCH QUESTION OF LAW AS IS REFERRED TO IN SUB-SECTI ON (1). (7) SAVE AS OTHERWISE PROVIDED IN THIS ACT, THE PRO VISIONS OF THE CODE OF CIVIL PROCEDURE, 1908 (5 OF 1908), RELATING TO APPEALS TO THE HIGH C OURT SHALL, AS FAR AS MAY BE, APPLY IN THE CASE OF APPEALS UNDER THIS SECTION . (EMPHASIS, S UPPLIED) THE HON'BLE COURT MIGHT AS WELL HAVE DECLINED ADMIS SION, STATING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THE ORDER BY THE TRIBUNAL. THAT IT WENT THROUGH THE TRIBUNALS ORDER, DELINEATING THE FACTS AS RECORDED BY IT, AS WELL AS ITS DECISION, PRIOR TO HOLDING THAT, IN ITS VIEW, NO SUBSTANTIAL QUESTION OF LAW AROSE IN THE FACTS OF THE CASE AND ITS ADJUDICATIO N BY THE TRIBUNAL, ONLY SHOWS THAT IT CHOSE TO MAKE ITS THIS FINDING (AS TO THE NON-ARISING OF ANY SUBSTANTIAL QUESTION OF LAW OUT OF THE ORDER BY THE TRIBUNAL) T RANSPARENT. NOTHING, THUS, TURNS ON THE ASSESSEES RELIANCE ON THE SAID DECISI ON. 4.7 BE THAT AS IT MAY, AND PARTICULARLY CONSIDERING THAT ASSESSEE HAS ALSO RELIED ON DECISIONS THAT SUGGEST THAT A RUNNING AC COUNT WOULD TAKE THE TRANSACTIONS ENTERED INTO OUT OF THE PURVIEW OF S. 2(22)(E) (OR S. 2(6A)(E) OF THE 1922 ACT), WE MAY, FOR THE SAKE OF CLARITY, ADVERT, ONCE AGAIN, TO THE DECISIONS BY THE APEX COURT REFERRED HEREINABOVE, EXTRACTING FROM THE DECISIONS IN TARULATA SHYAM (SUPRA) (AT PARA 4.4); MUKUNDRAY K. SHAH (SUPRA) (PARA 4.5). ON FACTS, WE HAVE ALREADY CLARIFIED THAT THE NATURE OF THE FINANCIAL TRANSACTIONS IN THE INSTANT CASE IS IN THE NATURE OF LOAN/S, ALS O ADVERTING TO THE DECISIONS WHEREIN, SIMILARLY, OPEN, CURRENT ACCOUNTS WERE MAI NTAINED. A RUNNING ACCOUNT IS NOTHING BUT AN ACCOUNT WITH TR ANSACTIONS BOTH WAYS. THE DEBITS AND CREDITS (TO THE ACCOUNT OF THE PAYER -COMPANY) IN ITS ACCOUNTS BY THE SHARE-HOLDER COULD IMPLY PAYMENT/S, DIRECT OR I NDIRECT, BY IT TO THE SAID COMPANY AND, ACCORDINGLY, RECEIPT BACK THEREOF, AGA IN, DIRECTLY OR INDIRECTLY. AGAIN, IT COULD WELL BE THAT THE DEBITS REPRESENT R EPAYMENT OF THE SUMS RECEIVED, DIRECTLY OR INDIRECTLY, IN THE FIRST INSTANCE BY TH E ASSESSEE-SHAREHOLDER AND, ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 20 ACCORDINGLY, CREDITED TO THE ACCOUNT OF THE PAYER-C OMPANY. NOW, NEITHER THE SUMS PAID BY THE SHARE-HOLDER NOR THEIR REPAYMENT, ATTRACT S. 2(22)(E). THEIR EXISTENCE OR OTHERWISE, THUS, AS AFORE-STATED, IS O F NO SIGNIFICATION IN-SO-FAR AS THE ATTRACTION OF THE SAID PROVISION IS CONCERNED ( REFER PARAS 4.4 & 4.5). THESE, IN FACT, OUGHT TO BE IGNORED, UNLESS OF COURSE THE PRIVATE LIMITED COMPANY TO WHICH THE PAYMENTS ARE MADE BY THE SHARE-HOLDER, IS ITSELF A SHARE-HOLDER (WITH A HOLDING IN EXCESS OF THE THRESHOLD LIMIT) IN THE SHARE-HOLDER COMPANY, BEING A COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY IN TERESTED (WHICH THE APPELLANT COMPANY APPARENTLY IS). IT IS ONLY THE OPPOSITE SET OF TRANSACTIONS THAT HO LD SIGNIFICANCE AS FAR AS SEC. 2(22)(E) IS CONCERNED . THAT IT, IT IS THE PAYMENT BY THE PAYER-COMPANY TO ITS SHARE-HOLDER BY WAY OF A LOAN OR ADVANCE THAT IS LIABLE TO BE, TO THE EXTENT OF ITS ACCUMULATED PROFIT, DEEME D AS DISTRIBUTION OF THE SAID PROFIT AND, THUS, DIVIDEND INCOME IN THE HANDS OF T HE PAYEE-SHAREHOLDER. SURELY, AS AFORE-EXPLAINED, IF THERE ARE SUM/S ALREADY DUE BY THE PAYER-COMPANY THERETO, THE SAME WOULD, UNLESS THERE IS AN UNDERSTANDING TO THE CONTRARY, FIRSTLY ADJUSTED AGAINST THE AMOUNT DUE. THE PAYMENT, UNLESS GIVEN A S A CONSIDERATION FOR VALUE RECEIVED EARLIER (OR EVEN TO BE RECEIVED), ITSELF C REATES AN OBLIGATION FOR REPAYMENT, SO THAT NOTHING TURNS, AS EXPLAINED BY T HE HONBLE COURTS, BY THE FACT OF ITS REPAYMENT WHICH, AS AFORE-DISCUSSED, C OULD BE IMMEDIATELY, OR THOUGH TO NO CONSEQUENCE, AFTER A LENGTH OF TIME. W HY, THE PAYMENT RECEIVED BEING ONLY AS IT WOULD BE REQUIRED (FOR ITS PURPOS ES) BY THE ASSESSEE- SHAREHOLDER, SHOULD THE LENGTH OF TIME OF RETENTION BE OF ANY CONSEQUENCE; THE INCOME HAVING BEEN ALREADY ARISEN ON THE RECEIPT OF LOAN/ADVANCE? THE RETENTION IN WALCHAND & CO. LTD . (SUPRA) WAS ONLY 23 DAYS, THOUGH FOUND OF NO CONSEQUENCE BY THE HONBLE COURT. IN FACT, WHERE TH E SUMS ARE BORROWED FOR THE PURPOSE OF ITS BUSINESS BY THE SHAREHOLDER, AS IN THE INSTANT CASE, IT WOULD BE GUIDED IN THE MATTER BY BUSINESS CONSIDERATIONS, I. E., THE NEED FOR FUNDS, BESIDES BEING LIABLE TO BE RETURNED ONLY WHERE NOT REQUIRED FOR THE TIME BEING, THEREFOR. THAT IS, IT IS THE BUSINESS, FOR WHICH THE BORROWIN G HAS BEEN MADE, THAT WOULD ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 21 DICTATE THE LENGTH OF RETENTION, BESIDES OF COURSE THE TERMS OF THE BORROWING CONTRACT, WITH THE INTEREST COST BEING LIABLE TO BE ABSORBED AS AN EXPENSE THEREOF. THE ARGUMENT OF THE RETENTION PERIOD BEING LOW A RELATIVE TERM, THEREFORE CARRIES NO SIGNIFICANCE IN THE CONTEXT OF THE PROVI SION, I.E., APART FROM LEGALLY, EVEN FACTUALLY; THE REPAYMENT BEING A FUNCTION OF T HE BUSINESS NEED/S. A REPAYMENT IN DISREGARD THEREOF MAY HURT THE BORROWE RS BUSINESS INTEREST. HOW COULD, THEN, EVEN FACTUALLY SPEAKING, THE EARLY R ETURN, BE OF ANY IMPORT? IT IS FOR THIS AND SUCH OTHER REASONS THAT WE STATED HERE INBEFORE THE ASSESSEES CASE AS UNTENABLE EVEN ON FACTS. THE EXTENSION OF A LOAN/ADVANCE CARRIES WITH IT AN OBLIGATION TO REPAY, WITH OR WITHOUT INTEREST. THIS EXTENSION, WHICH COU LD BE BOTH WAYS, THUS, DOES NOT CREATE ANY MUTUAL OBLIGATION I.E., APART FROM, AND ONLY UNDERSTANDABLY, THAT CONCOMITANT TO THE BORROWING. AS, FOR INSTANCE, OF REPAYMENT, WHICH COULD BE ON DEMAND OR AFTER A FIXED PERIOD. THE TWO COMPANIE S IN THE INSTANT CASE ARE NOT IN THE BUSINESS OF MONEY LENDING. AS STATED, AND EV EN OTHERWISE STANDS TO REASON, A COMPANY WOULD GIVE FUNDS TO ANOTHER ONLY WHEN THEY ARE FOR THE TIME BEING SURPLUS WITH IT, AS OTHERWISE IT WOULD, BESID ES FACING LOGISTICAL ISSUES, NOT BE ACTING IN THE INTEREST OF ITS BUSINESS. SIMILAR LY, THE PAYER-COMPANY WOULD BORROW ONLY WHEN IT REQUIRES MONEY FOR ITS PURPOSE S, AND BEING AT A COST, WOULD RETAIN IT ONLY FOR THE PERIOD AS IS NECESSARY . THAT IS, IN EITHER CASE, EACH COMPANY, IN RECEIVING THE LOAN OR ADVANCE, IS PRIMA RILY CATERING TO ITS OWN (BUSINESS) INTEREST. THIS IS SIMILAR TO ANY BORROWING ARRANGEMENT THAT A COMPANY MAY ENTER INTO WITH A BANK OR FINANCIAL INS TITUTION . THE LENDING COMPANY IS, TO THE PAYEE-COMPANY, ONLY A SOURCE OF FUNDS. IT IS THIS VERY SOURCE, WHERE THE PAYEES INTEREST IN THE PAYER-COMPANY EXC EEDS A DEFINED LIMIT, AND THE LATTER, BEING A COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED, IS NOT IN THE BUSINESS OF MONEY LENDING, THAT IS PROSC RIBED OR, MORE CORRECTLY, SOUGHT TO BE HIT BY THE LEGAL FICTION BY REGARDING IT AS DISTRIBUTION OF PROFIT, I.E., DIVIDEND, BY DEFINITION, AND DEEMED AS THE INCOME O F THE PAYEE TO THE EXTENT OF ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 22 THE ACCUMULATED PROFIT. THE PURPOSE TO WHICH THE PA YEE MAY DEPLOY THE FUNDS RECEIVED, I.E., BUSINESS OR OTHERWISE, AND WHICH MA Y PERHAPS BE ALSO OF CONCERN/ INTEREST, AS INDEED IT WOULD BE TO ANY SERIOUS LEND ER INASMUCH AS HE WOULD BE INTERESTED IN REPAYMENT, IS OF NO SIGNIFICANCE OR C ONSEQUENCE AS FAR AS THE DEEMING FICTION OF THE PROVISION IS CONCERNED. AS E XPLAINED IN TARULATA SHYAM (SUPRA), THE PAYEE MAY, IN LAW AND IN FACT, BE LIAB LE TO REPAY AND, IN FACT, EVEN REPAY, BUT THE PROVISION NONETHELESS STANDS ATTRACT ED ON THE RECEIPT OF THE LOAN/ADVANCE WHERE THE OTHER CONDITIONS OF THE PROV ISION ARE SATISFIED. A LOAN OR ADVANCE FOR BUSINESS PURPOSE, I.E., WHERE IT SERVES A BUSINESS PURPOSE OF THE LENDING COMPANY, IS EXCLUDED. NO SUCH BUSINESS PURP OSE INFORMS THE LENDING OF GAPL TO THE ASSESSEE IN THE INSTANT CASE, AS NONE H AS BEEN EXHIBITED OR, IN FACT, EVEN STATED. THAT THE TWO COMPANIES ARE, AS STATED WITHOUT BEING SHOWN, IN THE SAME LINE OF BUSINESS, IS INCIDENTAL; THE BORROWING BY EITHER BEING GUIDED BY ITS OWN BUSINESS INTEREST, AND THE LENDING TO EACH OTHE R BEING ONLY FOR THE REASON THAT THE TWO FALL, AS IT APPEARS, UNDER THE SAME MA NAGEMENT. IT WOULD, AS AFORE- EXPLAINED, BE DOING A DISSERVICE TO ITS OWN BUSINE SS IF IT DID NOT DO SO, THOUGH THERE IS NOTHING TO SUGGEST THAT. THE BALANCE OUTST ANDING (AS AT THE YEAR-END) IS REFLECTED AS A LOAN OR ADVANCE IN THE AUDITED FINAL ACCOUNTS OF BOTH THE COMPANIES. IN FACT, THE REPAYMENT OF THE WHOLE OF I T (WHICH IS BY 29/11/2013), OR NEARLY THE WHOLE OF IT, I.E., IF THE SUBSEQUENT REPAYMENT IS ALSO TO BE TAKEN INTO ACCOUNT I.E., SAVE FOR RS. 9.81 LACS (THE BALA NCE OUTSTANDING REPRESENTING INTEREST, WHICH THOUGH WOULD ASSUME THE CHARACTER O F THE PRINCIPAL, AS THE PAST CONDUCT OF THE ACCOUNT SHOWS), I.E., BEFORE THE YEA R-END, ITSELF PROVES IT TO BE NOTHING BUT FINANCIAL TRANSACTIONS. IT IS FOR THIS REASON THAT LOAN TRANSACTIONS, WHERE THE LENDER-COMPANY IS IN THE BUSINESS OF MONE Y LENDING, ARE EXCEPTED U/S. 2(22)(E). THE OTHER ASPECT THAT PREVAILED WITH THE TRIBUNAL IN SURAJ DEV DADA (SUPRA), THE OPERATIVE PART OF WHOSE ORDER STANDS R EPRODUCED BY THE HON'BLE COURT IN ITS ORDER, IS THAT NO MISUSE OF FUNDS B ELONGING TO PAYER-COMPANY WAS SHOWN, COUPLED WITH THE FACT OF THE ASSESSEE-APPELL ANT HAVING LENT THE MONEY TO ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 23 THE PAYER-COMPANY MOST OF THE TIME DURING THE RELEV ANT YEAR; THE TRANSACTIONS BEING IN THE NATURE OF A RUNNING ACCOUNT, WITH THE CREDIT OBTAINING FOR THE PERIOD OF ONLY 55 DAYS DURING THE RELEVANT YEAR. WE HAVE A LSO AFORE-DISCUSSED THAT THE LENDING OF MONEY BY A SHAREHOLDER TO THE PAYER-COMP ANY HOLDS, IN THIS CONTEXT, NO PARTICULAR SIGNIFICANCE, BEING OUTSIDE THE AMBIT OF THE PROVISION. THERE IS NO REFERENCE BY THE TRIBUNAL TO JUDICIAL PRECEDENTS, O R EVEN THE LAW IN THE MATTER, WITH REFERENCE TO WHICH WE HAVE STATED THE PERIOD O F RETENTION, OR THE LENGTH OF TIME FOR WHICH THE CREDIT OBTAINS, AS OF NO CONSEQU ENCE, BEING NOT A RELEVANT CONSIDERATION. WHEN THE FACTOR OF REPAYMENT OF LOAN OR ADVANCE, BE ING IN FACT INHERENT THERETO, ITSELF IS NOT RELEVANT, HOW COULD THE RETENTION PERIOD, I.E., THE PERIOD AFTER WHICH THE REPAYMENT IS EFFECTED, COULD POSSIBLY BE ? ALL THESE ASPECTS HAVE IN FACT BEEN DELIBERATED AND CONCLUDED BY THE APEX COURT PER ITS CONSTITUTION BENCH DECISION IN NAVNIT LAL C. JHAVERI (SUPRA). THE CHALLENGE IN THAT CASE WAS TO THE VIRES OF THE ANALOGOUS PROVISION OF S. 12(1B) R/W S. 2(6A)(E) OF THE 1922 ACT. PER HIS DISSENTING JUDGMENT RAGHUBAR DAYAL J. HELD SUBSTANTIALLY THE SAME WHAT INFORMS AND GUIDES THE DECISION BY THE TRIBUNAL IN SURAJ DEV DADA (SUPRA), EVEN AS IT IS NOT COMPETENT FOR THE TRIBU NAL TO, UNDER THE SCHEME OF THINGS, READ DOWN A PROVISI ON THAT IS INTRA VIRES THE CONSTITUTION (OF INDIA) OR READ IT INCONSISTENT OR DE HORS THE DECISIONS BY THE HIGHER COURTS OF LAW LAYING DOWN THE LAW IN THE MAT TER. LOANS BORROWED BY A SHAREHOLDER FROM A COMPANY, THE DISSENTING JUSTICE STATED, DO NOT COME WITHIN THE GENERAL DEFINITION OF INCOME. AS SUCH, IF THE S HAREHOLDER HAD BEEN PAID HIS SHARE OF PROFIT OSTENSIBLY AS A LOAN WHICH IS REA LLY A SHARE OF PROFIT, IT CAN BE TAXED AS INCOME UNDER AN APPROPRIATE ENACTMENT. H OWEVER, ANY AD HOC PAYMENT TO A SHAREHOLDER AS A LOAN/ADVANCE, UNRELAT ED TO HIS SHARE IN THE ACCUMULATED PROFIT, CANNOT RATIONALLY COME WITHIN THE EXPRESSION OF DI VIDEND . THAT IS, IT WAS NOT OPEN TO THE LEGISLATURE TO DESC RIBE ANY PAYMENT OF MONEY BY A COMPANY TO A SHAREHOLDER BY THE WORD DIVIDEND, AND THEN PROVIDE THAT SUCH PAYMENT WILL COME WITHIN THE EXPRESSION INCOME FO R THE PURPOSE OF ANY LAW ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 24 ENACTED BY VIRTUE OF ENTRY 82, LIST 1, SCHEDULE VII TO THE CONSTITUTION. THE DEFINITION OF DIVIDEND MUST HAVE A RATIONAL CONNECT ION WITH THE CONCEPT OF DIVIDEND IN THE CONTEXT OF THE PROFIT OF A COMPAN Y AND ITS DISTRIBUTION AMONGST THE SHAREHOLDERS AT ANY TIME AFTER THE PROF ITS HAVE BEEN EARNED. IT WAS IN FACT UNREASONABLE TO PROVIDE THAT A PARTICULAR SHAREHOLDER SHOULD BE DEEMED TO HAVE RECEIVED AN AMOUNT IN EXCESS OF HIS PROPORT IONATE SHARE (IN THE PROFIT) AS DIVIDEND. THAT IT IS TO SAY, THAT THE LAW, IN HIS O PINION, OUGHT TO HAVE PROVIDED THAT THE LOAN OR ADVANCE BY A COMPANY WAS, IN SUBST ANCE, A DISTRIBUTION OF PROFIT BY IT AND, FURTHER, COULD NOT ASCRIBE SUCH DISTRIBU TION AS DIVIDEND IN EXCESS OF THE PROPORTIONATE SHARE OF THE PAYEE IN THE ACCUMUL ATED PROFITS. THE SAME, HOWEVER, DID NOT FIND FAVOR WITH THE OTHER FOUR JUD GES CONSTITUTING THE BENCH, WHO DELIVERED THE MAJORITY OPINION UPHOLDING THE CO NSTITUTIONALITY OF THE PROVISION OF SECTION 12(1B) R/W S. 2(6A)(E) OF THE INDIAN INCOME TAX ACT, 1922, ALSO FINDING THE SAME AS NOT VIOLATING FUNDAMENTAL RIGHTS GUARANTEED UNDER ARTICLE 19(1)(F) AND (G) OF THE CONSTITUTION. THE S COPE OF THE RELEVANT ENTRY (IN THE LEGISLATIVE LISTS), IT EXPLAINED, ARE NOT POWER S BUT FIELDS OF LEGISLATION AND THE WIDEST IMPORT AND SIGNIFICANCE SHOULD BE ATTACH ED TO THEM. WHILE SECTION 2(6A), ANALOGOUS TO SECTION 2(22) OF THE ACT, DEFIN ES DIVIDEND, INCLUDING DEEMED DIVIDEND (UNDER CERTAIN SPECIFIED CONDITIONS ) (BOTH PER CLAUSE (E) THEREOF), SEC.12(1B) PROVIDES FOR BRINGING THE AMOU NT OUTSTANDING AS ON 01.4.1955, I.E., EVEN WHERE RECEIVED OR ACCUMULATED OVER THE PAST YEARS, TO TAX. THE HONBLE COURT NOTED A CIRCULAR BY THE BOARD PRO VIDING A WINDOW WHEREBY THE PROVISION WAS EXCEPTED ON GENUINE REPAYMENTS OF SUCH OUTSTANDING BY 30.6.1955 (CIRCULAR NO. 20 (XXI-6/55) DATED 10.5.19 55). THE HONBLE COURT EXAMINED SEVERAL PRECEDENTS, INCLUDING CHALLENGES T O THE PROVISION OF SECTION 12B, ENHANCING THE SCOPE OF INCOME TO INCLUDE CA PITAL GAINS; TO SECTION 23A(1), PROVIDING AN ARTIFICIAL DIVIDEND PAYOUT AT A MINIMUM OF 60%, LEST THE SHORTFALL THEREIN BE LIABLE TO SUPER-TAX, I.E., RES TRAINING THE COMPANY FROM ACCUMULATING ITS PROFIT BEYOND 40% TO BUILD UP RES ERVES OR TO PROVIDE FOR ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 25 CAPITAL EXPENDITURE; AND SEC. 16(3)(A) (OF THE 1922 ACT), SEEKING TO TAX THE INCOME ARISING TO WIFE AND MINOR SON/S OF THE ASSES SEE-INDIVIDUAL IN HIS HANDS. ALL THESE PROVISIONS WERE CONSIDERED BY THE APEX CO URT AS REASONABLE STEPS TAKEN BY THE PARLIAMENT, WITHIN ITS LEGISLATIVE CO MPETENCE, TOWARD COUNTERING TAX EVASION, ALSO NOTING THE RATIONALE OF EACH PROV ISION, I.E., THE MISCHIEF THAT IT WAS INTENDED OR DESIGNED TO DEFEAT. THE WORD INCOM E, IT OPINED, ALSO MAKING REFERENCE TO THE PRECEDENTS WHICH CONSIDERED LEGISL ATIVE COMPETENCE, MUST RECEIVE A WIDE INTERPRETATION, THE CAVEAT BEING THA T THERE HAS TO BE A RATIONAL CONNECTION BETWEEN THE ITEM TAXED AND THE CONCEPT O F INCOME LIBERALLY CONSTRUED. IT ALSO NOTED SUITABLE CONDITIONS/EXCEPT IONS BEING PROVIDED FOR IN THE IMPUGNED PROVISIONS (OF SS. 2(6A)(E) AND 12(1B)), A S BY WAY OF RESTRICTION ON THEIR SCOPE TO TRANSACTIONS OF/BY COMPANIES, IN WHI CH PUBLIC IS NOT SUBSTANTIALLY INTERESTED, WITH ITS MAJOR SHAREHOLDERS, I.E., HOL DING OVER A THRESHOLD (10%) VOTING POWER THEREIN; EXCLUSION OF TRANSACTIONS IN THE ORDINARY COURSE OF BUSINESS WHERE THE PAYER-COMPANY IS IN THE BUSINESS OF MONEY-LENDING; AND, THIRDLY, MAKING THE DEEMING (OF THE LOAN/ADVANCE OR PAYMENT) AS DIVIDEND SUBJECT TO AND, FURTHER, TO THE EXTENT OF, ACCUMULA TED PROFITS OF SUCH COMPANY, ALL OF WHICH WERE REGARDED AS NECESSARY AND SUITABL E SAFEGUARDS. SIMILAR ATTEMPTS, IT NOTED, WERE ALSO MADE BY OTHER COUNTRI ES IN THEIR DOMESTIC INCOME- TAX LAW. THAT THE PROVISION MAY CAUSE HARDSHIP IN S OME CASES WAS CONSIDERED AS IRRELEVANT (FOR DETERMINING THE QUESTION OF LEGISLA TIVE COMPETENCE). THE ARGUMENT WITH REGARD TO THE LOAN BEING INTEREST BEA RING, AND OF IT HAVING BEEN REPAID SINCE, WERE ADVANCED AND CONSIDERED AS NOT V ALID GROUNDS FOR EXCLUDING THE LOAN OR ADVANCE GIVEN FROM THE PURVIEW OF OR FO R THE PURPOSE OF DEEMING THE SAME AS DIVIDEND (REFER PGS. 208-210), WHICH WE MAY REPRODUCE FOR READY REFERENCE: THE LOAN MAY CARRY INTEREST AND THE SAID INTEREST M AY BE RECEIVED BY THE COMPANY; BUT THE MAIN OBJECT UNDERLYING THE LOAN IS TO AVOID PAY MENT OF TAX. IT MAY ULTIMATELY BE REPAID TO THE COMPANY AND WHEN IT IS SO REPAID, IT MAY OR MAY NOT BE TREATED AS PART OF ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 26 ACCUMULATED PROFITS. IT IS THIS KIND OF A WELL-PLAN NED DEVICE WHICH S. 12(1B) INTENDS TO REACH FOR THE PURPOSE OF TAXATION. (PG. 208) THE HONBLE COURT AGREED THAT THE DOCTRINE DOES NOT MEAN THAT THE PARLIAMENT CAN CHOOSE TO TAX AS INCOME AN ITEM WHICH CAN IN NO RATIONAL SENSE BE REGARDED AS THE CITIZENS INCOME. THE ITEM TAXED SHOULD BE R ATIONALLY CAPABLE OF BEING CONSIDERED AS THE INCOME OF THE CITIZEN. BUT IN CON SIDERING THE QUESTION AS TO WHETHER A PARTICULAR ITEM CAN BE REGARDED AS INCOME IN THE HANDS OF THE CITIZEN OR NOT, IT WOULD NOT BE APPROPRIATE, IT HELD, TO AP PLY THE TESTS TRADITIONALLY PRESCRIBED BY THE INCOME TAX ACT AS SUCH. FURTHER, THE PROVISION DOES NOT AFFECT THE APPELLANTS RIGHT TO BORROW MONEY FROM ANY OTHE R SOURCE, OR EVEN FROM THE PAYEE-COMPANY WHERE IT IS IN THE BUSINESS OF MONEY LENDING. THE RESTRICTION IMPOSED BY THE SECTION COULD NOT, IN ITS VIEW, BE REGARDED AS UNREASONABLE (PAGES 208, 210 OF THE REPORTS). THE DECISION BY TH E HON'BLE HIGH COURT (REPORTED AT [1963] 48 ITR 451 (BOM)) UPHOLDING THE CONSTITUTIONALITY OF THE PROVISION, WAS ACCORDINGLY AFFIRMED, ALSO NOTING A SIMILAR CHALLENGE HAVING BEEN REPELLED IN K.M.S. LAKSHMANA AIYER (SUPRA). THE APPEAL WAS ACCORDINGLY DISMISSED WITH COSTS. THIS WAS FOLLOWED BY ANOTHER DECISION BY THE CONSTITUTIONAL BENCH OF THE APEX COURT IN PUNJAB DISTILLING INDUSTRIES LIMITED V. CIT [1965] 57 ITR 1 (SC), WHEREIN, RELYING ON, AMONG O THERS, THE DECISION IN NAVNIT LAL C. JHAVERI (SUPRA), IT UPHELD THE CONSTITUTIONALITY OF S. 2(6 A)(D), UNDER CHALLENGE BEFORE IT. THERE WAS NO INCONSISTEN CY, IT CLARIFIED, BETWEEN THE RECEIPT BEING A CAPITAL ONE UNDER THE COMPANY LAW A ND BY FICTION BEING TREATED AS THE INCOME CHARGEABLE TO TAX UNDER THE INCOME-TA X ACT. THE DIVIDEND U/S. 2(6A)(E) (CORRESPONDING TO S. 2(22)(E) OF THE ACT), IT EXPLAINED, WAS, AS OPPOSED TO DIVIDENDS U/SS. 2(22)(A) TO (D), NOT A PERMANENT PAYOUT. THE APPEAL WAS DISMISSED WITH COSTS. THE FULL BENCH DECISION BY TH E HONBLE JURISDICTIONAL HIGH COURT (REPORTED AT 48 ITR 288 (PUNJ)(FB)) WAS AFFIR MED. WHERE, THEN, ONE MAY ASK, IS THERE ANY SCOPE FOR AN ARGUMENT, INTRODUCIN G THE NOTION OF MISUSE OF FUNDS BELONGING TO THE PAYER-COMPANY, SO THAT WHERE SUCH MISUSE IS NOT SHOWN ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 27 TRANSFERRING, BY IMPLICATION, THE ONUS OF SO SHOW ING ON THE REVENUE, THE SECTION CANNOT BE INVOKED? THE ANSWER TO THIS QUESTION COULD ONLY BE IN THE NEGATIVE . THE ASPECT THAT INFORMS THE SAID QUESTION IS IF T HE SECTION COULD POSSIBLY COVER GENUINE CASES OF SUMS BORROWED BY A SHAREHOLDER, TEMPORARY OR OTHERWISE. THE QUESTION/S, THOUGH VALID, DOES NOT S URVIVE AFTER THE AFORE-CITED DECISIONS BY THE LARGER BENCHES OF THE APEX COURT, WHICH BIND EVEN ITS LOWER CONSTITUTION BENCHES. SIMILAR ARGUMENTS/S, IT WOULD BE NOTED, WAS ALSO ADVANCED IN TARULATA SHYAM (SUPRA), STATING THAT A CONDITION SIMILAR TO THAT IN SECTION 108 (1) OF THE COMMONWEALTH INCOME TAX ACT, FROM WHICH THE PROVISION DRAWS ITS INSPIRATION, BE READ INTO THE PROVISION TO MAKE IT REASONABLE. THE APEX COURT DISCOUNTENANCED THE SAME, STATING THAT SUCH A CONDI TIONS/S WAS NOT CONSIDERED APPROPRIATE (BY THE LEGISLATURE) TO BE INCORPORATED IN THE PROVISION. THE GENUINENESS OF THE BORROWING, INASMUCH AS THE SECT ION DOES NOT DRAW ANY DISTINCTION BETWEEN GENUINE AND NON-GENUINE TRANSAC TIONS WHICH WAS ARGUED AS THE PRINCIPAL FLAW IN THE PROVISION, TARGETING T HUS GENUINE LOANS/ADVANCES AS WELL, WHICH CONSIDERATION ALSO PREVAILED WITH THE D ISSENTING JUDGE (IN NAVNIT LAL C. JHAVERI (SUPRA)) IN HOLDING OTHERWISE, WAS NOT FOUND A VAL ID GROUND FOR STRIKING DOWN THE PROVISION WHICH, IN ITS VIEW, LA ID A REASONABLE RESTRICTION ON THE SOURCE OF BORROWING BY A SUBSTANTIAL SHAREHOLDE R IN A PRIVATE COMPANY. IT MUST BE REMEMBERED, IT OBSERVED THEREIN, THAT THE L OAN/ADVANCE IS MADE IN FULL KNOWLEDGE OF THE PROVISION CONTAINED IN THE IMPUGNE D SECTION (PAGE 207). IF THE LEGISLATURES THINKS, IT EXPLAINED, THAT LOAN/ADVANC E(S) IN ALMOST EVERY CASE IS A RESULT OF A DEVICE, IT IS COMPETENT TO PRESCRIBE A FICTION AND HOLD THAT IN CASES OF SUCH LOANS/ADVANCES TAX SHALL BE RECOVERED FROM THE SHAREHOLDER ON THE BASIS THAT HE HAD RECEIVED THE DIVIDEND (PAGE 209). THAT, THEREFORE, THERE IS NO MISUSE OF FUNDS OF/BELONGING TO SUCH A COMPANY, I S OF NO MOMENT IN DETERMINING IF THE PROVISION IS IN THE FACTS AND CI RCUMSTANCES OF THE CASE ATTRACTED , AND TOWARD WHICH THE APEX COURT CLARIFIED THAT TH E PROVISION IMPINGES, SUBJECT TO FIVE CONDITIONS, ON THREE TYPE S OF PAYMENTS. ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 28 THESE CONDITIONS WERE REITERATED BY THE APEX COURT IN TARULATA SHYAM (SUPRA), OBSERVING THE FIFTH CONDITION TO BE APPLIC ABLE FOR THE TRANSITIONAL YEAR (I.E., AY 1955-56) (PG. 355). ALL THAT THEREFORE IS RELEVANT FOR THE INVOCATION OF THE SECTION IS THE SATISFACTION OF THESE FOUR CONDI TIONS, BEING, FIRSTLY , THAT THE PAYER-COMPANY SHOULD BE ONE IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED; SECONDLY , THE PAYEE SHOULD BE A SHARE-HOLDER IN THE COMPANY ON THE DATE/S ON WHICH THE LOAN IS ADVANCED, THE EXTENT OF HIS SHARE HOLDING BEING IMMATERIAL; THIRDLY , THE LOAN OR ADVANCE COULD BE DEEMED AS DIVIDEND T O THE EXTENT OF THE ACCUMULATED PROFIT OF THE PAYER-COMPANY AS ON THE D ATE OF THE LOAN; AND, FOURTHLY , THE LOAN MUST NOT BE ADVANCED BY THE COMPANY IN T HE ORDINARY COURSE OF ITS BUSINESS, WHERE MONEY LENDING IS A SUBSTANTI AL PART OF SUCH BUSINESS. IT IS SURPRISING INDEED THAT ARGUMENTS OF THE NATURE RAIS ED BEFORE THE TRIBUNAL IN SURAJ DEV DADA (SUPRA), AS WELL AS BEFORE US, CONTINUE TO BE SO R AISED DECADES AFTER THE DECISIONS BY THE LARGER BENCHES OF THE AP EX COURT; THE ASSESSEE ALSO REFERRING IN ITS WRITTEN SUBMISSIONS, NOT ADVERTED TO DURING HEARING, TO THE DECISION IN CIT (TDS) V. SCHUTZ DISHMAN BIO-TECH (P.) LTD . (TA NO. 958 OF 2018, DATED 21/12/2015, AT PB PGS. 10-12). THE SAID DECISIONS, WHICH HAVE BEEN CAREFULLY PERUSED, ARE WITHOUT REFERENCE TO THE DEL IBERATIONS; THE FINDINGS AND THE OBSERVATIONS BY THE APEX COURT PER ITS LARGER B ENCH DECISIONS, SINCE FOLLOWED PER ITS DIVISION BENCH DECISIONS. THERE I S IN FACT NO REFERENCE TO EVEN THE EARLIER JUDGMENTS BY THE SAME COURT. THAT APART , THE DECISIONS ARE DISTINGUISHABLE ON FACTS INASMUCH AS THE SAME ARE B ASED ON MUTUAL BENEFITS AND ADJUSTMENT ENTRIES WITHOUT SPECIFYING THE NATURE OF THE ADJUSTMENTS, WHILE IN THE INSTANT CASE THE SAME ARE ONLY RECEIPT AND PAYM ENT OF MONEY, I.E., A LOAN OR ADVANCE SIMPLICITER . HOW, AGAIN, ONE WONDERS, IS THE FACT OF THE ASSES SEE HAVING ALSO LENT MONEY TO THE COMPANY WHICH, AGAIN, COULD BE IN THE SAME YEAR OR IN A PRECEDING YEAR, OR EVEN IN THE SUBSEQUENT YEAR, REL EVANT. IT IS THE LENDING TRANSACTION, AS OPPOSED TO A BUSINESS TRANSACTION, WHERE THE PAYER-COMPANY IS A COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY IN TERESTED AND THE PAYEE IS A ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 29 SUBSTANTIAL SHARE-HOLDER THEREIN, THAT ALONE COMES WITHIN THE LETTER OF LAW, AND SOUGHT TO BE PLACED RESTRICTION ON. THE ACT OF LEND ING BY THE SHAREHOLDER TO THE COMPANY IS NOT IN ANY MANNER TARGETED. IT IS IN FAC T AN INDEPENDENT TRANSACTION, I.E., OF THE LOAN AND ADVANCE BY SUCH A COMPANY THE RETO. THIS IS IN FACT ADMITTEDLY SO IN THE INSTANT CASE, BEING DEPENDENT ON THE AVAILABILITY OF SURPLUS FUNDS WITH THE ASSESSEE AND, FURTHER, ON THE SAME B EING REQUIRED AT THE RELEVANT TIME BY THE COMPANY. IT IS THE SOURCE OF BORROWING TO A SHAREHOLDER THAT THE LAW PLACES RESTRICTION ON . CONSIDERING THE SAID RESTRICTION ON IT, IT IS NOT PERMISSIBLE FOR A SHAREHOLDER TO CONTEND THOUGH TO BE FAIR IT HAS NOT BEEN BEFORE US, THAT THE LOAN OR ADVANCE TO IT BY THE PAYER-COMPANY IS I N CONSIDERATION OF IT, SIMILARLY, ADVANCING MONIES THERETO. THAT WOULD TAN TAMOUNT TO DEFEATING THE CLEAR AND STRICT PROVISION OF LAW WHICH, AS AFORE-N OTED, COVERS CASES OF GENUINE LOANS AND ADVANCES AS WELL, SO THAT SUCH AN ARGUMEN T, SHOWN TO BE FACTUALLY NOT VALID IN THE INSTANT CASE, IS NOT TENABLE. THAT IS, SUCH AN ARGUMENT, EVEN WHERE THE LOANS BY ONE TO ANOTHER DO NOT CARRY INTEREST, SO THAT IT MAY FACTUALLY ACQUIRE SOME FORCE, IS NOT A VALID ARGUMENT, AND SUCH AN AR RANGEMENT WOULD, IN VIEW OF THE CLEAR LANGUAGE OF THE PROVISION, LISTING FOUR C ONDITIONS NOTED SUPRA, THE CUMULATIVE SATISFACTION OF WHICH ALONE IS RELEVANT, NOT BE A VALID ARGUMENT. IN FACT, THE CHARGE OF INTEREST, SO THAT THE FUNDS ARE IN THE INSTANT CASE MADE AVAILABLE BY ONE TO ANOTHER AT A COST, PRECLUDE THE RAISING OF SUCH A CONTENTION AS BEING IMPUTED. WHAT A SHAREHOLDER DOES WITH ITS FU NDS, ON WHICH THERE IS NO EMBARGO, IS NOT RELEVANT. IT WOULD BE A DIFFERENT M ATTER, WE MAY ADD, WHERE THE FUNDS BORROWED OR ADVANCED, ARE FOR BUSINESS PURPOS E, IN WHICH CASE THE SAME WOULD STAND TO BE ADJUSTED AGAINST THE BUSINESS PUR POSE FOR WHICH THE AMOUNT STANDS PAID OR RECEIVED, VIZ. AN ADVANCE AGAINST PU RCHASE OF GOODS, WHILE IN THE INSTANT CASE THE MONIES RECEIVED, DIRECTLY OR INDIR ECTLY, HAVE BEEN MET BY REPAYMENT OF MONIES, I.E., ARE LOANS OR ADVANCES SIMPLICITER , TO WHICH, AS CLARIFIED, THE PROVISION IS APPLICABLE. THE RELIANC E ON THE CITED DECISIONS WOULD THEREFORE BE OF NO ASSISTANCE TO THE ASSESSE. ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 30 4.8 IT MAY ALSO BE CLARIFIED THAT THE PROVISION IS ATTRACTED IRRESPECTIVE OF THE STATUS OF THE SHAREHOLDER. THAT IS, IS APPLICABLE T O A SHARE-HOLDER, AS EXPLAINED IN SADHANA TEXTILE MILLS (P.) LTD. V. CIT [1991] 188 ITR 318 (BOM), TO A CORPORATE SHAREHOLDER, AS THE ASSESSE-COMPANY. WE C ONSIDER IT PERTINENT TO CLARIFY THIS AS IT IS STATED THAT THE PROVISION IS NOT APPLICABLE TO AN INTER CORPORATE DEPOSIT (ICD), I.E., A DEPOSIT, BY DEFINI TION, BY ONE COMPANY TO ANOTHER. IT IS IN FACT NOBODYS CASE THAT THE RUNNING ACCOUN T BETWEEN THE TWO ENTITIES CONSTITUTES AN ICD(S) . BE THAT AS IT MAY, THE PROVISION COVERS ANY PAYMENT WHICH IS IN THE NATURE OF A LOAN AND ADVANCE, WHIC H THE IMPUGNED BORROWING/S IS, SO THAT THE SAME GETS HIT BY THE PR OVISION IRRESPECTIVE OF WHETHER OR NOT IT STANDS TO BE REGARDED ALSO AS AN ICD. THE ONLY THING RELEVANT IS IF THE PAYMENT CAN BE REGARDED AND, RATHER, IS, IN SUBSTAN CE, A LOAN OR AN ADVANCE, BOTH TERMS BEING JUDICIALLY WELL DEFINED . AN ICD, A DEPOSIT BY DEFINITION, IS, RATHER, ONLY IN THE NATURE OF A LOAN; DEPOSITS BEIN G A SPECIES OF LOANS/ADVANCES. ITS EXCLUSION WOULD THEREFORE ONLY BE WHERE THE DEP OSITOR (LENDING) COMPANY IS IN THE BUSINESS OF MONEY LENDING AND THE DEPOSIT IS GIVEN IN THE NORMAL COURSE OF ITS BUSINESS. THE EXCLUSION OF A BUSINESS ADVAN CE, REFERRED TO EARLIER, I.E., EVEN AS THE PROVISION SPEAKS OF ANY PAYMENT BY WAY OF A LOAN OR ADVANCE , COVERING THEREFORE ADVANCES OF ALL TYPES, IS ONLY O N THE PREMISE THAT THE SAID WORD, READ CONJUNCTIVELY WITH THE WORD LOAN, APPL YING THE PRINCIPLE OF EJUSDEM GENERIS , SHOULD ONLY INCLUDE PAYMENTS IN THE NATURE OF LOA NS, EXCLUDING BUSINESS TRANSACTIONS, WHICH HAVE, AS A MATTER OF C OURSE, IF NOT NECESSARILY, TO BE SETTLED BY REMITTING FUNDS; THE PROVISION IN NO MAN NER SEEKING TO IMPINGE ON GENUINE BUSINESS TRANSACTIONS. 4.9 FINALLY, IT IS STATED THAT THE ENTRIES IN THE B OOKS OF ACCOUNT ARE NOT DETERMINATIVE. THE SAME SEEKS TO PERHAPS MEET THE R EFLECTION OF THE OUTSTANDING SUM (AS AT THE YEAR-END) AS A LOAN OR ADVANCE IN TH E BALANCE-SHEET OF THE LENDER OR THE BORROWER COMPANY. IT IS NOBODY'S CASE THAT T HE PROVISION STANDS INVOKED ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 31 ON ACCOUNT OF SUCH REFLECTION, WHICH HAS NOT BEEN S HOWN TO BE INCORRECT, SO THAT THERE IS NO FACTUAL BASIS TO THE ARGUMENT. THE PROV ISION WOULD IN FACT APPLY EVEN IF THE SHAREHOLDER DOES NOT, AS IS USUALLY THE CASE FOR AN INDIVIDUAL SHAREHOLDER, MAINTAIN BOOKS OF ACCOUNT, AND WHICH IS SO IN THE P RESENT CASE ONLY BECAUSE OF IT BEING A CORPORATE ENTITY. ON THE CONTRARY, IT IS TH E ASSESSEE WHO DRAWS ON THE ACCOUNTS, STATING IT TO BE A RUNNING ACCOUNT AND, F URTHER, A LOW RETENTION PERIOD, AND ON THAT BASIS PLEAD THAT THE PROVISION SHALL NOT APPLY. THE PROVISION IS APPLICABLE QUA ANY PAYMENT AND, THEREFORE, WOULD (OR WOULD NOT) A PPLY WITH REFERENCE TO EACH SPECIFIC SUM. IT IS IMMATERIAL WH ETHER SUCH PAYMENT/S IS RECORDED IN THE BOOKS OF ACCOUNT OR NOT, AND THE ON LY THING RELEVANT IS IF IT IS IN THE NATURE OF A LOAN/S OR ADVANCE/S. THE ASSESSEES ARGUMENT, WHICH IS EVEN OTHERWISE NOT BACKED BY ANY MATERIAL AND ONLY IN TH E NATURE OF A BALD STATEMENT, IS THEREFORE WITHOUT MERIT. 4.10 THE ONLY OTHER ISSUE RAISED IN APPEAL IS THE C HARGEABILITY OF THE DIVIDEND UNDER SECTION 2(22)(E) AS INCOME FROM OTHER SOURCE S U/S. 56. NO ARGUMENT WAS ADVANCED IN THIS RESPECT EITHER BEFORE US OR, AS IT APPEARS FROM THEIR ORDERS, BEFORE THE REVENUE AUTHORITIES. THERE IS NO REFEREN CE THERETO EVEN IN THE WRITTEN SUBMISSIONS BY THE ASSESSEE, ADDUCED DURING HEARING . SO, HOWEVER, THE MATTER BEING LEGAL, WE WOULD NONE-THE-LESS CONSIDER THE SA ME. SECTION 56, IN ITS RELEVANT PART, READS AS UNDER: INCOME FROM OTHER SOURCES. 56. (1) INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUD ED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEA D INCOME FROM OTHER SOURCES, IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. (2) IN PARTICULAR AND WITHOUT PREJUDICE TO THE GENE RALITY OF THE PROVISIONS OF SUB-SECTION (1), THE FOLLOWING INCOME SHALL BE CHARGEABLE TO IN COME-TAX UNDER THE HEAD INCOME FROM OTHER SOURCES, NAMELY: (I) DIVIDENDS; CLEARLY, THEREFORE, DIVIDEND IN SECTION 56 REFERS TO THE DIVIDEND AS DEFINED U/S. 2 (22) OF THE ACT. WE HAVE ALREADY HELD THAT THE IM PUGNED SUMS QUALIFY TO BE ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 32 DIVIDEND U/S. 2(22)(E). THE ONLY THING THEREFORE TH AT NEEDS TO BE EXAMINED IS IF THE SAME STANDS EXCLUDED FROM THE PURVIEW OF THE T OTAL INCOME U/S. 2(45) OF THE ACT. CHAPTER III OF THE ACT, COMPRISING SECTION S 10 TO 13B, SPECIFIES SUCH INCOMES. SECTION 10(34), BROUGHT ON THE STATUTE-BOO K W.E.F. 01.4.2004, READS AS UNDER: INCOMES NOT INCLUDED IN TOTAL INCOME. 10. IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR O F ANY PERSON, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE IN CLUDED (1) (33) . (34) ANY INCOME BY WAY OF DIVIDENDS REFERRED TO IN SECTI ON 115-O ; IT IS THUS ONLY THE DIVIDEND DECLARED, DISTRIBUTED OR PAID BY A COMPANY, ON WHICH TAX U/S. 115-O HAS BEEN SUFFERED, THAT FALLS U/S. 1 0(34), AND WOULD THEREFORE NOT STAND TO BE ASSESSED U/S. 2(24)(II) R/W S. 56 OF TH E ACT. THE SAID DIVIDEND WOULD ONLY BE THAT ENVISAGED U/S. 2(22)(A), I.E., AS DECL ARED OBSERVING THE REQUIRED PROCEDURE IN ITS RESPECT UNDER THE COMPANIES ACT, 1 956 (OR, AS THE CASE MAY BE, COMPANIES ACT, 2013), TO ALL THE SHAREHOLDERS, I.E. , IN PROPORTION TO THEIR SHAREHOLDING. THIS WOULD CERTAINLY NOT COVER DIVIDE ND WHICH GETS INCLUDED WITHIN ITS DEFINITION UNDER THE ACT IN VIEW OF THE EXTENDED MEANING OF THE TERM DIVIDEND BY VIRTUE OF A LEGAL FICTION. THE DIVIDE ND DEEMED AS SUCH U/S. 2(22)(E) WOULD, THEREFORE, STAND TO BE ASSESSED AND , ACCORDINGLY, HAS BEEN RIGHTLY BROUGHT TO TAX, U/S. 56 OF THE ACT. THE ASS ESSE FAILS ON ITS GD. 3 AS WELL. IN SUM 5. THE PRINCIPAL OBJECTION OF THE ASSESSEE IN THIS CASE, AS INDEED IN OTHERS CITED BY IT, IS THAT THE AMOUNT ADVANCED (BY THE PA YER-COMPANY, GAPL) STANDS SINCE REPAID, SO THAT THE PROVISION OF S. 2(22)(E) OUGHT NOT TO COVER GENUINE CASES OF LOANS/ADVANCES, PARTICULARLY WHERE THE SHA REHOLDER HAS ALSO GIVEN, SIMILARLY, LOANS/ADVANCES TO THE SAID COMPANY. THE SAME ACCORDINGLY HAS BEEN DISCUSSED WITH REFERENCE TO THE FOUNDATIONAL JUDGME NTS BY THE APEX COURT, ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 33 BEING BY ITS LARGER BENCHES, SETTLING THE LAW IN T HE MATTER, AS IN NAVNIT LAL C. JHAVERI (SUPRA); PUNJAB DISTILLING INDS. LTD . (SUPRA) AND TARULATA SHYAM (SUPRA), WHICH IN FACT STAND FOLLOWED PER IT'S LATE R DECISIONS, AS IN SARDA (P.) (SUPRA) AND MUKUNDRAY K. SHAH (SUPRA), TO ALL OF WHICH EXTENSIVE REFERENCE STANDS MADE. IN FACT, PER THESE DECISIONS ITSELF TH E APEX COURT HAS NOTED WITH APPROVAL SEVERAL DECISIONS BY THE HONBLE HIGH COUR TS CITED BEFORE IT, EVEN AS IT, IN EACH CASE, AFFIRMED THE DECISION BY THE HON' BLE HIGH COURT, UNDER CHALLENGE BEFORE IT. THE MATTER STANDS DISCUSSED AT LENGTH IN THIS ORDER (REFER PARAS 4.1 THRO 4.10), TO WHICH THEREFORE REGARD IS TO BE HAD. WE MAY, WHILE CONCLUDING OUR ORDER, EXTRACT FROM THE DECISION IN SARADA (P.) (SUPRA) (PG. 448), I.E., APART FROM ADVERTING SIMILAR EXTRACTS IN THE FOREGOING PART OF THIS ORDER, IF ONLY TO EMPHASIZE THE UNANIMITY AND UNAMBIGUITY IN THE LAW AS CLARIFIED AND SETTLED BY THE LARGER BENCHES OF THE APEX COURT: SEC. 2(22)(E) AS IT STOOD AT THE MATERIAL TIME DE FINED DIVIDEND TO INCLUDE 'ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY.. TO THE EXTENT TO WHICH THE COMPANY... POSSESSES ACCUMULATED PROFITS'. IN THE INSTANT CASE THERE IS NO DISPUTE THAT THE APPELLANT HAD A SUBSTANTIAL INTEREST IN THE COMPANY. THE NATURE OF THE COMPANY IS ALSO NOT IN DISPUTE. FROM THE FACTS AS STATED HEREINABOVE, IT APPEARS TH AT THE WITHDRAWALS MADE BY THE APPELLANT FROM THE COMPANY AMOUNTED TO GRANT OF LOA N OR ADVANCE BY THE COMPANY TO THE SHAREHOLDER. THE LEGAL FICTION CAME INTO PLAY AS SO ON AS THE MONIES WERE PAID BY THE COMPANY TO THE APPELLANT. THE ASSESSEE MUST BE DEEMED TO HAVE RECEIVED DIVIDE NDS ON THE DATES ON WHICH SHE WITHDREW THE AFORESAID AMOUNTS O F MONEY FROM THE COMPANY. THE LOAN OR ADVANCE TAKEN FROM THE COMPANY MAY HAVE BEEN ULT IMATELY REPAID OR ADJUSTED BUT THAT WILL NOT ALTER THE FACT THAT THE ASSESSEE, IN THE E YE OF LAW, HAD RECEIVED DIVIDEND FROM THE COMPANY DURING THE RELEVANT ACCOUNTING PERIOD . IT WAS HELD BY THIS COURT IN THE CASE OF SMT. TARULATA SHYAM & ORS. VS. CIT [1977] 108 ITR 345 (SC) THAT THE STATUTORY FICTION CREATED BY S. 2(6A)(E) OF THE INDIAN IT ACT, 1922 WOULD COME INTO OPERATION AT THE TIME OF THE PAYMEN T OF ADVANCE OR LOAN TO A SHAREHOLDER BY THE COMPANY. THE LEGISLATURE HAD DELIBERATELY NO T MADE THE SUBSISTENCE OF THE LOAN OR ADVANCE, OR ITS REMAINING OUTSTANDING, ON THE LAST DATE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR A PRE-REQUISITE FOR RAISING THE STA TUTORY FICTION. (EMPHASIS, SUPPLIED) THE NATURE OF TRANSACTIONS, PURELY FINANCIAL IN NAT URE, HAS BEEN FOUND TO BE RECEIPT AND PAYMENT OF MONEY, I.E., A LOAN BY DEF INITION, A TERM JUDICIALLY WELL ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 34 EXPOUNDED. THIS ASPECT, DENOTING A PRIMARY FACT, IS IN FACT ADMITTED. THE GENUINENESS OF A LOAN OR ADVANCE, I.E., CREATES AN ACTUAL LIABILITY AN ABSENCE OF WHICH WOULD ATTRACT S. 68, IS NOT IN ISSUE. HOWEVER , THAT THE LOAN/ADVANCE REPRESENTS AN ACTUAL LIABILITY OF THE SHAREHOLDER, WHICH MAY HAVE BEEN REPAID SINCE, WHICH COULD EVEN BE IN THE RELEVANT YEAR ITS ELF, DID NOT FIND FAVOUR WITH THE APEX COURT IN VIEW OF THE CLEAR, UNAMBIGUOUS LA NGUAGE OF THE PROVISION; IT FURTHER NOTING THAT THE OBJECT OF THE PROVISION HAD A RATIONAL NEXUS WITH INCOME, SO THAT THE PROVISION, WHICH IT AGREED WAS HARSH, W AS WITHIN THE LEGISLATIVE COMPETENCE OF THE PARLIAMENT AND, THEREFORE, HAD TO BE GIVEN AFFECT TO. A PARALLEL IN THIS CONTEXT STANDS DRAWN BY US WITH SE CTION 68 OF THE ACT. THE ARGUMENT OF THE SUM NOT REPRESENTING REAL INCOME, THOUGH NOT SPECIFICALLY ADVANCED BEFORE US, IS IMPLICIT IN THE ARGUMENT ADV ANCED WITH REFERENCE TO THE GENUINENESS OF THE LOAN/ ADVANCE, AND THEREFORE CON SIDERED. THE SAME WOULD NOT CARRY THE ASSESSEES CASE FURTHER, AS WOULD EVEN OT HERWISE BE APPARENT FROM THE HOST OF DECISIONS BY THE APEX COURT. AS EXPLAINED I N POONA ELECTRIC SUPPLY CO. LTD. V. CIT [1965] 57 ITR 521 (SC), THE CONCEPT OF REAL INCOM E IS SUBJECT TO THE PROVISIONS OF THE ACT. THE LOAN OR ADVANCE BEIN G BOTH WAYS WOULD NOT CARRY ANY SPECIAL SIGNIFICANCE IN THE CONTEXT OF THE PROV ISION INASMUCH AS BOTH QUALIFY, INDEPENDENTLY, TO BE A LOAN OR ADVANCE, WH ICH IN THE PRESENT CASE IS WITH INTEREST, FURTHER, ESTABLISHING, IF IT WAS REQ UIRED, THE PAYMENTS TO BE PURELY FINANCIAL TRANSACTIONS, I.E., LOAN/ADVANCE(S) SIMPLICITER , SQUARELY COVERED WITHIN THE AMBIT OF THE PROVISION, WHICH SEEKS TO PLACE RE STRICTION ON PAYMENTS TO A SUBSTANTIAL SHAREHOLDER BY A COMPANY IN WHICH PUBLI C IS NOT SUBSTANTIALLY INTERESTED NOTHING MORE AND NOTHING LESS. IN FACT , LOAN/ADVANCE BY ONE TO ANOTHER WOULD ONLY BE IF THE FUNDS ARE FOR THE TIME BEING SURPLUS WITH THE LENDING COMPANY AND, THUS, INDEPENDENT OF A SUBSEQU ENT LOAN, IF ANY, TO THE BORROWER COMPANY. FURTHER, IT WOULD ARISE ONLY WHER E, THOUGH AVAILABLE, THE MONEY IS, AT THE SAME TIME, REQUIRED BY THE BORROWI NG COMPANY, SO THAT THERE IS NO CERTAINTY UNDER SUCH AN ARRANGEMENT, BOTH WITH R EGARD WITH THE QUANTUM AND ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 35 TIME OF THE SOURCE OF FUNDS FOR SUCH AN ARRANGEMENT TO BE REGARDED AS VIABLE OR A DEPENDABLE ONE, OR TO CONTEND OF THE LOAN BEING TEM PORARY. NO BUSINESS PURPOSE HAS BEEN SHOWN OR OTHERWISE STATED, SO THAT THE CON TENTION IN ITS RESPECT IS A BALD ONE. THE PERIOD OF RETENTION HAS AGAIN BEEN FOUND T O BE NOT RELEVANT. THE ASPECT OF SET OFF OF SUBSEQUENT CREDITS (RECEIPTS), I.E., SUBSEQUENT TO REPAYMENT OF THE EARLIER RECEIPT, ADVANCED IN TARULATA SHYAM (SUPRA), THOUGH NOT ANSWERED BY THE APEX COURT, BEING HYPOTHETICAL (REFER PG. 358 OF TH E REPORTS), ALSO DO NOT ARISE IN THE INSTANT CASE AS THE REVENUE HAS BROUGHT ONLY THE PEAK CREDIT DURING THE YEAR TO TAX. IT MAY BE NOTED THAT INASMUCH AS EACH PAYMENT QUALIFYING AS A LOAN OR ADVANCE FALLS WITHIN THE AMBIT OF THE PROVISION, AND ITS SUBSEQUENT REPAYMENT HELD AS OF NO CONSEQUENCE, THE ENTIRE PAYMENT TO (R ECEIPT BY) THE SHAREHOLDER (COMPANY) WOULD STAND TO BE REGARDED AS DIVIDEND. IN FACT, A PLEA AS TO ONLY THE PEAK CREDIT BEING REGARDED AS DIVIDEND WAS RAIS ED, THOUGH NOT ACCEPTED, IN P.K. BADIANI (SUPRA) (REFER PG. 380), A DECISION WHICH SUBSEQUE NTLY FOUND APPROVAL IN MUKUNDRAY K. SHAH (SUPRA). THAT IS, THE REVENUE HAS, IN REGARDING ONLY THE PEAK AMOUNT ADVANCED AS THE QUALIFYING AMO UNT, ACTED AS REASONABLE AS IT COULD UNDER THE CIRCUMSTANCES, I.E., GIVEN THE S ETTLED LAW IN THE MATTER, THE PAYMENT BEING REGARDED AS DIVIDEND ONLY UNDER ITS A RTIFICIAL DEFINITION, AS EXPLAINED, PER AN IRREBUTTABLE PRESUMPTION, STATUTO RILY PROVIDED. THE QUESTION OF THE GENUINENESS OF THE LOAN OR ADVANCE, IS, FOR THE SAME REASON, OF NO SIGNIFICANCE. THE DECISIONS CITED ARE, BESIDES BEIN G WITHOUT REFERENCE TO BINDING JUDICIAL PRECEDENTS, DISTINGUISHABLE ON FACTS. FURT HER, BEING NOT A REGULAR DIVIDEND, DECLARED AND PAID BY COMPANY, THE SAME DO ES NOT FALL TO BE COVERED U/S. 10(34) AND, THUS, IS NOT EXCEPTED U/S. 56. THE SAME HAS, ACCORDINGLY, BEEN RIGHTLY BROUGHT TO TAX U/S. 2(24)(II) R/W SS. 2(22) (E) AND 56 OF THE ACT BY THE REVENUE, WHOSE ACTION IS UPHELD. THE ASSESSEE, IN T HIS VIEW OF THE MATTER, FAILS. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 36 ORDER PRONOUNCED IN THE OPEN COURT ON JULY 05, 2019 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 05.07.2019 /GP/SR/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: G. G. OILS & FATS PVT. LTD., 230 1, BHUPINDRA FLOUR MILLS, AMRIK SINGH ROAD, BATHINDA (2) THE RESPONDENT: DEPUTY COMMISSIONER OF INCOME T AX, CIRCLE-1, BATHINDA (3) THE CIT(APPEALS), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. THIS IS THE TRUE COPY OF THE ORDER PRONOUNCED ON 05 .07.2019, AS CORRECTED AND MODIFIED BY THE CORRIGENDUM ORDER DATED 11.07.2 019, BOTH ON RECORD, AND ALSO BEING UPLOADED HEREWITH. BY ORDER ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 37 IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NO. 508/ASR/2017 ASSES SMENT YEAR: 2014-15 G. G. OILS & FATS PVT. LTD., 2301, BHUPINDRA FLOUR MILLS, AMRIK SINGH ROAD, BATHINDA [PAN: AADCG 8857 H] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA & SH. PARSHOTAM K . SINGLA (ADV.) RESPONDENT BY: SH. CHARAN DASS (D.R.) CORRIGENDUM PER SANJAY ARORA, AM: ORDER IN THIS APPEAL, HEARD ON 11/4/2019, STANDS SI NCE PROPOSED. CERTAIN OMISSIONS AND CORRECTIONS HAVE HOWEVER SINCE COME T O LIGHT, WHICH ARE BEING SOUGHT TO BE RECTIFIED THROUGH THIS CORRIGENDUM. TH E SAME MAY ACCORDINGLY BE CONSIDERED AS INTEGRAL TO THE ORDER UNDER CONSIDERA TION. 1. IN PARA 4.4 (IN SUB-PARA 2, BEGINNING WITH THE W ORDS THE CONSISTENT VIEW, THEREFORE, ..), A COMMA , BE READ AFTER THE WORD REPAYMENT OCCURRING IN THE SENTENCE BEGINNING WITH THE WORDS THE SUBSEQUENT D ISCHARGE OF THE .) AT PAGE 12 OF THE ORDER; 2. IN PARA 4.5 (IN SUB-PARA 2, BEGINNING WITH THE W ORDS THE TRANSACTIONS BETWEEN THE TWO COMPANIES), AT PAGE 16, THE FOLL OWING SENTENCE BE READ AFTER THE SENTENCE BEGINNING WITH THE WORDS WHY, T HE SAME CARRIES ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 38 INTEREST,..) AND BEFORE THE NEXT SENTENCE BEGINNI NG WITH THE WORDS MONEY RECEIVED ON ACCOUNT), AT PAGE 17 OF THE ORDER: THAT THE SAME ARE IN THE NATURE OF A FINANCIAL ACC OMMODATION IS NOT IN DISPUTE. 3. IN PARA 4.6, AFTER THE REPRODUCTION OF SECTION 2 60A, THE FOLLOWING BE SUBSCRIBED:(EMPHASIS,SUPPLIED) 4. IN PARA 4.7 (IN SUB-PARA 3, BEGINNING WITH THE W ORDS THE EXTENSION OF A LOAN/ADVANCE CARRIES WITH IT.), THE FOLLOWING SE NTENCE AT PAGE 23: WHEN THE FACTOR OF REPAYMENT OF LOAN AND ADVANCE IT SELF IS NOT RELEVANT, HOW COULD THE RETENTION PERIOD, I.E., THE PERIOD AFTER WHICH THE REPAYMENT IS EFFECTED, COULD POSSIBLY BE ?, BEING THE LAST SENTENCE OF THE SAID SUB-PARA, B E READ AS: WHEN THE FACTOR OF REPAYMENT OF LOAN OR ADVANCE, BE ING IN FACT INHERENT THERETO, ITSELF IS NOT RELEVANT, HOW COULD THE RETE NTION PERIOD, I.E., THE PERIOD AFTER WHICH THE REPAYMENT IS EFFECTED, COULD POSSIB LY BE ?; 5. IN PARA 4.7 (IN SUB-PARA 4, BEGINNING WITH THE W ORDS ALL THESE ASPECTS HAVE IN FACT BEEN DELIBERATED AND CONCLUDED BY THE APEX COURT) IN THE SENTENCE (AT PGS. 24-25) BEGINNING WITH THE WORDS: THE DEFINITION OF DIVIDEND MUST HAVE..), THE WORD THE BE READ BETWEEN THE W ORDS CONTEXT OF AND PROFIT OF A COMPANY; 6. IN PARA 4.7 (IN SUB-PARA 4, BEGINNING WITH THE W ORDS ALL THESE ASPECTS HAVE IN FACT BEEN DELIBERATED AND CONCLUDED BY THE APEX COURT), AFTER THE SENTENCE (AT PG. 26) BEGINNING WITH THE WORDS: THE RE WAS NO INCONSISTENCY, IT CLARIFIED, .) AND ENDING WITH THE WORDS INCOME-TA X ACT., THE FOLLOWING SENTENCE BE READ: ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 39 THE DIVIDEND U/S. 2(6A)(E) (CORRESPONDING TO S.2(2 2)(E) OF THE ACT), IT EXPLAINED, WAS, AS OPPOSED TO DIVIDENDS U/SS. 2(6A) (A) TO (D), NOT A PERMANENT PAYOUT,; 7. IN PARA 4.7 (IN SUB-PARA 4, BEGINNING WITH THE W ORDS ALL THESE ASPECTS HAVE IN FACT BEEN DELIBERATED AND CONCLUDED BY THE APEX COURT), AFTER THE SENTENCE (AT PG. 27) BEGINNING WITH THE WORDS: IT MUST BE REMEMBERED,.), THE WORD THEREIN BE READ IMMEDIATELY AFTER THE WO RD OBSERVED; 8. IN PARA 4.7 (IN SUB-PARA 5, BEGINNING WITH THE WORD S THESE CONDITIONS WERE REITERATED BY THE APEX COURT IN TARULATA SHYAM (SUPRA), ..), AT PAGE 27, THE WORDS BEFORE THE TRIBUNAL BE READ AFTER T HE WORDS OF THE NATURE RAISED AND BEFORE THE WORDS IN SURAJ DEV DADA (SUPRA), IN THE SENTENCE BEGINNING WITH THE WORDS IT IS SURPRISING INDEED.. AT PAGE 28 OF THE ORDER; 9. IN PARA 5, IN THE SENTENCE BEGINNING WITH THE WO RDS THE GENUINENESS OF A LOAN OR ADVANCE AND BEFORE THE WORDS IS NOT IN ISSUE, AT PAGE 33, TH E FOLLOWING WORDS BE READ: I.E., CREATES AN ACTUAL LIABILITY AN ABSENCE OF WHICH WOULD ATTRACT S. 68,; 10. IN PARA 5, AFTER THE WORDS WITH THE LENDING CO MPANY AND , IN THE SENTENCE BEGINNING WITH THE WORDS: IN FACT, LOAN/ADVANCE BY ONE TO ANOTHER WOULD), AT PAGE 34 OF THE ORDER, THE FOLLOWING W ORDS BE READ: THUS, INDEPENDENT OF A SUBSEQUENT LOAN, IF ANY, TO THE BORROWER COMPANY. FURTHER, IT WOULD ARISE ONLY WHERE, THOUGH AVAILABL E, THE MONEY IS,; 11. IN PARA 5, AFTER THE WORDS DIVIDEND WAS RAISED AND BEFORE THE WORDS IN P.K. BADIANI (SUPRA) OCCURRING IN THE SENTENCE BEGINNING WITH THE WORDS: IN FACT, A PLEA AS TO ONLY THE PEAK CREDIT BEING REGAR DED), AT PAGE 35 OF THE ORDER, THE FOLLOWING WORDS BE READ: , THOUGH NOT A CCEPTED, ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 40 ORDER PRONOUNCED IN THE OPEN COURT ON JULY 11, 2019 SD/- 11/07/2019 SD/- 04/07/2019 (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 11.07.2019 /GP/SR/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: G. G. OILS & FATS PVT. LTD., 230 1, BHUPINDRA FLOUR MILLS, AMRIK SINGH ROAD, BATHINDA (2) THE RESPONDENT: DEPUTY COMMISSIONER OF INCOME T AX, CIRCLE-1, BATHINDA (3) THE CIT(APPEALS), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY O RDER ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 41 IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NO. 508/ASR/2017 ASSES SMENT YEAR: 2014-15 G. G. OILS & FATS PVT. LTD., 2301, BHUPINDRA FLOUR MILLS, AMRIK SINGH ROAD, BATHINDA [PAN: AADCG 8857 H] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA & SH. PARSHOTAM K . SINGLA (ADV.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 11.04.2019 DATE OF PRONOUNCEMENT: 05.07.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), BATHINDA (CI T(A) FOR SHORT) DATED 21.6.2017, DISMISSING THE ASSESSEES APPEAL CONTEST ING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREI NAFTER) FOR ASSESSMENT YEAR (AY) 2014-15 VIDE ORDER DATED 16.12.2016. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE -COMPANY, A DEALER IN EDIBLE/NON-EDIBLE OILS, WAS FOUND DURING THE ASSESS MENT PROCEEDINGS TO HAVE RECEIVED UNSECURED LOAN/S DURING THE RELEVANT PREVI OUS YEAR, I.E., F.Y. 2013-14, FROM ANOTHER COMPANY, NAMELY, GURDAS AGRO PVT. LTD. (GAPL), IN WHICH IT HELD SHARES WITH 34.40% VOTING POWER. THE LOAN, WHI CH WAS INTEREST-BEARING, WAS NOT FOR ANY PARTICULAR AMOUNT, BUT IN THE FORM OF AN OPEN CURRENT ACCOUNT ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 42 WITH REGULAR DEBITS AND CREDITS DURING THE YEAR; TH E OPENING BALANCE (AS ON 01.4.2013) BEING IN FACT AT A DEBIT (I.E., RECEIVAB LE) OF RS.279.48 LACS, WHICH THOUGH STOOD LIQUIDATED BY 15.4.2013, TURNING INTO A CREDIT (PAYABLE) BALANCE OF RS.304.91 LACS ON THAT DATE. THE PEAK BALANCE FOR T HE YEAR WAS AT RS. 3266.12 LACS ON 06.11.2013. GAPL WAS A COMPANY IN WHICH PUB LIC IS NOT SUBSTANTIALLY INTERESTED, I.E., IS COMPANY OTHER THAN THAT DEFINE D U/S. 2(18) OF THE ACT. TO THE EXTENT OF ITS ACCUMULATED PROFIT, THEREFORE, THE L OAN OR ADVANCE TO THE ASSESSEE WAS LIABLE TO THE ASSESSED IN ITS HANDS AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. THE ACCUMULATED PROFIT UP TO 31.3.2013, I.E., IMMEDIATELY PRIOR TO THE CURRENT YEAR, STOOD AT RS. 67.36 LACS. THE PROFIT F OR THE YEAR, AS PER THE AUDITED ACCOUNTS, WAS AT RS. 150.00 LACS, SO THAT, ON A PRO -RATA BASIS (I.E., UP TO 06/11/2013), IT WORKED TO RS. 49.81 LACS. THE TOTAL ACCUMULATED PROFIT UP TO THAT DATE, I.E., RS.117.17 LACS, WAS ACCORDINGLY, AFTER SHOW CAUSING THE ASSESSEE, BROUGHT TO TAX U/S. 2(22)(E) R/W S. 56 OF THE ACT I N ASSESSMENT. IN APPEAL, THE ASSESSEE RAISED SEVERAL CONTENTIONS, EACH OF WHICH WAS MET BY THE LD. CIT(A). THE FINANCIAL STATEMENTS DID NOT REFLECT ANY TRADIN G TRANSACTION OR BUSINESS RELATIONSHIP BETWEEN THE TW O, I.E., THE PAYER (GAPL) AND THE PAYEE (ASSESSEE) COMPANIES , WITH IN FACT THE BALANCE AS ON 31.3.2014 (RS. 14.48 LACS) BEING REFLECTED AS AN UNSECURED L OAN IN THE ASSESSEES BALANCE- SHEET AS AT THE YEAR-END. THE ASSESSEE HAD SUBSCRIB ED TO 40 LAKH SHARES IN GAPL DURING THE YEAR, WHICH WORKED TO 34.40% SHARE-HOLDI NG THEREIN, SO THAT THERE WAS NO MERIT IN INVOKING THE RULE OF CONSISTENCY; T HE PROVISION BECOMING ACCORDINGLY APPLICABLE FOR THE FIRST TIME ONLY FOR THE CURRENT YEAR. THE ASSESSEE HAVING RECEIVED RS. 4267.01 LACS DURING THE CURRENT YEAR, THE ASSESSING OFFICER (AO) HAD, IN FACT, BEEN REASONABLE IN WORKING THE S UM ASSESSABLE U/S. 2(22)(E) U/S. 56 AT RS.117.17 LACS, WHICH WAS ACCORDINGLY CO NFIRMED BY THE FIRST APPELLATE AUTHORITY, PLACING RELIANCE ON TARULATA SHYAM V. CIT [1997] 108 ITR 345 (SC) AND SARADA (P.) V. CIT [1998] 229 ITR 444 (SC). ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 43 AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL, RAISIN G THE FOLLOWING GROUNDS: 1. THAT THE ORDER OF COMMISSIONER OF INCOME TAX (AP PEALS) AND DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1 BATHINDA IS AGA INST LAW & FACTS. 2. THAT COMMISSIONER OF INCOME TAX (APPEALS) WAS ER RED IN LAW TO SUSTAIN THE AMOUNT TO ASSESS AS 'DEEMED DIVIDEND' OF RS. 1,17,1 7,142.00 IN ABSENCE OF ANY ADVERSE FINDING WITH REGARD TO BUSINESS LOANS & ADVANCES. T HE ADDITION MADE BY ASSESSING OFFICER U/S. 2(22)(E) OF INCOME TAX ACT 1961 IS HIG HLY UNJUSTIFIED IN EYES OF LAW AS THE SAID SECTION HAS BEEN WRONGLY INVOKED. 3. THAT CIT (APPEALS) WAS NOT JUSTIFIED TO SUSTAIN THE ADDITION OF RS. 1,17,17,142.00 U/S. 56 ON ACCOUNT OF DEEMED DIVIDEND WITHOUT CON SIDERING THE FACTS AND WRITTEN SUBMISSION FILED DURING COURSE OF APPELLANT PROCEED INGS. 3. BEFORE US, THE ASSESSEES PRIME CONTENTION WAS O F HAVING MAINTAINED A RUNNING ACCOUNT WITH GAPL. THE TRANSFER OF FUNDS FR OM ONE COMPANY TO ANOTHER WAS ON NEED BASIS. WHILE THE ASSESSE-COMPAN Y WAS THE BENEFICIARY OF THE SUMS RECEIVED THEREFROM, GAPL, THE PAYER COMPAN Y, WAS THE BENEFICIARY OF THE SUMS PAID BY THE ASSESSEE THERETO. THE SAME THE REFORE COULD NOT BE REGARDED AS EITHER A LOAN OR AN ADVANCE, FOR S. 2(22)(E) TO APPLY, BUT ONLY AS AN OPEN, MUTUAL AND CURRENT ACCOUNT. THE CREDIT OBTAINED ONL Y FOR A PERIOD OF 82 DAYS DURING THE RELEVANT YEAR. IT WAS UNDER THESE CIRCUM STANCES THAT THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V. SURAJ DEV DADA [2014] 367 ITR 78 (P&H), WHERE THE CREDIT WAS FOR 55 DAYS ONLY, HELD THAT TH E PROVISION OF S. 2(22)(E), WHICH WAS TO STOP THE MISUSE BY TAKING FUNDS OUT OF THE COMPANY BY WAY OF A LOAN OR ADVANCE INSTEAD OF DIVIDEND AND, THEREBY, A VOID TAX, COULD BE INVOKED. SIMILAR VIEW, IT WAS SUBMITTED, WAS EXPRESSED BY TH E HON'BLE CALCUTTA HIGH COURT IN CIT V. GAYATRI CHAKRABORTY [2018] 407 ITR 730 (CAL), RENDERED AFTER CONSIDERING THE DECISIONS BY THE APEX COURT IN SARDA (P.) (SUPRA) AND CIT V. MUKUNDRAY K. SHAH [2007] 290 ITR 433 (SC). THE DECISIONS IN TARULATA SHYAM (SUPRA) AND SARDA (P.) , IT WAS ARGUED, ARE DISTINGUISHABLE INASMUCH AS TH ERE WERE NO MUTUAL BENEFITS AND OBLIGATIONS IN THE FACT S OF THE SAID CASES. IN BOTH THESE CASES THERE WERE ONLY ONE-WAY TRANSACTIONS DU RING THE YEAR, I.E., PAYMENT ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 44 BY THE PAYER-COMPANY TO THE ASSESSEE-SHAREHOLDER, W HILE IN THE INSTANT CASE THERE ARE TRANSACTIONS BOTH WAYS; THE ASSESSEE-COMP ANY ALSO MAKING PAYMENT/S TO THE PAYER-COMPANY (GAPL). THIS IS PARTICULARLY S O AS THE TWO COMPANIES ARE IN THE SAME LINE OF BUSINESS. ON A QUERY BY THE BEN CH AS TO IF THE PROVISION OF INTEREST, CHARGED (TO THE ASSESSEE-COMPANY BY GAPL) AT RS. 5.19 LACS FOR THE YEAR ON THE OVERDRAFT ACCOUNT, WOULD TAKE THE SUM B ORROWED BY THE ASSESSEE DURING THE YEAR (AT A MAXIMUM OF RS.3266.12 LACS) O UT OF THE PURVIEW S. 2(22)(E), THE LD. COUNSEL FOR THE ASSESSEE, SH. ARO RA, DID NOT OFFER ANY DEFINITE ANSWER, WITH THE BENCH OBSERVING THAT THESE ASPECTS OF THE MATTER HAVE UNDERSTANDABLY BEEN CONSIDERED BY THE HON'BLE APEX COURT PER ITS DECISIONS IN THE MATTER. THE LD. SR. DEPARTMENTAL REPRESENTATIVE (DR) WOULD RELY ON THE IMPUGNED ORDER, STATING THAT NEITHER THE PRIMARY FA CTS OF THE CASE ARE IN DISPUTE NOR IN FACT THE LAW IN THE MATTER, EXPLAINED BY THE APEX COURT PER ITS SEVERAL DECISIONS, TO SOME OF WHICH REFERENCE STANDS MADE B Y THE LD. CIT(A). 4. WE HAVE HEARD THE PARTIES, PERUSED THE MATERIAL ON RECORD, AND GIVEN OUR CAREFUL CONSIDERATION TO THE MATTER. THE EDIFICE OF THE ASSESSEES CASE IS THAT IT HAS BOTH, GIVEN, AS WELL AS RECEIVED, AMOUNTS TO/FR OM GAPL, I.E., TO MUTUAL BENEFIT AND, THEREFORE, S. 2(22) (E) OF THE ACT SHA LL NOT APPLY EVEN AS HELD BY THE HON'BLE COURTS, REFERENCE TO WHICH, INCLUDING BY TH E HON'BLE JURISDICTIONAL HIGH COURT, STANDS MADE. THE MATTER, AS WE FIND, IS NO L ONGER RES INTEGRA , HAVING BEEN ABUNDANTLY CLARIFIED, AND IN ALL ITS ASPECTS, BY THE HON'BLE COURTS, INCLUDING BY THE LARGER BENCHES OF THE APEX COURT, ALL UNANIMOUS IN THEIR VERDICT . THE ASSESSEES CLAIM (REFER ITS GD. 2) IS ALSO N OT TENABLE ON FACTS. IT IS RATHER SURPRISING THAT DESPITE SUCH CLEAR ENUNCIATION OF LAW PER BINDING J UDICIAL PRECEDENTS, SUCH MATTERS CONTINUE TO BE LITIGATED B EFORE THE APPELLATE FORUMS. IT IS THE LAW AS ELUCIDATED AND THE PRIMARY FACTS OF T HE CASE, ON BOTH OF WHICH THERE IS NO DISPUTE, OR EVEN SCOPE FOR, THAT SHALL ACCORD INGLY INFORM OUR ORDER. ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 45 4.1 WE MAY BEGIN BY REPRODUCING THE RELEVANT PROVIS ION, AS UNDER: DEFINITIONS 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES ,- (1) (21) . (22) DIVIDEND INCLUDES- (A) (D) .. (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS RE PRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MA Y, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFIC IAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH O R WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING PO WER, OR TO ANY CONCERN, IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN) 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 PROFIT S; BUT 'DIVIDEND' DOES NOT INCLUDE (I) . (IA) (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER OR T HE SAID CONCERN BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY; (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET O FF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TR EATED AS A DIVIDEND WITHIN THE MEANING OF SUB- CLAUSE (E), TO THE EXTENT TO WHICH IT IS SO SET OFF. AS A MERE READING OF THE PROVISION, LANGUAGE OF WHI CH IS CLEAR AND UNAMBIGUOUS, SUGGESTS AND, IN ANY CASE, UPON A FAIR LOOK AND READING THEREOF, THE PROVISION IS TRIGGERED WHERE: A) A LOAN OR ADVANCE IS GIVEN BY A COMPANY (IN WHIC H THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED) TO A SHAREHOLDER WHO BENE FICIALLY OWNS SHARES THEREIN TO THE EXTENT NOT LESS THAN 10% OF THE VOTING POWER THEREIN; OR B) A LOAN OR ADVANCE IS GIVEN BY SUCH A COMPANY TO ANY CONCERN IN WHICH SUCH SHAREHOLDER HAS SUBSTANTIAL INTEREST (EXPLAINE D AS ENTITLING HIM TO A BENEFICIAL INTEREST IN 20% OF ITS INCOME); OR C) ANY PAYMENT IS MADE BY SUCH A COMPANY ON BEHALF OF, OR FOR THE BENEFIT OF, SUCH A SHAREHOLDER. ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 46 THE LOAN OR ADVANCE OR PAYMENT IS, UNDER SUCH CIRCU MSTANCES, TO BE DEEMED AS DIVIDEND TO THE EXTENT THE PAYING COMPANY HAS ACCUM ULATED PROFITS, THE EXCEPTION BEING WHERE THE LENDING COMPANY IS IN THE BUSINESS OF MONEY LENDING. 4.2 WE MAY AT THIS STAGE ADVERT TO THE RELEVANT TRA NSACTIONS COMPRISING THE IMPUGNED CREDIT OF RS. 3266.12 LACS, DEEMED AS DIVIDEND TO THE EXTE NT OF THE ACCUMULATED PROFIT (OF GAPL), ON THE BASIS OF THE L EDGER ACCOUNT OF GAPL IN THE BOOKS OF THE ASSESSEE-COMPANY (PB PGS. 3-4): ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 47 DATE PARTICULARS NARRATION DEBIT CREDIT CLOSING BALANCE 01/04/2013 OPENING BALANCE 27947593 27947593.00 DR 09/04/2013 HDFC BANK CH. NO. : XXX 15/04/2013 HDFC BANK CH. NO. : XXX 04/05/2013 HDFC BANK CH. NO.: XXX 08/05/2013 HDFC BANK CH. NO.: XXX 13/05/2013 HDFC BANK CH. NO.: XXX 0.00 23/05/2013 FLC INSURANCE EXP POLICY NO. XXX 29/06/2013 HDFC BANK CH. NO.: XXX 12/07/2013 HDFC BANK CH. NO. : XXX 0.00 ' 29/07/2013 FLC INSURANCE EXP POLICY NO. XXX 31/07/2013 FLC INSURANCE EXP POLICY NO. XXX 769144.00 CR 15/10/2013 FLC INSURANCE EXP POLICY NO. 247482.00 1016626.00 CR 15/10/2013 FLC INSURANCE EXP POLICY NO. 124491.00 1141117.00 CR 16/10/2013 HDFCBANK CH. NO: 769144.00 371973.00 CR 17/10/2013 FLC INSURANCE EXP POLICY NO. 250482.00 622455.00 CR 05/11/2013 HDFC BANK CH. NO. 54400000.00 55022455.00 CR 05/11/2013 HDFC BANK CH. NO. 54045000.00 109067455.00 CR 05/1 1/2013 HDFC BANK CH. NO. 54000000.00 163067455.00 CR 05/11/2013 HDFC BANK CH. NO. 53945000.00 217012455.00 CR 06/11/2013 HDFC BANK CH. NO. 54000000.00 271012455.00 CR 06/11/2013 HDFC BANK CH. NO. 55600000.00 326612455.00 CR 13/11/2013 TO 29/11/2013 HDFC BANK CH. NO. XXX 2121455,00 CR 29/11/2013 HDFC BANK CH. NO. 10000000.00 7878545.00 DR 29/11/2013 TO 08/01/2014 HDFC BANK CH. NO. XXX XXX 1349481.00 CR 05/02/2014 TO 03/03/2014 HDFC BANK CH. NO. XXX XXX 981313.00 CR 31 /03/2014 INT E REST PAID INTEREST 518665.00 1499978.00 CR 31/03/2014 TDS INT E REST TDS ON INTEREST 51867 1448111.00 CR (PAY A BLE) ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 48 THE PAYMENT OF RS. 6.22 LACS (ON OCTOBER 15 & 17, 2 013) IS ON ACCOUNT OF INSURANCE IN RESPECT OF FOREIGN LETTER OF CREDIT (F LC) BY GAPL FOR AN ON BEHALF OF THE ASSESSEE-COMPANY, CLAIMED BY THE LATTER AS A N INSURANCE EXPENSE. THE BALANCE PAYMENT OF RS. 3259.90 LACS (ON NOVEMBER 5 & 6, 2013) IS BY WAY OF DIRECT PAYMENTS, CREDITED TO THE ASSESSEES BANK AC COUNT WITH HDFC BANK. THE SAME THUS FALLS UNDER LIMB (C) AND, AS THE CASE MAY BE, LIMB (A), AFORE-STATED (PARA 4.1). THE REQUIREMENT OF THE PAYMENT BEING FO R THE BENEFIT OF THE PAYEE- SHAREHOLDER IS ATTACHED ONLY TO PAYMENT/S MADE INDI RECTLY, I.E., TO RS.6.22 LACS IN THE INSTANT CASE. THE SAID BENEFIT IS IMPLICIT IN T HE VERY CREDIT OF THE SAME BY THE ASSESSEE TO THE ACCOUNT OF GAPL (AND THE CORRESPOND ING DEBIT BY GAPL IN ITS ACCOUNTS TO THE ASSESSEES ACCOUNT) AND, FURTHER, I TS CLAIM AS AN EXPENDITURE BY THE ASSESSEE, I.E., AS AN EXPENSE OF ITS BUSINESS, BEING INCURRED FOR ITS PURPOSE/S. THERE IS NO DISPUTE AND, IN FACT, A CLAI M TO THAT EFFECT, I.E., OF THE PAYMENT RECEIVED BEING FOR THE ASSESSEES BENEFIT ( AND VICE-VERSA)(REFER PARA 3). RATHER, THE AMOUNT RECEIVED (RS.3266.12 LACS) BEING , ON ACCOUNT OF A LOWER AMOUNT OF ACCUMULATED PROFIT, FAR IN EXCESS OF THE SUM DEEMED AS DIVIDEND (RS. 117.17 LACS), THE INDIRECT RECEIPT (RS.6.22 LACS) C OULD EASILY BE IGNORED OR OVERLOOKED AS BEING RECEIVED, BY IMPLICATION, OUT O F OTHER THAN THE PROFIT OF GAPL, THE PAYER-COMPANY AND, THUS, NOT COVERED U/S. 2(22)(E), FOR IT TO BE REGARDED AS DIVIDEND THERE-UNDER. THE ONLY AMOUNT REPAID BY THE ASSESSEE TO GAPL DU RING THIS PERIOD (I.E., FROM 15.10.2013 TO 06.11.2013) IS RS. 7,69,1 44 (ON 16.10.2013), WHICH IS IN RESPECT OF CREDITS (DATED 29.07.2013 & 31.07.201 3) TOWARD INSURANCE PAYMENT. THE SAME, THOUGH LIABLE TO BE CONSTRUED AS DIVIDEND U/S. 2(22)(E), DO NOT FORM PART OF THE QUALIFYING SUM OF RS. 3266.12 LACS FOR US TO DILATE THEREON. CONTINUING FURTHER, THE ENTIRE CREDIT OF RS. 3266.1 2 LACS STANDS REPAID FROM 13/11/2013 TO 29/11/2013, ON WHICH (LATER) DATE THE ASSESSEE HAD IN FACT PAID IN EXCESS BY RS. 78.79 LACS. THE LOAN/ADVANCE BY THE A SSESSEE SWELLED TO RS. 284.29 LACS (BY 04.12.2013), ALL THROUGH DIRECT PAY MENTS, ONLY TO BE RECEIVED ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 49 BACK, IN FULL, BEFORE THE YEAR-END, ON WHICH DATE T HE CREDIT BALANCE OF GAPL STOOD AT RS. 14.48 LACS (INCLUDING A CREDIT ON ACCO UNT OF INTEREST, NET OF TDS, AT RS. 4.67 LACS). 4.3 THE QUESTION THAT THEREFORE ASSUMES SIGNIFICANC E IS IF THE FACT OF THE SUBSEQUENT REPAYMENT (OF LOAN/ADVANCE) RELEVANT, I. E., IN DETERMINING IF THE AMOUNT RECEIVED FROM THE PAYER-COMPANY IS TO BE, OR IS NOT TO BE, CONSIDERED AS DIVIDEND U/S. 2(22)(E)? THIS IS AS DE HORS THE AMOUNTS PAID BY THE ASSESSEE TO GAPL, WHICH ARE AGAIN, AS WE SHALL PRESENTLY SEE, O NLY IN THE NATURE OF LOANS/ ADVANCES, EITHER PRIOR TO 15/10/2013, OR SUBSEQUENT TO 28/11/2013, THE SUMS RECEIVED BY IT FROM GAPL ARE ONLY IN THE NATURE OF LOANS/ADVANCES, ON WHICH IN FACT EVEN INTEREST STANDS CHARGED. THE SECOND QUESTION THAT WOULD FOLLOW, I.E., WHERE THE ANSWER TO THE FIRST QUESTION IS IN THE AFFIRMATIVE, IS THE LENGTH OF T HE PERIOD OVER WHICH THE CREDIT OBTAINS, BEING AT 45 D AYS (I.E., FROM 15.10.2013 TO 29.11.2013) IN THE INSTANT CASE? THE THIRD QUESTION IN THIS REGARD THAT WOULD NEED TO BE ADDRESSED, IS IF THE SUBSEQUENT, OR EVEN THE PRIOR CONDUCT OF THE ACCOUNT, RELEVANT? AS WHERE, FOR EXAMPLE, THE ASSES SEE HAS, PRIOR OR SUBSEQUENT TO THE RECEIPT OF LOAN OR ADVANCE, GIVEN LOAN/ADVAN CE TO THE PAYER-COMPANY, WHICH MAY OR MAY NOT BE IN THE CURRENT YEAR. 4.4 THE ISSUE OF REPAYMENT OF THE AMOUNT RECEIVED C AME UP BEFORE THE TRIBUNAL IN TARULATA SHYAM (SUPRA) IN THE CONTEXT OF S. 2(6A)(E), THE ANALOGO US PROVISION UNDER THE 1922 ACT, INTRODUCED, ALONG WIT H S.12(1B), BY FINANCE ACT, 1955 W.E.F. 01.4.1955. THERE AROSE A DIFFERENCE BET WEEN THE MEMBERS OF THE TRIBUNAL. THE AM TOOK THE VIEW THAT THE MOMENT A PA YMENT AS ENVISAGED U/S. 2(6A)(E) IS RECEIVED, IT GETS CLOTHED WITH THE CHAR ACTER OF DIVIDEND, AND IS TO BE REGARDED AS THE INCOME OF THE ASSESSEE-SHAREHOLDER, AND THAT THERE-FORE, THE SUBSEQUENT ACTION OR REPAYMENT BY THE SHARE-HOLDER CANNOT TAKE IT OUT OF THE MISCHIEF OF THE PROVISION. THE JM EXPRESSED A CONTR ARY OPINION. IF THE AMOUNT ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 50 HAD BEEN RETURNED BEFORE THE END OF THE YEAR, NO LO AN OR ADVANCE FROM THE SECTION 23A COMPANY (I.E., A COMPANY IN WHICH THE P UBLIC IS NOT SUBSTANTIALLY INTERESTED) CAN BE SAID TO HAVE BEEN AVAILED OF FOR HIS BENEFIT BY THE SHAREHOLDER. THE MATTER WAS REFERRED TO THE PRESIDENT OF THE TRI BUNAL, WHO AGREED WITH THE VIEW BY THE AM. A LOAN OR ADVANCE RECEIVED BY A SHA RE-HOLDER ASSUMED THE CHARACTER OF DIVIDEND AND BECOMES HIS INCOME BY THE FICTION OF S. 2(6A)(E), I.E., ON ITS RECEIPT. IT CEASES TO BE THE LIABILITY OF T HE SHAREHOLDER, I.E., FOR THE PURPOSE OF TAXATION, ALTHOUGH HE MAY IN FACT OR IN LAW REMAIN LIABLE TO THE PAYER- COMPANY FOR IT . IF IT IS REPAID, THE SAME SHALL NOT LIQUIDATE OR REDUCE THE QUANTUM OF INCOME, WHICH HAD ALREADY ACCRUED, AND SUCH REPA YMENT IS NOT A PERMISSIBLE DEDUCTION U/S. 12(2). THE MAJORITY OPINION WAS CHAL LENGED BEFORE THE HON'BLE HIGH COURT, WHICH HELD IN FAVOR OF THE REVENUE, STA TING THAT THE REPAYMENT BEFORE THE END OF THE YEAR WAS IMMATERIAL. THIS IS PRECISELY WHAT HAD EARLIER BEEN HELD IN K.M.S. LAKSHMANA AIYER V. ITO (ADDL.) [1960] 40 ITR 469 (MAD). THE MATTER WAS CARRIED TO THE APEX COURT, WHICH AFF IRMED THE DECISION BY THE HIGH COURT PER ITS LARGER BENCH DECISION IN TARULATA SHYAM (SUPRA). SECTION 2(22)(E), IT WAS ARGUED THEREIN, SHOULD BE READ DOW N INASMUCH AS IT CARRIED AN IRREBUTTABLE PRESUMPTION OF A LOAN OR ADVANCE TO A SUBSTANTIAL SHAREHOLDER BEING A DISTRIBUTION OF PROFIT AND, THUS, DIVIDEND THERET O, BY DEFINITION, BY A COMPANY (IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERESTED). IT WORKED UNFAIRLY ON THOSE REPAYING THE LOAN AS AGAINST THOSE RETAINING IT. BE SIDES, IT MAY LEAD TO DOUBLE TAX, AS WHERE THE REPAID AMOUNT IS AGAIN LENT TO TH E SHAREHOLDER DURING THE YEAR INASMUCH AS THE SAME AMOUNT IS LIABLE TO BE REGARDE D AS DIVIDEND. THE APEX COURT AGREED THAT THE PROVISION WAS HARSHER THAN SE C. 108 OF THE COMMONWEALTH INCOME-TAX ACT, WHICH WAS ITS INSPIRATION. HOWEVER , THE PARLIAMENT HAD ITSELF EXERCISED ITS LEGISLATIVE JUDGMENT, RAISING A CONC LUSIVE PRESUMPTION THAT IN ALL CASES WHERE LOANS ARE ADVANCED TO A SHAREHOLDER IN A PRIVATE LIMITED COMPANY HAVING ACCUMULATED PROFITS, THE ADVANCE SHOULD BE D EEMED TO BE THE DIVIDEND INCOME OF SUCH SHAREHOLDER. IT IS THIS PRESUMPTION, IT EXPLAINED, WHICH IS THE ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 51 FOUNDATION OF THE STATUTORY FICTION INCORPORATED IN S. 2(6A)(E). THUS, S. 108 OF THE COMMONWEALTH ACT APPEARS TO BE MORE REASONABLE AND LESS HARSH THAN ITS INDIAN COUNTERPART. THE LANGUAGE OF THE PROVISION W AS CLEAR AND UNAMBIGUOUS, AND THERE WAS NO SCOPE FOR IMPORTING INTO THE STATU TE WORDS THAT WERE NOT THERE. THAT WOULD, IT STATED, BE NOT TO CONSTRUE, BUT TO A MEND THE STATUTE. THERE WAS, IT EXPLAINED, NO JUSTIFICATION TO DEPART FROM THE NORM AL RULE OF CONSTRUCTION ACCORDING TO WHICH THE INTENTION OF THE LEGISLATURE IS TO BE PRIMARILY GATHERED FROM THE WORDS USED IN THE STATUTE. EVEN IF THERE B E A CASUS OMISSUS , IT CLARIFIED, THE DEFECT CAN BE REMEDIED ONLY BY LEGISLATION AND NOT BY JUDICIAL INTERPRETATION. REFERRING TO CAPE BRANDY SYNDICATE V. IRS [1921] 1 KB 64 (KB), IT RECALLED THE WORDS OF ROWALTT J., THAT: (AT PG. 71) '...... IN A TAXING ACT ONE HAS TO LOOK MERELY AT W HAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THE RE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED.' FURTHER, ONCE AN ASSESSEE COMES WITHIN THE LETTER O F LAW, HE HAD TO BE TAXED, HOWEVER GREAT THE HARDSHIP MAY APPEAR TO BE TO THE JUDICIAL MIND. NOTING THE SATISFACTION OF THE CONDITIONS OF THE PROVISION, IT CONCLUDED AS UNDER: (PGS. 357 & 358) 17THIS HIGHLIGHTS THE FACT THAT THE LEGISLATURE HAS DELIBERATELY NOT MADE THE SUBSISTENCE OF THE LOAN OR ADVANCE, OR ITS BEING OU TSTANDING NO THE LAST DATE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, A PR E- REQUISITE FOR RAISING THE STATUTORY FICTION. IN OTHER WORDS, EVEN IF THE LOAN OR ADVANC E CEASES TO BE OUTSTANDING AT THE END OF THE PREVIOUS YEAR, IT CAN STILL BE DEEMED AS A 'DIV IDEND' IF THE OTHER FOUR CONDITIONS FACTUALLY EXIST, TO THE EXTENT OF THE ACCUMULATED P ROFITS POSSESSED BY THE COMPANY. 18. AT THE COMMENCEMENT OF THIS JUDGMENT WE HAVE NO TICED SOME GENERAL PRINCIPLES, ONE OF WHICH IS, THAT THE PREVIOUS YEAR IS THE UNIT OF TIME ON WHICH THE ASSESSMENT IS BASED (S. 3). AS THE TAXABILITY OF AN INCOME IS RELATED TO IT S RECEIPT OR ACCRUAL IN THE PREVIOUS YEAR, THE MOMENT A DIVIDEND IS RECEIVED, WHETHER IT IS AC TUAL DIVIDEND DECLARED BY THE COMPANY OR IS A DEEMED DIVIDEND, INCOME TAXABLE UNDER THE R ESIDUARY HEAD, 'INCOME FROM OTHER SOURCES', ARISES. THE CHARGE BEING ON ACCRUAL OR RE CEIPT THE STATUTORY FICTION CREATED BY S. 2(6A)(E) AND S. 12(1B) WOULD COME INTO OPERATION AT THE TIME OF THE PAYMENT BY WAY OF ADVANCE OR LOAN, PROVIDED THE OTHER CONDITIONS ARE SATISFIED. ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 52 19. WE DO NOT PROPOSE TO EXAMINE THE SOUNDNESS OR O THERWISE OF THE ILLUSTRATIONS GIVEN BY MR. SHARMA SINCE THEY ARE FOUNDED ON ASSUMED FACTS WHICH DO NOT EXIST IN THE PRESENT CASE. 20. FOR THE FOREGOING REASONS WE WOULD ANSWER THE Q UESTION PROPOSED IN FAVOUR OF THE REVENUE AND DISMISS THIS APPEAL WITH COSTS . THE CONSISTENT VIEW, THEREFORE, RIGHT FROM THE STAG E OF THE ASSESSING AUTHORITY, TO THE APEX COURT, WAS THE SAME, I.E., THE REPAYMENT O F A LOAN/S OR ADVANCE/S WAS INCONSEQUENTIAL FOR THE PURPOSE OF APPLICATION OF T HE FICTION OF THE PROVISION OF DEEMED DIVIDED, INTRODUCED ON THE STATUTE BOOK FROM AY 1955-56 ONWARDS. WHY, IN A GIVEN CASE, THE REPAYMENT MAY BE AFTER TH E CLOSE OF THE RELEVANT YEAR, AND WHICH WOULD THEREFORE HAVE LITTLE BEARING IN TH E MATTER, WHILE OUGHT TO BE GIVEN REGARD TO IF THE FACT OF THE REPAYMENT IS REL EVANT? HOW SHOULD, ONE MAY ASK, IT MATTER THAT THE REPAYMENT IS AFTER X DAYS O R Y DAYS OR ANY OTHER ? IN A GIVEN CASE THE PAYMENT MAY BE RECEIVED AT THE FAG-E ND OF THE YEAR, OR ON THE LAST DATE ITSELF, SO THAT REPAYMENT, EVEN AFTER A FEW DA YS, FALLS IN THE FOLLOWING YEAR. A LOAN OR ADVANCE CARRIES WITH IT, BY DEFINITION, A N OBLIGATION FOR REPAYMENT (RETURN OF VALUE), SO THAT THE FACT OF REPAYMENT - WHETHER DURING OR SUBSEQUENT TO THE RELEVANT YEAR, WOULD BE, AS CLARIFIED, OF NO MO MENT. THE LENGTH OF THE TIME FOR WHICH THE LOAN OR ADVANCE OBTAINS WOULD ACCORDI NGLY BE OF NO SIGNIFICANCE, I.E., FOR TAXATION PURPOSES; THE AMOUNT HAVING BEEN REGARDED, ON ITS RECEIPT, AS THE INCOME OF THE PAYEE. THE ASSESSEES ARGUMENT OF HAVING RETAINED THE CREDIT (SUM BORROWED), WHICH IS ON INTEREST, FOR ONLY 82 D AYS DURING THE YEAR, WOULD THEREFORE BE OF NO ASSISTANCE THERETO, BEING AN IRR ELEVANT CONSIDERATION. COMPARISON MAY, FOR THE SAKE OF DISCUSSION, AS WELL AS FOR BETTER COMPREHENSION, ALSO BE MADE TO SEC. 68 OF THE ACT D EEMING A CREDIT AS THE INCOME OF THE DEBTOR WHERE THE SAME IS NOT SATISFAC TORILY EXPLAINED AS TO ITS NATURE AND SOURCE. THE SUBSEQUENT DISCHARGE OF THE CREDIT, AS BY REPAYMENT, WHERE IT IS DESCRIBED AS A LOAN OR ADVANCE, IS OF L ITTLE CONSEQUENCE, I.E., WHERE IT IS DEEMED AS AN UNEXPLAINED CREDIT U/S. 68. TEMPORA RY LOAN/ADVANCE(S) WERE, ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 53 ACCORDINGLY, EVEN PRIOR THERETO, HELD AS FALLING WI THIN THE MISCHIEF OF S. 2(22)(E). AS EXPLAINED IN WALCHAND & CO. LTD. V. CIT [1975] 100 ITR 598 (BOM), NOTED WITH APPROVAL IN TARULATA SHYAM (SUPRA), THE FACT THAT THE LOAN OR ADVANCE WAS FACTUALLY REPAID OR MADE GOOD WITHIN A SHORT PERIOD , IS NO DEFENCE TO THE ATTRACTION OF THE PROVISION. THOUGH STATED TO BE A CURRENT ACCOUNT, THE NATURE OF THE ACCOUNT SHOWED IT TO BE A LOAN, MADE FURTHER AM PLY CLEAR BY THE FACT OF CHARGE OF INTEREST AT THE END OF THE YEAR, EVEN THO UGH THE ACCOUNT HAD BEEN SQUARED OFF THEREBY. SUB-CLAUSE (E) (TO S. 2(6A), C ORRESPONDING TO S. 2(22)(E) OF THE ACT) WAS CONTRASTED BY THE HONBLE COURT WITH T HE PRECEDING SUB-CLAUSES, I.E., (A) TO (D), WHICH ADMITTEDLY ENVISAGED PERMAN ENT DISTRIBUTION OF THE AMOUNT REGARDED AS DIVIDEND. THE DURATION OF THE LOAN OR A DVANCE, WHICH WAS ONLY 23 DAYS , REGARDED AS IMMATERIAL FOR THE PURPOSE OF DIVIDEN D UNDER SUB-CLAUSE (E) (PGS. 602, 603). THE SIMILARITY WITH THE FACTS OF T HE INSTANT CASE IS STRIKING. THE REPAYMENT OF THE LOAN OR ADVANCE, WHICH GETS DEEMED, ON RECEIPT, ON ACCOUNT OF THE LEGAL FICTION, AS A DISTRIBUTION OF PROFIT AND, THUS, AS INCOME IN THE HANDS OF THE PAYEE SHARE-HOLDER, IS THEREFORE O F NO CONSEQUENCE. AS EXPLAINED BY THE APEX COURT IT IS THIS PRESUMPTION JURIS ET DE JURE WHICH FORMS THE FOUNDATION OF THE STATUTORY FICTION. THE DECISI ONS IN CIT V. K. SRINIVASAN [1963] 50 ITR 788 (MAD); CIT V. P.K. BADIANI [1970] 76 ITR 369 (BOM); AND WALCHAND & CO. LTD . (SUPRA) WERE, BESIDES K.M.S. LAKSHMANA AIYER (SUPRA), ALSO NOTED WITH APPROVAL IN TARULATA SHYAM (SUPRA). THE HONBLE COURT ALSO DREW ON ITS DECISION IN NAVNIT LAL C. JHAVERI V. AAC [1965] 56 ITR 198 (SC), ALSO RELIED UPON BEFORE IT. THE FIRST QUESTION AFORE-STATED (REFER PARA 4.3) IS, ACCORDI NGLY, ANSWERED IN THE NEGATIVE. THE SECOND QUESTION, I.E., AS REGARDS THE RELEVANCE OF THE RETENTION PERIOD, DOES NOT CONSEQUENTLY ARISE. 4.5 CONTINUING FURTHER, CLEARLY, THERE IS TWO-WAY T RAFFIC, I.E., RECEIPT OF LOAN OR ADVANCE, AS WELL AS ITS REPAYMENT, IN THE INSTANT CASE. THAT THE REPAYMENT WAS ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 54 IN EXCESS, CONSTITUTING A LOAN/ADVANCE BY THE SHARE -HOLDER TO THE PAYEE- COMPANY, WOULD, IN THE CONTEXT OF THE PROVISION, CA RRY NO SPECIAL SIGNIFICANCE. THE PLEA OF A MUTUAL, OPEN AND CURRENT ACCOUNT WAS ADOPTED IN P.K. BADIANI (SUPRA). THE APEX COURT CONSIDERED IT RELEVANT TO R EPRODUCE THE RELEVANT PART OF THE SAID DECISION IN MUKUNDRAY K. SHAH (SUPRA), REFERRED TO DURING HEARING BY THE LD. SR. DR, AS UNDER: (AT PG. 447) WE ALSO QUOTE HERE-IN-BELOW PARA 19 AND PARA 21 OF THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. P.K. BADIANI [1970] 76 ITR 369 (BOM) : ' 19. NOW, THE ASSESSEES ACCOUNT FOR 1ST APRIL, 1957 , TO 31ST MARCH, 1958, SHOWS THAT THERE ARE CREDITS AS WELL AS DEBITS. WHAT HAS TO BE ASCERTAINED IS WHETHER THE DEBITS ARE LOANS, SO THAT THEY CAN BE DEEMED AS DIVIDENDS. T HE ACCOUNT IS A MUTUAL, OPEN, AND CURRENT ACCOUNT. EVERY DEBIT, I.E., EVERY PAYMENT B Y THE COMPANY TO THE ASSESSEE, MAY NOT BE A LOAN. TO BE TREATED AS A LOAN, EVERY AMOUNT PA ID MUST MAKE THE COMPANY A CREDITOR OF THE ASSESSEE FOR THAT AMOUNT. IF, HOWEVER, AT TH E TIME WHEN THE PAYMENT IS MADE BY THE COMPANY IS ALREADY A DEBTOR OF THE ASSESSEE, THE PA YMENT WOULD BE MERELY A REPAYMENT BY THE COMPANY TOWARDS ITS ALREADY EXISTING DEBT. IT WOULD BE A LOAN BY THE COMPANY ONLY IF THE PAYMENT EXCEEDS THE AMOUNT OF ITS ALREADY EX ISTING DEBT AND THAT TOO ONLY TO THE EXTENT OF THE EXCESS. THEREFORE, THE POSITION AS REGARDS EACH DEBIT WILL HAVE TO BE INDIVIDUALLY CONSIDERED , BECAUSE IT MAY OR MAY NOT BE A LOAN. THE TWO BASI C PRINCIPLES ARE, THAT ONLY A LOAN, WHICH WOULD INCLUDE THE OTHE R PAYMENTS MENTIONED IN S. 2(6A)(E), CAN BE DEEMED TO BE DIVIDEND AND THAT TOO ONLY TO T HE EXTENT THAT THE COMPANY HAS AT THE DATE OF THE PAYMENT ACCUMULATED PROFITS AFTER DED UCTING THEREFROM ALL ITEMS LEGITIMATELY DEDUCTIBLE THEREFROM. XXXX 21. AS REGARDS QUESTION NOS. 3 AND 4, MR. RAJGOPAL CONTENDED THAT THE DEBIT BALANCE, IF ANY, AT THE LAST DATE OF THE ASSESSEES ACCOUNTING YEAR 1ST APRIL, 1957 TO 31ST MARCH, 1958, SHOULD BE TAKEN AS THE AMOUNT TO BE TREATED AS DIVI DEND AND AS THE ASSESSEES ACCOUNT IS ON THE LAST DAY TO HIS CREDIT, NO AMOUNT CAN BE DEE MED TO BE DIVIDEND. AS ALREADY POINTED OUT, THE POSITION HAS TO BE ASCERTAINED AT THE DATE OF EACH PAYMENT BY THE COMPANY TO THE ASSESSEE AND THIS CONTENTION MUST, THEREFORE, BE RE JECTED. IF MR. RAJGOPALS CONTENTION WAS TO BE ACCEPTED, THE RESULT WOULD BE THAT IF A SHARE HOLDER BORROWS A LARGE AMOUNT DURING THE YEAR, BUT REPAYS IT ON THE LAST DAY OF THE YEAR , IT WOULD NOT BE CONSIDERED TO BE A LOAN, THOUGH THE FACTS SHOW THAT HE DID BORROW A LOAN. SU CH A CONTRADICTION OF THE REAL FACT WOULD RESULT IF MR. RAJGOPALS CONTENTION WERE TO B E ACCEPTED. MR. RAJGOPAL FURTHER CONTENDED THAT IN ANY EVENT THE HIGHEST AMOUNT TO T HE ASSESSEES DEBIT ON ANY DAY OF THE YEAR SHOULD BE THE AMOUNT TO BE DEEMED TO BE DIVIDE ND. THIS ARGUMENT, AGAIN, IGNORES THE PRINCIPLE LAID DOWN BY US, THAT THE POSITION AT THE DATE OF EACH PAYMENT MUST BE CONSIDERED. MOREOVER, THERE IS ANOTHER REASON AND T HAT IS THAT IF IT WERE TO BE SO DONE, IT WOULD NOT ENABLE THE POSITION OF THE BALANCE OF THE ACCUMULATED PROFITS BEING TAKEN INTO ACCOUNT, AS MORE THAN ONE SHAREHOLDER MAY HAVE BORR OWED LOANS FROM THE COMPANY IN AN ACCOUNT SIMILAR TO THAT OF THE ASSESSEE. ALL THESE CONTENTIONS OF MR. RAJGOPAL IGNORE THE ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 55 BASIC FACT THAT S. 2(6A)(E) USES THE WORDS ANY PAY MENT WHICH MEANS, EVERY PAYMENT, AND S. 2(6A)(E) REQUIRES THE DETERMINATION OF TWO FACTO RS, VIZ., WHETHER THE PAYMENT IS A LOAN AND WHETHER AT THE DATE WHEN THE PAYMENT IS MADE TH ERE WERE ACCUMULATED PROFITS AND THAT THESE TWO FACTORS ARE TO BE CORRELATED AND THE RESULT MUST BE ASCERTAINED AT THE DATE OF EACH SUCH PAYMENT .' (EMPHASIS, ITALICISED IN PRINT, SUPPLIED) NEITHER, THEREFORE, THE FACT OF SUBSEQUENT REPAYMEN T, NOR OF THE PAYMENT FINDING REFLECTION IN A CURRENT ACCOUNT, WAS CONSIDERED AS OF ANY MOMENT; THE HONBLE COURT CLARIFYING THAT THE NATURE SHALL HAVE TO BE E XAMINED WITH REFERENCE TO EACH INDIVIDUAL PAYMENT, I.E., WHETHER IT CREATES A DEBT OR IS IN DISCHARGE OF AN EARLIER ONE. NO WONDER, THEN, THAT IN CIT V. NAGINDAS M. KAPADIA [1989] 177 ITR 393 (BOM), THE ADVANCES RECEIVED AGAINST PURCHASES BY T HE ASSESSEE SHARE-HOLDER WERE IGNORED FROM THE RUNNING ACCOUNT AND ONLY THE BALANCE AMOUNTS, NOT RELATABLE TO BUSINESS, REPRESENTING ONLY FINANCIAL TRANSACTIONS, SO ISOLATED, WERE REGARDED AS DIVIDEND U/S. 2(22)(E), UPHOLDING THE T RIBUNALS VIEW. A LOAN, ACCORDING TO BLACK'S LAW DICTIONARY, FIFTH EDITION, PAGE 844, MEANS 'A LENDING; DELIVERY BY ONE PARTY TO AND RECEIPT BY ANOTHER PAR TY OF SUM OF MONEY UPON AGREEMENT, EXPRESS OR IMPLIED, TO REPAY IT WITH OR WITHOUT INTEREST [ISAACSON V. HOUSE, 216, GA. 698; 119SE 2D 113,116]'. A LOAN IS SOMETHING QUITE DIFFERENT FROM A DEBT. FOR A LOAN, THERE MUST BE A LENDER, A BORROWER, A THING LOANED FOR USE, AS WELL AS A CONTRACT BETWEEN THE PARTIES FOR THE RETURN OF THE THING LOANED. A LOAN CONTRACTED NO DOUBT CREATES A DEBT BUT THERE MAY BE A DEBT WITHOUT CONTRACTING A LOAN. EVERY SALE OF GOODS ON CREDIT D OES NOT AMOUNT TO A TRANSACTION OF LOAN [ LAKHMICHAND MUCHHAL V. CIT [1961] 43 ITR 315,317-8 (MP); BOMBAY STEAM NAVIGATION CO. (1953) P. LTD. V. CIT [1965] 56 ITR 52, 57 (SC); CIT V. SAURASHRA CEMENT & CHEMICAL INDUSTRIES LTD . [1975] 101 ITR 502, 510 (GUJ)]. AN ADVANCE, ON OTHER HAND, MEANS SUMS PAID TO A PERSON AHEAD OF THE TIME WHEN IT IS DUE TO BE PAID ( K. SRINIVASAN (SUPRA)). THE TRANSACTIONS BETWEEN THE TWO COMPANIES IN THE I NSTANT CASE, IT NEEDS TO BE APPRECIATED, ARE PURELY FINANCIAL TRANSACTION S, I.E., RECEIPT AND PAYMENT OF MONEY, EITHER DIRECTLY OR INDIRECTLY (I.E., WHERE T HE AMOUNT IS PAID WHICH IS BY ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 56 THE PAYER-COMPANY, TO ANOTHER FOR AND ON BEHALF OF THE PAYEE AND, ACCORDINGLY, DEBITED TO ITS ACCOUNT OR, CORRESPONDINGLY, CREDIT ED TO THE ACCOUNT OF GAPL BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT). WHY, THE SA ME CARRIES INTEREST, IMPLYING THAT THE SAME IMPINGES ON EVERY AMOUNT RECEIVED AND REPAID, AS WELL AS PAID AND RECEIVED BACK, I.E., TO ALL THE DEBITS AND CRED ITS IN ACCOUNT, REPRESENTING FINANCIAL TRANSACTIONS. MONEY RECEIVED ON ACCOUNT O F A BUSINESS TRANSACTION (VIZ. ADVANCE AGAINST PURCHASES), OR OTHERWISE RECEIVED I N THE COURSE OF MONEY LENDING BUSINESS, FROM THE PAYEE-COMPANY, ARE EXCLU DED, BY DEFINITION, FROM THE PURVIEW OF S. 2(22)(E), WHICH TARGETS ONLY A LO AN/S OR ADVANCE/S SIMPLICITER . IT IS ONLY IN THIS CONTEXT, I.E., WHERE THE AMOUNT ADVANCED IS FOR THE PURPOSE OF BUSINESS OF THE PAYEE-COMPANY, THAT THE SAME WOULD STAND EXCLUDED. NO BUSINESS PURPOSE OF GAPL, WHICH IS NOT IN THE BUSIN ESS OF MONEY LENDING, IS SHOWN. THE AMOUNTS PAID AND RECEIVED IN THE INSTANT CASE ARE CLEARLY IN THE NATURE OF A LOAN/S, I.E., SUMS BORROWED, WHICH THOU GH IS NOT AT A FIXED AMOUNT OR FOR A FIXED PERIOD OF TIME. THIS VARIABILITY, THOUG H, WOULD NOT ALTER THE NATURE OF THE AMOUNTS AS LOAN (OR ADVANCE SIGNIFYING, HERE, A TEMPORARY LOAN). THE CHARGE OF INTEREST, CONFIRMS, IF ANY WAS REQUIRED, THE NATURE OF THE AMOUNT PAID AND RECEIVED AS LOAN/S, ADJUSTING THE AMOUNT RECEIV ED FIRSTLY AGAINST THE LOAN/S ALREADY ADVANCED, AND VICE VERSA. WHY, IF THE INTER EST CHARGED IS AT 10 % P.A., AS FOR THE PRECEDING YEAR (BEING NOT MENTIONED IN THE NARRATION TO RELEVANT ENTRY IN ACCOUNTS), THE SAME, AT RS.5,18,665, IMPLIES AN AVE RAGE LOAN OF RS. 51.87 LACS DURING THE YEAR. THIS THOUGH WOULD BE OF NO CONSEQU ENCE; IT HAVING BEEN SUFFICIENTLY CLARIFIED THAT A REDUCTION OR EVEN A C EASURE OF LIABILITY (ON ACCOUNT OF LOAN/ADVANCE) BY THE RELEVANT YEAR-END IS NOT RELEV ANT. THIS, THEN, ANSWERS THE THIRD QUESTION SET UP BY US (REFER PARA 4.3), IN THAT THE MATTER IS FACTUAL AND, ACCORDINGLY, IN THE FACT S AND CIRCUMSTANCES OF THE CASE (ALSO REFER PARA 4.2), THE IMPUGNED SUM OF RS. 3266 .12 LACS REPRESENTS A LOAN, TEMPORARY IN NATURE, HAVING BEEN PAID IN FULL BY 29 /11/2013, I.E., WITHIN 45 DAYS, EVEN AS THE FACT OF SUBSEQUENT REPAYMENT OR T HE LENGTH OF PERIOD OVER ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 57 WHICH IT OBTAINS, IS OF NO CONSEQUENCE AS REGARDS T HE ATTRACTION OF THE PROVISION OF S. 2(22)(E). FURTHER , AS THE REPAYMENT DEPENDS ON THE AVAILABILITY OF S URPLUS FUNDS WITH THE ASSESSEE, BEING DEPLOYED IN ITS BUS INESS, TO SUB-SERVE THE INTEREST OF WHICH THE LOAN STANDS CONTRACTED, THERE COULD BE NO CERTAINTY AS TO THE LENGTH OF THE RETENTION PERIOD AND, THUS, THE NATURE OF A LOAN AS A TEMPORARY (ITSELF A RELATIVE TERM) LOAN, IS, IN THE FACTS AND CIRCUMSTA NCES OF THE CASE, SUSPECT. 4.6 WE MAY NEXT CONSIDER THE DECISION BY HON'BLE JU RISDICTIONAL HIGH COURT IN SURAJ DEV DADA (SUPRA). THE HON'BLE COURT, AFTER REPRODUCING THE ORDER BY THE TRIBUNAL (AT PAGES 83-84 OF THE REPORTS), STATE S AS UNDER: (PG. 84) 10. FROM THE ABOVE, IT EMERGES THAT CIT(A) AND THE TRIBUNAL HAD CONCURRENTLY RECORDED THAT THE ASSESSEE HAD RUNNING ACCOUNT WITH THE COMP ANY - M/S DADA MOTORS PVT. LIMITED AND HAD BEEN ADVANCING MONEY TO IT. IT WAS FURTHER OBSERVED THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT ATTRACTED IN T HE PRESENT CASE AS THIS PROVISION WAS INSERTED TO STOP THE MISUSE BY THE ASSESSEE BY TAKI NG THE FUNDS OUT OF THE COMPANY BY WAY OF LOAN ADVANCES INSTEAD OF DIVIDENDS AND THEREBY A VOID TAX. IN THE PRESENT CASE, THE ASSESSEE HAD INFACT ADVANCED MONEY TO THE COMPANY A ND THERE WAS CREDIT FOR ONLY 55 DAYS FOR WHICH PROVISIONS OF SECTION 2(22) (E) OF T HE ACT COULD NOT BE INVOKED. THESE FINDINGS WERE NOT SHOWN TO BE ERRONEOUS OR PERVERSE IN ANY MANNER. 11. IN VIEW OF THE ABOVE, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEA L . CONSEQUENTLY, FINDING NO MERIT IN THE APPEAL, THE S AME IS HEREBY DISMISSED. (EMPHASIS, SU PPLIED) THE ONLY FINDING RECORDED BY THE HON'BLE COURT IS T HAT THE FINDINGS BY THE FIRST AND THE SECOND APPELLATE AUTHORITY HAVE NOT BEEN SH OWN TO BE ERRONEOUS OR PERVERSE. HOW COULD THAT, BY ITSELF, ONE WONDERS, B E REGARDED AS A STATEMENT OF LAW BY IT; IT, IN FACT, CLEARLY HOLDING THAT IN ITS VIEW NO SUBSTANTIAL QUESTION/S OF LAW ARISES FOR ITS ADJUDICATION? HOW COULD THEN IT BE REGARDED AS HAVING EXPRESSED ANY VIEW OR ANSWERED THE SUBSTANTIAL QUES TION OF LAW RAISED BEFORE IT? RATHER, ITS OBSERVATION EVEN LEAVES THE SCOPE FOR THE HONBLE COURT, WHILE STATING ITS VIEW IN A LATER CASE ON A SUBSTANTIA L QUESTION OF LAW, EXPRESSING A DIFFERENT VIEW, I.E., BASED ON THE ARGUMENTS ADVANC ED AND THE POSITION OF LAW URGED ON THE BASIS OF JUDICIAL PRECEDENTS. THE JURI SDICTION OF THE HIGH COURT ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 58 UNDER THE ACT, WHICH IS THE THIRD APPELLATE AUTHORI TY THERE-UNDER, ARISES ONLY ON A POSITIVE FINDING ON A SUBSTANTIAL QUESTION OF LAW ARISING OUT OF THE ORDER BY THE TRIBUNAL, I.E., THE SECOND APPELLATE AUTHORITY UNDE R THE ACT. THIS IS PATENT FROM A MERE BROWSE OF SEC. 260A WHERE AN APPEAL IS PREFERR ED BEFORE THE HIGH COURT; IT READING AS UNDER: APPEAL TO HIGH COURT . 260A. (1) AN APPEAL SHALL LIE TO THE HIGH COURT FROM EVE RY ORDER PASSED IN APPEAL BY THE APPELLATE TRIBUNAL IF THE HIGH COURT IS SATISFIED THAT THE CASE INVOLV ES A SUBSTANTIAL QUESTION OF LAW . (2) THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMI SSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER] OR AN ASSESSEE AGGRIEVED BY ANY OR DER PASSED BY THE APPELLATE TRIBUNAL MAY FILE AN APPEAL TO THE HIGH COURT AND SUCH APPEA L UNDER THIS SUB-SECTION SHALL BE (A) FILED WITHIN ONE HUNDRED AND TWENTY DAYS FROM T HE DATE ON WHICH THE ORDER APPEALED AGAINST IS RECEIVED BY THE ASSESSEE OR THE PRINCIPA L CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIO NER; (B) (C) IN THE FORM OF A MEMORANDUM OF APPEAL PRECISELY STATING THEREIN THE SUBSTANTIAL QUESTION OF LAW INVOLVED . (2A) THE HIGH COURT MAY ADMIT AN APPEAL AFTER THE E XPIRY OF THE PERIOD OF ONE HUNDRED AND TWENTY DAYS REFERRED TO IN CLAUSE (A) OF SUB-SE CTION (2), IF IT IS SATISFIED THAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE SAME WITHIN THA T PERIOD. (3) WHERE THE HIGH COURT IS SATISFIED THAT A SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN ANY CASE, IT SHALL FORMULATE THAT QUESTION. (4) THE APPEAL SHALL BE HEARD ONLY ON THE QUESTION SO FORMULATED, AND THE RESPONDENTS SHALL AT THE HEARING OF THE APPEAL, BE ALLOWED TO A RGUE THAT THE CASE DOES NOT INVOLVE SUCH QUESTION: PROVIDED THAT NOTHING IN THIS SUB-SECTION SHALL BE DEEMED T O TAKE AWAY OR ABRIDGE THE POWER OF THE COURT TO HEAR, FOR REASONS TO BE RECOR DED, THE APPEAL ON ANY OTHER SUBSTANTIAL QUESTION OF LAW NOT FORMULATED BY IT, IF IT IS SATI SFIED THAT THE CASE INVOLVES SUCH QUESTION. (5) THE HIGH COURT SHALL DECIDE THE QUESTION OF LAW SO FORMULATED AND DELIVER SUCH JUDGMENT THEREON CONTAINING THE GROUNDS ON WHICH SU CH DECISION IS FOUNDED AND MAY AWARD SUCH COST AS IT DEEMS FIT. (6) THE HIGH COURT MAY DETERMINE ANY ISSUE WHICH (A) HAS NOT BEEN DETERMINED BY THE APPELLATE TRIBUN AL; OR ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 59 (B) HAS BEEN WRONGLY DETERMINED BY THE APPELLATE TR IBUNAL, BY REASON OF A DECISION ON SUCH QUESTION OF LAW AS IS REFERRED TO IN SUB-SECTI ON (1). (7) SAVE AS OTHERWISE PROVIDED IN THIS ACT, THE PRO VISIONS OF THE CODE OF CIVIL PROCEDURE, 1908 (5 OF 1908), RELATING TO APPEALS TO THE HIGH C OURT SHALL, AS FAR AS MAY BE, APPLY IN THE CASE OF APPEALS UNDER THIS SECTION . (EMPHASIS , SUPPLIED) THE HON'BLE COURT MIGHT AS WELL HAVE DECLINED ADMIS SION, STATING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THE ORDER BY THE TRIBUNAL. THAT IT WENT THROUGH THE TRIBUNALS ORDER, DELINEATING THE FACTS AS RECORDED BY IT, AS WELL AS ITS DECISION, PRIOR TO HOLDING THAT, IN ITS VIEW, NO SUBSTANTIAL QUESTION OF LAW AROSE IN THE FACTS OF THE CASE AND ITS ADJUDICATIO N BY THE TRIBUNAL, ONLY SHOWS THAT IT CHOSE TO MAKE ITS THIS FINDING (AS TO THE NON-ARISING OF ANY SUBSTANTIAL QUESTION OF LAW OUT OF THE ORDER BY THE TRIBUNAL) T RANSPARENT. NOTHING, THUS, TURNS ON THE ASSESSEES RELIANCE ON THE SAID DECISI ON. 4.7 BE THAT AS IT MAY, AND PARTICULARLY CONSIDERING THAT ASSESSEE HAS ALSO RELIED ON DECISIONS THAT SUGGEST THAT A RUNNING AC COUNT WOULD TAKE THE TRANSACTIONS ENTERED INTO OUT OF THE PURVIEW OF S. 2(22)(E) (OR S. 2(6A)(E) OF THE 1922 ACT), WE MAY, FOR THE SAKE OF CLARITY, ADVERT, ONCE AGAIN, TO THE DECISIONS BY THE APEX COURT REFERRED HEREINABOVE, EXTRACTING FROM THE DECISIONS IN TARULATA SHYAM (SUPRA) (AT PARA 4.4); MUKUNDRAY K. SHAH (SUPRA) (PARA 4.5). ON FACTS, WE HAVE ALREADY CLARIFIED THAT THE NATURE OF THE FINANCIAL TRANSACTIONS IN THE INSTANT CASE IS IN THE NATURE OF LOAN/S, ALS O ADVERTING TO THE DECISIONS WHEREIN, SIMILARLY, OPEN, CURRENT ACCOUNTS WERE MAI NTAINED. A RUNNING ACCOUNT IS NOTHING BUT AN ACCOUNT WITH TR ANSACTIONS BOTH WAYS. THE DEBITS AND CREDITS (TO THE ACCOUNT OF THE PAYER -COMPANY) IN ITS ACCOUNTS BY THE SHARE-HOLDER COULD IMPLY PAYMENT/S, DIRECT OR I NDIRECT, BY IT TO THE SAID COMPANY AND, ACCORDINGLY, RECEIPT BACK THEREOF, AGA IN, DIRECTLY OR INDIRECTLY. AGAIN, IT COULD WELL BE THAT THE DEBITS REPRESENT R EPAYMENT OF THE SUMS RECEIVED, DIRECTLY OR INDIRECTLY, IN THE FIRST INSTANCE BY TH E ASSESSEE-SHAREHOLDER AND, ACCORDINGLY, CREDITED TO THE ACCOUNT OF THE PAYER-C OMPANY. NOW, NEITHER THE ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 60 SUMS PAID BY THE SHARE-HOLDER NOR THEIR REPAYMENT, ATTRACT S. 2(22)(E). THEIR EXISTENCE OR OTHERWISE, THUS, AS AFORE-STATED, IS O F NO SIGNIFICATION IN-SO-FAR AS THE ATTRACTION OF THE SAID PROVISION IS CONCERNED ( REFER PARAS 4.4 & 4.5). THESE, IN FACT, OUGHT TO BE IGNORED, UNLESS OF COURSE THE PRIVATE LIMITED COMPANY TO WHICH THE PAYMENTS ARE MADE BY THE SHARE-HOLDER, IS ITSELF A SHARE-HOLDER (WITH A HOLDING IN EXCESS OF THE THRESHOLD LIMIT) IN THE SHARE-HOLDER COMPANY, BEING A COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY IN TERESTED (WHICH THE APPELLANT COMPANY APPARENTLY IS). IT IS ONLY THE OPPOSITE SET OF TRANSACTIONS THAT HO LD SIGNIFICANCE AS FAR AS SEC. 2(22)(E) IS CONCERNED . THAT IT, IT IS THE PAYMENT BY THE PAYER-COMPANY TO ITS SHARE-HOLDER BY WAY OF A LOAN OR ADVANCE THAT IS LIABLE TO BE, TO THE EXTENT OF ITS ACCUMULATED PROFIT, DEEME D AS DISTRIBUTION OF THE SAID PROFIT AND, THUS, DIVIDEND INCOME IN THE HANDS OF T HE PAYEE-SHAREHOLDER. SURELY, AS AFORE-EXPLAINED, IF THERE ARE SUM/S ALREADY DUE BY THE PAYER-COMPANY THERETO, THE SAME WOULD, UNLESS THERE IS AN UNDERSTANDING TO THE CONTRARY, FIRSTLY ADJUSTED AGAINST THE AMOUNT DUE. THE PAYMENT, UNLESS GIVEN A S A CONSIDERATION FOR VALUE RECEIVED EARLIER (OR EVEN TO BE RECEIVED), ITSELF C REATES AN OBLIGATION FOR REPAYMENT, SO THAT NOTHING TURNS, AS EXPLAINED BY T HE HONBLE COURTS, BY THE FACT OF ITS REPAYMENT WHICH, AS AFORE-DISCUSSED, C OULD BE IMMEDIATELY, OR THOUGH TO NO CONSEQUENCE, AFTER A LENGTH OF TIME. W HY, THE PAYMENT RECEIVED BEING ONLY AS IT WOULD BE REQUIRED (FOR ITS PURPOS ES) BY THE ASSESSEE- SHAREHOLDER, SHOULD THE LENGTH OF TIME OF RETENTION BE OF ANY CONSEQUENCE; THE INCOME HAVING BEEN ALREADY ARISEN ON THE RECEIPT OF LOAN/ADVANCE? THE RETENTION IN WALCHAND & CO. LTD . (SUPRA) WAS ONLY 23 DAYS, THOUGH FOUND OF NO CONSEQUENCE BY THE HONBLE COURT. IN FACT, WHERE TH E SUMS ARE BORROWED FOR THE PURPOSE OF ITS BUSINESS BY THE SHAREHOLDER, AS IN THE INSTANT CASE, IT WOULD BE GUIDED IN THE MATTER BY BUSINESS CONSIDERATIONS, I. E., THE NEED FOR FUNDS, BESIDES BEING LIABLE TO BE RETURNED ONLY WHERE NOT REQUIRED FOR THE TIME BEING, THEREFOR. THAT IS, IT IS THE BUSINESS, FOR WHICH THE BORROWIN G HAS BEEN MADE, THAT WOULD DICTATE THE LENGTH OF RETENTION, BESIDES OF COURSE THE TERMS OF THE BORROWING ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 61 CONTRACT, WITH THE INTEREST COST BEING LIABLE TO BE ABSORBED AS AN EXPENSE THEREOF. THE ARGUMENT OF THE RETENTION PERIOD BEING LOW A RELATIVE TERM, THEREFORE CARRIES NO SIGNIFICANCE IN THE CONTEXT OF THE PROVI SION, I.E., APART FROM LEGALLY, EVEN FACTUALLY; THE REPAYMENT BEING A FUNCTION OF T HE BUSINESS NEED/S. A REPAYMENT IN DISREGARD THEREOF MAY HURT THE BORROWE RS BUSINESS INTEREST. HOW COULD, THEN, EVEN FACTUALLY SPEAKING, THE EARLY R ETURN, BE OF ANY IMPORT? IT IS FOR THIS AND SUCH OTHER REASONS THAT WE STATED HERE INBEFORE THE ASSESSEES CASE AS UNTENABLE EVEN ON FACTS. THE EXTENSION OF A LOAN/ADVANCE CARRIES WITH IT AN OBLIGATION TO REPAY, WITH OR WITHOUT INTEREST. THIS EXTENSION, WHICH COU LD BE BOTH WAYS, THUS, DOES NOT CREATE ANY MUTUAL OBLIGATION I.E., APART FROM, AND ONLY UNDERSTANDABLY, THAT CONCOMITANT TO THE BORROWING. AS, FOR INSTANCE, OF REPAYMENT, WHICH COULD BE ON DEMAND OR AFTER A FIXED PERIOD. THE TWO COMPANIE S IN THE INSTANT CASE ARE NOT IN THE BUSINESS OF MONEY LENDING. AS STATED, AND EV EN OTHERWISE STANDS TO REASON, A COMPANY WOULD GIVE FUNDS TO ANOTHER ONLY WHEN THEY ARE FOR THE TIME BEING SURPLUS WITH IT, AS OTHERWISE IT WOULD, BESID ES FACING LOGISTICAL ISSUES, NOT BE ACTING IN THE INTEREST OF ITS BUSINESS. SIMILAR LY, THE PAYER-COMPANY WOULD BORROW ONLY WHEN IT REQUIRES MONEY FOR ITS PURPOSE S, AND BEING AT A COST, WOULD RETAIN IT ONLY FOR THE PERIOD AS IS NECESSARY . THAT IS, IN EITHER CASE, EACH COMPANY, IN RECEIVING THE LOAN OR ADVANCE, IS PRIMA RILY CATERING TO ITS OWN (BUSINESS) INTEREST. THIS IS SIMILAR TO ANY BORROWING ARRANGEMENT THAT A COMPANY MAY ENTER INTO WITH A BANK OR FINANCIAL INS TITUTION . THE LENDING COMPANY IS, TO THE PAYEE-COMPANY, ONLY A SOURCE OF FUNDS. IT IS THIS VERY SOURCE, WHERE THE PAYEES INTEREST IN THE PAYER-COMPANY EXC EEDS A DEFINED LIMIT, AND THE LATTER, BEING A COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED, IS NOT IN THE BUSINESS OF MONEY LENDING, THAT IS PROSC RIBED OR, MORE CORRECTLY, SOUGHT TO BE HIT BY THE LEGAL FICTION BY REGARDING IT AS DISTRIBUTION OF PROFIT, I.E., DIVIDEND, BY DEFINITION, AND DEEMED AS THE INCOME O F THE PAYEE TO THE EXTENT OF THE ACCUMULATED PROFIT. THE PURPOSE TO WHICH THE PA YEE MAY DEPLOY THE FUNDS ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 62 RECEIVED, I.E., BUSINESS OR OTHERWISE, AND WHICH MA Y PERHAPS BE ALSO OF CONCERN/ INTEREST, AS INDEED IT WOULD BE TO ANY SERIOUS LEND ER INASMUCH AS HE WOULD BE INTERESTED IN REPAYMENT, IS OF NO SIGNIFICANCE OR C ONSEQUENCE AS FAR AS THE DEEMING FICTION OF THE PROVISION IS CONCERNED. AS E XPLAINED IN TARULATA SHYAM (SUPRA), THE PAYEE MAY, IN LAW AND IN FACT, BE LIAB LE TO REPAY AND, IN FACT, EVEN REPAY, BUT THE PROVISION NONETHELESS STANDS ATTRACT ED ON THE RECEIPT OF THE LOAN/ADVANCE WHERE THE OTHER CONDITIONS OF THE PROV ISION ARE SATISFIED. A LOAN OR ADVANCE FOR BUSINESS PURPOSE, I.E., WHERE IT SERVES A BUSINESS PURPOSE OF THE LENDING COMPANY, IS EXCLUDED. NO SUCH BUSINESS PURP OSE INFORMS THE LENDING OF GAPL TO THE ASSESSEE IN THE INSTANT CASE, AS NONE H AS BEEN EXHIBITED OR, IN FACT, EVEN STATED. THAT THE TWO COMPANIES ARE, AS STATED WITHOUT BEING SHOWN, IN THE SAME LINE OF BUSINESS, IS INCIDENTAL; THE BORROWING BY EITHER BEING GUIDED BY ITS OWN BUSINESS INTEREST, AND THE LENDING TO EACH OTHE R BEING ONLY FOR THE REASON THAT THE TWO FALL, AS IT APPEARS, UNDER THE SAME MA NAGEMENT. IT WOULD, AS AFORE- EXPLAINED, BE DOING A DISSERVICE TO ITS OWN BUSINE SS IF IT DID NOT DO SO, THOUGH THERE IS NOTHING TO SUGGEST THAT. THE BALANCE OUTST ANDING (AS AT THE YEAR-END) IS REFLECTED AS A LOAN OR ADVANCE IN THE AUDITED FINAL ACCOUNTS OF BOTH THE COMPANIES. IN FACT, THE REPAYMENT OF THE WHOLE OF I T (WHICH IS BY 29/11/2013), OR NEARLY THE WHOLE OF IT, I.E., IF THE SUBSEQUENT REPAYMENT IS ALSO TO BE TAKEN INTO ACCOUNT I.E., SAVE FOR RS. 9.81 LACS (THE BALA NCE OUTSTANDING REPRESENTING INTEREST, WHICH THOUGH WOULD ASSUME THE CHARACTER O F THE PRINCIPAL, AS THE PAST CONDUCT OF THE ACCOUNT SHOWS), I.E., BEFORE THE YEA R-END, ITSELF PROVES IT TO BE NOTHING BUT FINANCIAL TRANSACTIONS. IT IS FOR THIS REASON THAT LOAN TRANSACTIONS, WHERE THE LENDER-COMPANY IS IN THE BUSINESS OF MONE Y LENDING, ARE EXCEPTED U/S. 2(22)(E). THE OTHER ASPECT THAT PREVAILED WITH THE TRIBUNAL IN SURAJ DEV DADA (SUPRA), THE OPERATIVE PART OF WHOSE ORDER STANDS R EPRODUCED BY THE HON'BLE COURT IN ITS ORDER, IS THAT NO MISUSE OF FUNDS B ELONGING TO PAYER-COMPANY WAS SHOWN, COUPLED WITH THE FACT OF THE ASSESSEE-APPELL ANT HAVING LENT THE MONEY TO THE PAYER-COMPANY MOST OF THE TIME DURING THE RELEV ANT YEAR; THE TRANSACTIONS ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 63 BEING IN THE NATURE OF A RUNNING ACCOUNT, WITH THE CREDIT OBTAINING FOR THE PERIOD OF ONLY 55 DAYS DURING THE RELEVANT YEAR. WE HAVE A LSO AFORE-DISCUSSED THAT THE LENDING OF MONEY BY A SHAREHOLDER TO THE PAYER-COMP ANY HOLDS, IN THIS CONTEXT, NO PARTICULAR SIGNIFICANCE, BEING OUTSIDE THE AMBIT OF THE PROVISION. THERE IS NO REFERENCE BY THE TRIBUNAL TO JUDICIAL PRECEDENTS, O R EVEN THE LAW IN THE MATTER, WITH REFERENCE TO WHICH WE HAVE STATED THE PERIOD O F RETENTION, OR THE LENGTH OF TIME FOR WHICH THE CREDIT OBTAINS, AS OF NO CONSEQU ENCE, BEING NOT A RELEVANT CONSIDERATION. WHEN THE FACTOR OF REPAYMENT OF LOAN AND ADVANCE IT SELF IS NOT RELEVANT, HOW COULD THE RETENTION PERIOD, I.E., THE PERIOD AFTER WHICH THE REPAYMENT IS EFFECTED, COULD POSSIBLY BE ? ALL THESE ASPECTS HAVE IN FACT BEEN DELIBERATED AND CONCLUDED BY THE APEX COURT PER ITS CONSTITUTION BENCH DECISION IN NAVNIT LAL C. JHAVERI (SUPRA). THE CHALLENGE IN THAT CASE WAS TO THE VIRES OF THE ANALOGOUS PROVISION OF S. 12(1B) R/W S. 2(6A)(E) OF THE 1922 ACT. PER HIS DISSENTING JUDGMENT RAGHUBAR DAYAL J. HELD SUBSTANTIALLY THE SAME WHAT INFORMS AND GUIDES THE DECISION BY THE TRIBUNAL IN SURAJ DEV DADA (SUPRA), EVEN AS IT IS NOT COMPETENT FOR THE TRIBU NAL TO, UNDER THE SCHEME OF THINGS, READ DOWN A PROVISI ON THAT IS INTRA VIRES THE CONSTITUTION (OF INDIA) OR READ IT INCONSISTENT OR DE HORS THE DECISIONS BY THE HIGHER COURTS OF LAW LAYING DOWN THE LAW IN THE MAT TER. LOANS BORROWED BY A SHAREHOLDER FROM A COMPANY, THE DISSENTING JUSTICE STATED, DO NOT COME WITHIN THE GENERAL DEFINITION OF INCOME. AS SUCH, IF THE S HAREHOLDER HAD BEEN PAID HIS SHARE OF PROFIT OSTENSIBLY AS A LOAN WHICH IS REA LLY A SHARE OF PROFIT, IT CAN BE TAXED AS INCOME UNDER AN APPROPRIATE ENACTMENT. H OWEVER, ANY AD HOC PAYMENT TO A SHAREHOLDER AS A LOAN/ADVANCE, UNRELAT ED TO HIS SHARE IN THE ACCUMULATED PROFIT, CANNOT RATIONALLY COME WITHIN THE EXPRESSION OF DI VIDEND . THAT IS, IT WAS NOT OPEN TO THE LEGISLATURE TO DESC RIBE ANY PAYMENT OF MONEY BY A COMPANY TO A SHAREHOLDER BY THE WORD DIVIDEND, AND THEN PROVIDE THAT SUCH PAYMENT WILL COME WITHIN THE EXPRESSION INCOME FO R THE PURPOSE OF ANY LAW ENACTED BY VIRTUE OF ENTRY 82, LIST 1, SCHEDULE VII TO THE CONSTITUTION. THE ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 64 DEFINITION OF DIVIDEND MUST HAVE A RATIONAL CONNECT ION WITH THE CONCEPT OF DIVIDEND IN THE CONTEXT OF PROFIT OF A COMPANY AN D ITS DISTRIBUTION AMONGST THE SHAREHOLDERS AT ANY TIME AFTER THE PROFITS HAVE BEEN EARNED. IT WAS IN FACT UNREASONABLE TO PROVIDE THAT A PARTICULAR SHAREHO LDER SHOULD BE DEEMED TO HAVE RECEIVED AN AMOUNT IN EXCESS OF HIS PROPORTION ATE SHARE (IN THE PROFIT) AS DIVIDEND. THAT IT IS TO SAY, THAT THE LAW, IN HIS O PINION, OUGHT TO HAVE PROVIDED THAT THE LOAN OR ADVANCE BY A COMPANY WAS, IN SUBST ANCE, A DISTRIBUTION OF PROFIT BY IT AND, FURTHER, COULD NOT ASCRIBE SUCH DISTRIBU TION AS DIVIDEND IN EXCESS OF THE PROPORTIONATE SHARE OF THE PAYEE IN THE ACCUMUL ATED PROFITS. THE SAME, HOWEVER, DID NOT FIND FAVOR WITH THE OTHER FOUR JUD GES CONSTITUTING THE BENCH, WHO DELIVERED THE MAJORITY OPINION UPHOLDING THE CO NSTITUTIONALITY OF THE PROVISION OF SECTION 12(1B) R/W S. 2(6A)(E) OF THE INDIAN INCOME TAX ACT, 1922, ALSO FINDING THE SAME AS NOT VIOLATING FUNDAMENTAL RIGHTS GUARANTEED UNDER ARTICLE 19(1)(F) AND (G) OF THE CONSTITUTION. THE S COPE OF THE RELEVANT ENTRY (IN THE LEGISLATIVE LISTS), IT EXPLAINED, ARE NOT POWER S BUT FIELDS OF LEGISLATION AND THE WIDEST IMPORT AND SIGNIFICANCE SHOULD BE ATTACH ED TO THEM. WHILE SECTION 2(6A), ANALOGOUS TO SECTION 2(22) OF THE ACT, DEFIN ES DIVIDEND, INCLUDING DEEMED DIVIDEND (UNDER CERTAIN SPECIFIED CONDITIONS ) (BOTH PER CLAUSE (E) THEREOF), SEC.12(1B) PROVIDES FOR BRINGING THE AMOU NT OUTSTANDING AS ON 01.4.1955, I.E., EVEN WHERE RECEIVED OR ACCUMULATED OVER THE PAST YEARS, TO TAX. THE HONBLE COURT NOTED A CIRCULAR BY THE BOARD PRO VIDING A WINDOW WHEREBY THE PROVISION WAS EXCEPTED ON GENUINE REPAYMENTS OF SUCH OUTSTANDING BY 30.6.1955 (CIRCULAR NO. 20 (XXI-6/55) DATED 10.5.19 55). THE HONBLE COURT EXAMINED SEVERAL PRECEDENTS, INCLUDING CHALLENGES T O THE PROVISION OF SECTION 12B, ENHANCING THE SCOPE OF INCOME TO INCLUDE CA PITAL GAINS; TO SECTION 23A(1), PROVIDING AN ARTIFICIAL DIVIDEND PAYOUT AT A MINIMUM OF 60%, LEST THE SHORTFALL THEREIN BE LIABLE TO SUPER-TAX, I.E., RES TRAINING THE COMPANY FROM ACCUMULATING ITS PROFIT BEYOND 40% TO BUILD UP RES ERVES OR TO PROVIDE FOR CAPITAL EXPENDITURE; AND SEC. 16(3)(A) (OF THE 1922 ACT), SEEKING TO TAX THE ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 65 INCOME ARISING TO WIFE AND MINOR SON/S OF THE ASSES SEE-INDIVIDUAL IN HIS HANDS. ALL THESE PROVISIONS WERE CONSIDERED BY THE APEX CO URT AS REASONABLE STEPS TAKEN BY THE PARLIAMENT, WITHIN ITS LEGISLATIVE CO MPETENCE, TOWARD COUNTERING TAX EVASION, ALSO NOTING THE RATIONALE OF EACH PROV ISION, I.E., THE MISCHIEF THAT IT WAS INTENDED OR DESIGNED TO DEFEAT. THE WORD INCOM E, IT OPINED, ALSO MAKING REFERENCE TO THE PRECEDENTS WHICH CONSIDERED LEGISL ATIVE COMPETENCE, MUST RECEIVE A WIDE INTERPRETATION, THE CAVEAT BEING THA T THERE HAS TO BE A RATIONAL CONNECTION BETWEEN THE ITEM TAXED AND THE CONCEPT O F INCOME LIBERALLY CONSTRUED. IT ALSO NOTED SUITABLE CONDITIONS/EXCEPT IONS BEING PROVIDED FOR IN THE IMPUGNED PROVISIONS (OF SS. 2(6A)(E) AND 12(1B)), A S BY WAY OF RESTRICTION ON THEIR SCOPE TO TRANSACTIONS OF/BY COMPANIES, IN WHI CH PUBLIC IS NOT SUBSTANTIALLY INTERESTED, WITH ITS MAJOR SHAREHOLDERS, I.E., HOL DING OVER A THRESHOLD (10%) VOTING POWER THEREIN; EXCLUSION OF TRANSACTIONS IN THE ORDINARY COURSE OF BUSINESS WHERE THE PAYER-COMPANY IS IN THE BUSINESS OF MONEY-LENDING; AND, THIRDLY, MAKING THE DEEMING (OF THE LOAN/ADVANCE OR PAYMENT) AS DIVIDEND SUBJECT TO AND, FURTHER, TO THE EXTENT OF, ACCUMULA TED PROFITS OF SUCH COMPANY, ALL OF WHICH WERE REGARDED AS NECESSARY AND SUITABL E SAFEGUARDS. SIMILAR ATTEMPTS, IT NOTED, WERE ALSO MADE BY OTHER COUNTRI ES IN THEIR DOMESTIC INCOME- TAX LAW. THAT THE PROVISION MAY CAUSE HARDSHIP IN S OME CASES WAS CONSIDERED AS IRRELEVANT (FOR DETERMINING THE QUESTION OF LEGISLA TIVE COMPETENCE). THE ARGUMENT WITH REGARD TO THE LOAN BEING INTEREST BEA RING, AND OF IT HAVING BEEN REPAID SINCE, WERE ADVANCED AND CONSIDERED AS NOT V ALID GROUNDS FOR EXCLUDING THE LOAN OR ADVANCE GIVEN FROM THE PURVIEW OF OR FO R THE PURPOSE OF DEEMING THE SAME AS DIVIDEND (REFER PGS. 208-210), WHICH WE MAY REPRODUCE FOR READY REFERENCE: THE LOAN MAY CARRY INTEREST AND THE SAID INTEREST M AY BE RECEIVED BY THE COMPANY; BUT THE MAIN OBJECT UNDERLYING THE LOAN IS TO AVOID PAY MENT OF TAX. IT MAY ULTIMATELY BE REPAID TO THE COMPANY AND WHEN IT IS SO REPAID, IT MAY OR MAY NOT BE TREATED AS PART OF ACCUMULATED PROFITS. IT IS THIS KIND OF A WELL-PLAN NED DEVICE WHICH S. 12(1B) INTENDS TO REACH FOR THE PURPOSE OF TAXATION. (PG. 208) ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 66 THE HONBLE COURT AGREED THAT THE DOCTRINE DOES NOT MEAN THAT THE PARLIAMENT CAN CHOOSE TO TAX AS INCOME AN ITEM WHICH CAN IN NO RATIONAL SENSE BE REGARDED AS THE CITIZENS INCOME. THE ITEM TAXED SHOULD BE R ATIONALLY CAPABLE OF BEING CONSIDERED AS THE INCOME OF THE CITIZEN. BUT IN CON SIDERING THE QUESTION AS TO WHETHER A PARTICULAR ITEM CAN BE REGARDED AS INCOME IN THE HANDS OF THE CITIZEN OR NOT, IT WOULD NOT BE APPROPRIATE, IT HELD, TO AP PLY THE TESTS TRADITIONALLY PRESCRIBED BY THE INCOME TAX ACT AS SUCH. FURTHER, THE PROVISION DOES NOT AFFECT THE APPELLANTS RIGHT TO BORROW MONEY FROM ANY OTHE R SOURCE, OR EVEN FROM THE PAYEE-COMPANY WHERE IT IS IN THE BUSINESS OF MONEY LENDING. THE RESTRICTION IMPOSED BY THE SECTION COULD NOT, IN ITS VIEW, BE REGARDED AS UNREASONABLE (PAGES 208, 210 OF THE REPORTS). THE DECISION BY TH E HON'BLE HIGH COURT (REPORTED AT [1963] 48 ITR 451 (BOM)) UPHOLDING THE CONSTITUTIONALITY OF THE PROVISION, WAS ACCORDINGLY AFFIRMED, ALSO NOTING A SIMILAR CHALLENGE HAVING BEEN REPELLED IN K.M.S. LAKSHMANA AIYER (SUPRA). THE APPEAL WAS ACCORDINGLY DISMISSED WITH COSTS. THIS WAS FOLLOWED BY ANOTHER DECISION BY THE CONSTITUTIONAL BENCH OF THE APEX COURT IN PUNJAB DISTILLING INDUSTRIES LIMITED V. CIT [1965] 57 ITR 1 (SC), WHEREIN, RELYING ON, AMONG O THERS, THE DECISION IN NAVNIT LAL C. JHAVERI (SUPRA), IT UPHELD THE CONSTITUTIONALITY OF S. 2(6 A)(D), UNDER CHALLENGE BEFORE IT. THERE WAS NO INCONSISTEN CY, IT CLARIFIED, BETWEEN THE RECEIPT BEING A CAPITAL ONE UNDER THE COMPANY LAW A ND BY FICTION BEING TREATED AS THE INCOME CHARGEABLE TO TAX UNDER THE INCOME-TA X ACT. THE APPEAL WAS DISMISSED WITH COSTS. THE FULL BENCH DECISION BY TH E HONBLE JURISDICTIONAL HIGH COURT (REPORTED AT 48 ITR 288 (PUNJ)(FB)) WAS AFFIR MED. WHERE, THEN, ONE MAY ASK, IS THERE ANY SCOPE FOR AN ARGUMENT, INTRODUCIN G THE NOTION OF MISUSE OF FUNDS BELONGING TO THE PAYER-COMPANY, SO THAT WHERE SUCH MISUSE IS NOT SHOWN TRANSFERRING, BY IMPLICATION, THE ONUS OF SO SHOW ING ON THE REVENUE, THE SECTION CANNOT BE INVOKED? THE ANSWER TO THIS QUESTION COULD ONLY BE IN THE NEGATIVE . THE ASPECT THAT INFORMS THE SAID QUESTION IS IF T HE SECTION COULD POSSIBLY COVER GENUINE CASES OF SUMS BORROWED BY A SHAREHOLDER, TEMPORARY OR ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 67 OTHERWISE. THE QUESTION/S, THOUGH VALID, DOES NOT S URVIVE AFTER THE AFORE-CITED DECISIONS BY THE LARGER BENCHES OF THE APEX COURT, WHICH BIND EVEN ITS LOWER CONSTITUTION BENCHES. SIMILAR ARGUMENTS/S, IT WOULD BE NOTED, WAS ALSO ADVANCED IN TARULATA SHYAM (SUPRA), STATING THAT A CONDITION SIMILAR TO THAT IN SECTION 108 (1) OF THE COMMONWEALTH INCOME TAX ACT, FROM WHICH THE PROVISION DRAWS ITS INSPIRATION, BE READ INTO THE PROVISION TO MAKE IT REASONABLE. THE APEX COURT DISCOUNTENANCED THE SAME, STATING THAT SUCH A CONDI TIONS/S WAS NOT CONSIDERED APPROPRIATE (BY THE LEGISLATURE) TO BE INCORPORATED IN THE PROVISION. THE GENUINENESS OF THE BORROWING, INASMUCH AS THE SECT ION DOES NOT DRAW ANY DISTINCTION BETWEEN GENUINE AND NON-GENUINE TRANSAC TIONS WHICH WAS ARGUED AS THE PRINCIPAL FLAW IN THE PROVISION, TARGETING T HUS GENUINE LOANS/ADVANCES AS WELL, WHICH CONSIDERATION ALSO PREVAILED WITH THE D ISSENTING JUDGE (IN NAVNIT LAL C. JHAVERI (SUPRA)) IN HOLDING OTHERWISE, WAS NOT FOUND A VAL ID GROUND FOR STRIKING DOWN THE PROVISION WHICH, IN ITS VIEW, LA ID A REASONABLE RESTRICTION ON THE SOURCE OF BORROWING BY A SUBSTANTIAL SHAREHOLDE R IN A PRIVATE COMPANY. IT MUST BE REMEMBERED, IT OBSERVED, THAT THE LOAN/ADVA NCE IS MADE IN FULL KNOWLEDGE OF THE PROVISION CONTAINED IN THE IMPUGNE D SECTION (PAGE 207). IF THE LEGISLATURES THINKS, IT EXPLAINED, THAT LOAN/ADVANC E(S) IN ALMOST EVERY CASE IS A RESULT OF A DEVICE, IT IS COMPETENT TO PRESCRIBE A FICTION AND HOLD THAT IN CASES OF SUCH LOANS/ADVANCES TAX SHALL BE RECOVERED FROM THE SHAREHOLDER ON THE BASIS THAT HE HAD RECEIVED THE DIVIDEND (PAGE 209). THAT, THEREFORE, THERE IS NO MISUSE OF FUNDS OF/BELONGING TO SUCH A COMPANY, I S OF NO MOMENT IN DETERMINING IF THE PROVISION IS IN THE FACTS AND CI RCUMSTANCES OF THE CASE ATTRACTED , AND TOWARD WHICH THE APEX COURT CLARIFIED THAT TH E PROVISION IMPINGES, SUBJECT TO FIVE CONDITIONS, ON THREE TYPE S OF PAYMENTS. THESE CONDITIONS WERE REITERATED BY THE APEX COURT IN TARULATA SHYAM (SUPRA), OBSERVING THE FIFTH CONDITION TO BE APPLIC ABLE FOR THE TRANSITIONAL YEAR (I.E., AY 1955-56) (PG. 355). ALL THAT THEREFORE IS RELEVANT FOR THE INVOCATION OF THE SECTION IS THE SATISFACTION OF THESE FOUR CONDI TIONS, BEING, FIRSTLY , THAT THE ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 68 PAYER-COMPANY SHOULD BE ONE IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED; SECONDLY , THE PAYEE SHOULD BE A SHARE-HOLDER IN THE COMPANY ON THE DATE/S ON WHICH THE LOAN IS ADVANCED, THE EXTENT OF HIS SHARE HOLDING BEING IMMATERIAL; THIRDLY , THE LOAN OR ADVANCE COULD BE DEEMED AS DIVIDEND T O THE EXTENT OF THE ACCUMULATED PROFIT OF THE PAYER-COMPANY AS ON THE D ATE OF THE LOAN; AND, FOURTHLY , THE LOAN MUST NOT BE ADVANCED BY THE COMPANY IN T HE ORDINARY COURSE OF ITS BUSINESS, WHERE MONEY LENDING IS A SUBSTANTI AL PART OF SUCH BUSINESS. IT IS SURPRISING INDEED THAT ARGUMENTS OF THE NATURE RAIS ED IN SURAJ DEV DADA (SUPRA), AS WELL AS BEFORE US, CONTINUE TO BE SO RAISED DECA DES AFTER THE DECISIONS BY THE LARGER BENCHES OF THE APEX COURT; THE ASSESSEE ALSO REFERRING IN ITS WRITTEN SUBMISSIONS, NOT ADVERTED TO DURING HEARING, TO THE DECISION IN CIT (TDS) V. SCHUTZ DISHMAN BIO-TECH (P.) LTD . (TA NO. 958 OF 2018, DATED 21/12/2015, AT PB PGS. 10-12). THE SAID DECISIONS, WHICH HAVE BEEN CAREFULLY PERUSED, ARE WITHOUT REFERENCE TO THE DELIBERATIONS; THE FINDING S AND THE OBSERVATIONS BY THE APEX COURT PER ITS LARGER BENCH DECISIONS, SINCE FO LLOWED PER ITS DIVISION BENCH DECISIONS. THERE IS IN FACT NO REFERENCE TO EVEN TH E EARLIER JUDGMENTS BY THE SAME COURT. THAT APART, THE DECISIONS ARE DISTINGUI SHABLE ON FACTS INASMUCH AS THE SAME ARE BASED ON MUTUAL BENEFITS AND ADJUSTMEN T ENTRIES WITHOUT SPECIFYING THE NATURE OF THE ADJUSTMENTS, WHILE IN THE INSTANT CASE THE SAME ARE ONLY RECEIPT AND PAYMENT OF MONEY, I.E., A LOAN OR ADVANCE SIMPLICITER . HOW, AGAIN, ONE WONDERS, IS THE FACT OF THE ASSESSEE HAV ING ALSO LENT MONEY TO THE COMPANY WHICH, AGAIN, COULD BE IN THE SAME YEAR OR IN A PRECEDING YEAR, OR EVEN IN THE SUBSEQUENT YEAR, RELEVANT. IT IS THE LENDING TRANSACTION, AS OPPOSED TO A BUSINESS TRANSACTION, WHERE THE PAYER-COMPANY IS A COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED AND THE PAYE E IS A SUBSTANTIAL SHARE-HOLDER THEREIN, THAT ALONE COMES WITHIN THE LETTER OF LAW, AND SOUGHT TO BE PLACED RESTRICTION ON. THE ACT OF LENDING BY THE SHAREHOLD ER TO THE COMPANY IS NOT IN ANY MANNER TARGETED. IT IS IN FACT AN INDEPENDENT TRANSACTION, I.E., OF THE LOAN AND ADVANCE BY SUCH A COMPANY THERETO. THIS IS IN FACT ADMITTEDLY SO IN THE INSTANT ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 69 CASE, BEING DEPENDENT ON THE AVAILABILITY OF SURPLU S FUNDS WITH THE ASSESSEE AND, FURTHER, ON THE SAME BEING REQUIRED AT THE RELEVANT TIME BY THE COMPANY. IT IS THE SOURCE OF BORROWING TO A SHAREHOLDER THAT THE LAW P LACES RESTRICTION ON . CONSIDERING THE SAID RESTRICTION ON IT, IT IS NOT P ERMISSIBLE FOR A SHAREHOLDER TO CONTEND THOUGH TO BE FAIR IT HAS NOT BEEN BEFORE US, THAT THE LOAN OR ADVANCE TO IT BY THE PAYER-COMPANY IS IN CONSIDERATION OF IT, SIMILARLY, ADVANCING MONIES THERETO. THAT WOULD TANTAMOUNT TO DEFEATING THE CLE AR AND STRICT PROVISION OF LAW WHICH, AS AFORE-NOTED, COVERS CASES OF GENUINE LOAN S AND ADVANCES AS WELL, SO THAT SUCH AN ARGUMENT, SHOWN TO BE FACTUALLY NOT VA LID IN THE INSTANT CASE, IS NOT TENABLE. THAT IS, SUCH AN ARGUMENT, EVEN WHERE THE LOANS BY ONE TO ANOTHER DO NOT CARRY INTEREST, SO THAT IT MAY FACTUALLY ACQUIR E SOME FORCE, IS NOT A VALID ARGUMENT, AND SUCH AN ARRANGEMENT WOULD, IN VIEW OF THE CLEAR LANGUAGE OF THE PROVISION, LISTING FOUR CONDITIONS NOTED SUPRA, THE CUMULATIVE SATISFACTION OF WHICH ALONE IS RELEVANT, NOT BE A VALID ARGUMENT. I N FACT, THE CHARGE OF INTEREST, SO THAT THE FUNDS ARE IN THE INSTANT CASE MADE AVAI LABLE BY ONE TO ANOTHER AT A COST, PRECLUDE THE RAISING OF SUCH A CONTENTION AS BEING IMPUTED. WHAT A SHAREHOLDER DOES WITH ITS FUNDS, ON WHICH THERE IS NO EMBARGO, IS NOT RELEVANT. IT WOULD BE A DIFFERENT MATTER, WE MAY ADD, WHERE T HE FUNDS BORROWED OR ADVANCED, ARE FOR BUSINESS PURPOSE, IN WHICH CASE T HE SAME WOULD STAND TO BE ADJUSTED AGAINST THE BUSINESS PURPOSE FOR WHICH THE AMOUNT STANDS PAID OR RECEIVED, VIZ. AN ADVANCE AGAINST PURCHASE OF GOODS , WHILE IN THE INSTANT CASE THE MONIES RECEIVED, DIRECTLY OR INDIRECTLY, HAVE B EEN MET BY REPAYMENT OF MONIES, I.E., ARE LOANS OR ADVANCES SIMPLICITER , TO WHICH, AS CLARIFIED, THE PROVISION IS APPLICABLE. THE RELIANCE ON THE CITED DECISIONS WOULD THEREFORE BE OF NO ASSISTANCE TO THE ASSESSE. 4.8 IT MAY ALSO BE CLARIFIED THAT THE PROVISION IS ATTRACTED IRRESPECTIVE OF THE STATUS OF THE SHAREHOLDER. THAT IS, IS APPLICABLE T O A SHARE-HOLDER, AS EXPLAINED IN SADHANA TEXTILE MILLS (P.) LTD. V. CIT [1991] 188 ITR 318 (BOM), TO A ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 70 CORPORATE SHAREHOLDER, AS THE ASSESSE-COMPANY. WE C ONSIDER IT PERTINENT TO CLARIFY THIS AS IT IS STATED THAT THE PROVISION IS NOT APPLICABLE TO AN INTER CORPORATE DEPOSIT (ICD), I.E., A DEPOSIT, BY DEFINI TION, BY ONE COMPANY TO ANOTHER. IT IS IN FACT NOBODYS CASE THAT THE RUNNING ACCOUN T BETWEEN THE TWO ENTITIES CONSTITUTES AN ICD(S) . BE THAT AS IT MAY, THE PROVISION COVERS ANY PAYMENT WHICH IS IN THE NATURE OF A LOAN AND ADVANCE, WHIC H THE IMPUGNED BORROWING/S IS, SO THAT THE SAME GETS HIT BY THE PR OVISION IRRESPECTIVE OF WHETHER OR NOT IT STANDS TO BE REGARDED ALSO AS AN ICD. THE ONLY THING RELEVANT IS IF THE PAYMENT CAN BE REGARDED AND, RATHER, IS, IN SUBSTAN CE, A LOAN OR AN ADVANCE, BOTH TERMS BEING JUDICIALLY WELL DEFINED . AN ICD, A DEPOSIT BY DEFINITION, IS, RATHER, ONLY IN THE NATURE OF A LOAN; DEPOSITS BEIN G A SPECIES OF LOANS/ADVANCES. ITS EXCLUSION WOULD THEREFORE ONLY BE WHERE THE DEP OSITOR (LENDING) COMPANY IS IN THE BUSINESS OF MONEY LENDING AND THE DEPOSIT IS GIVEN IN THE NORMAL COURSE OF ITS BUSINESS. THE EXCLUSION OF A BUSINESS ADVAN CE, REFERRED TO EARLIER, I.E., EVEN AS THE PROVISION SPEAKS OF ANY PAYMENT BY WAY OF A LOAN OR ADVANCE , COVERING THEREFORE ADVANCES OF ALL TYPES, IS ONLY O N THE PREMISE THAT THE SAID WORD, READ CONJUNCTIVELY WITH THE WORD LOAN, APPL YING THE PRINCIPLE OF EJUSDEM GENERIS , SHOULD ONLY INCLUDE PAYMENTS IN THE NATURE OF LOA NS, EXCLUDING BUSINESS TRANSACTIONS, WHICH HAVE, AS A MATTER OF C OURSE, IF NOT NECESSARILY, TO BE SETTLED BY REMITTING FUNDS; THE PROVISION IN NO MAN NER SEEKING TO IMPINGE ON GENUINE BUSINESS TRANSACTIONS. 4.9 FINALLY, IT IS STATED THAT THE ENTRIES IN THE B OOKS OF ACCOUNT ARE NOT DETERMINATIVE. THE SAME SEEKS TO PERHAPS MEET THE R EFLECTION OF THE OUTSTANDING SUM (AS AT THE YEAR-END) AS A LOAN OR ADVANCE IN TH E BALANCE-SHEET OF THE LENDER OR THE BORROWER COMPANY. IT IS NOBODY'S CASE THAT T HE PROVISION STANDS INVOKED ON ACCOUNT OF SUCH REFLECTION, WHICH HAS NOT BEEN S HOWN TO BE INCORRECT, SO THAT THERE IS NO FACTUAL BASIS TO THE ARGUMENT. THE PROV ISION WOULD IN FACT APPLY EVEN IF THE SHAREHOLDER DOES NOT, AS IS USUALLY THE CASE FOR AN INDIVIDUAL SHAREHOLDER, ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 71 MAINTAIN BOOKS OF ACCOUNT, AND WHICH IS SO IN THE P RESENT CASE ONLY BECAUSE OF IT BEING A CORPORATE ENTITY. ON THE CONTRARY, IT IS TH E ASSESSEE WHO DRAWS ON THE ACCOUNTS, STATING IT TO BE A RUNNING ACCOUNT AND, F URTHER, A LOW RETENTION PERIOD, AND ON THAT BASIS PLEAD THAT THE PROVISION SHALL NOT APPLY. THE PROVISION IS APPLICABLE QUA ANY PAYMENT AND, THEREFORE, WOULD (OR WOULD NOT) A PPLY WITH REFERENCE TO EACH SPECIFIC SUM. IT IS IMMATERIAL WH ETHER SUCH PAYMENT/S IS RECORDED IN THE BOOKS OF ACCOUNT OR NOT, AND THE ON LY THING RELEVANT IS IF IT IS IN THE NATURE OF A LOAN/S OR ADVANCE/S. THE ASSESSEES ARGUMENT, WHICH IS EVEN OTHERWISE NOT BACKED BY ANY MATERIAL AND ONLY IN TH E NATURE OF A BALD STATEMENT, IS THEREFORE WITHOUT MERIT. 4.10 THE ONLY OTHER ISSUE RAISED IN APPEAL IS THE C HARGEABILITY OF THE DIVIDEND UNDER SECTION 2(22)(E) AS INCOME FROM OTHER SOURCE S U/S. 56. NO ARGUMENT WAS ADVANCED IN THIS RESPECT EITHER BEFORE US OR, AS IT APPEARS FROM THEIR ORDERS, BEFORE THE REVENUE AUTHORITIES. THERE IS NO REFEREN CE THERETO EVEN IN THE WRITTEN SUBMISSIONS BY THE ASSESSEE, ADDUCED DURING HEARING . SO, HOWEVER, THE MATTER BEING LEGAL, WE WOULD NONE-THE-LESS CONSIDER THE SA ME. SECTION 56, IN ITS RELEVANT PART, READS AS UNDER: INCOME FROM OTHER SOURCES. 56. (1) INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUD ED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEA D INCOME FROM OTHER SOURCES, IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. (2) IN PARTICULAR AND WITHOUT PREJUDICE TO THE GENE RALITY OF THE PROVISIONS OF SUB-SECTION (1), THE FOLLOWING INCOME SHALL BE CHARGEABLE TO IN COME-TAX UNDER THE HEAD INCOME FROM OTHER SOURCES, NAMELY: (I) DIVIDENDS; CLEARLY, THEREFORE, DIVIDEND IN SECTION 56 REFERS TO THE DIVIDEND AS DEFINED U/S. 2 (22) OF THE ACT. WE HAVE ALREADY HELD THAT THE IM PUGNED SUMS QUALIFY TO BE DIVIDEND U/S. 2(22)(E). THE ONLY THING THEREFORE TH AT NEEDS TO BE EXAMINED IS IF THE SAME STANDS EXCLUDED FROM THE PURVIEW OF THE T OTAL INCOME U/S. 2(45) OF THE ACT. CHAPTER III OF THE ACT, COMPRISING SECTION S 10 TO 13B, SPECIFIES SUCH ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 72 INCOMES. SECTION 10(34), BROUGHT ON THE STATUTE-BOO K W.E.F. 01.4.2004, READS AS UNDER: INCOMES NOT INCLUDED IN TOTAL INCOME. 10. IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR O F ANY PERSON, ANY INCOME FALLING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE IN CLUDED (1) (33) . (34) ANY INCOME BY WAY OF DIVIDENDS REFERRED TO IN SECTI ON 115-O . IT IS THUS ONLY THE DIVIDEND DECLARED, DISTRIBUTED OR PAID BY A COMPANY, ON WHICH TAX U/S. 115-O HAS BEEN SUFFERED, THAT FALLS U/S. 1 0(34), AND WOULD THEREFORE NOT STAND TO BE ASSESSED U/S. 2(24)(II) R/W S. 56 OF TH E ACT. THE SAID DIVIDEND WOULD ONLY BE THAT ENVISAGED U/S. 2(22)(A), I.E., AS DECL ARED OBSERVING THE REQUIRED PROCEDURE IN ITS RESPECT UNDER THE COMPANIES ACT, 1 956 (OR, AS THE CASE MAY BE, COMPANIES ACT, 2013), TO ALL THE SHAREHOLDERS, I.E. , IN PROPORTION TO THEIR SHAREHOLDING. THIS WOULD CERTAINLY NOT COVER DIVIDE ND WHICH GETS INCLUDED WITHIN ITS DEFINITION UNDER THE ACT IN VIEW OF THE EXTENDED MEANING OF THE TERM DIVIDEND BY VIRTUE OF A LEGAL FICTION. THE DIVIDE ND DEEMED AS SUCH U/S. 2(22)(E) WOULD, THEREFORE, STAND TO BE ASSESSED AND , ACCORDINGLY, HAS BEEN RIGHTLY BROUGHT TO TAX, U/S. 56 OF THE ACT. THE ASS ESSE FAILS ON ITS GD. 3 AS WELL. IN SUM 5. THE PRINCIPAL OBJECTION OF THE ASSESSEE IN THIS CASE, AS INDEED IN OTHERS CITED BY IT, IS THAT THE AMOUNT ADVANCED (BY THE PA YER-COMPANY, GAPL) STANDS SINCE REPAID, SO THAT THE PROVISION OF S. 2(22)(E) OUGHT NOT TO COVER GENUINE CASES OF LOANS/ADVANCES, PARTICULARLY WHERE THE SHA REHOLDER HAS ALSO GIVEN, SIMILARLY, LOANS/ADVANCES TO THE SAID COMPANY. THE SAME ACCORDINGLY HAS BEEN DISCUSSED WITH REFERENCE TO THE FOUNDATIONAL JUDGME NTS BY THE APEX COURT, BEING BY ITS LARGER BENCHES, SETTLING THE LAW IN T HE MATTER, AS IN NAVNIT LAL C. JHAVERI (SUPRA); PUNJAB DISTILLING INDS. LTD . (SUPRA) AND TARULATA SHYAM (SUPRA), WHICH IN FACT STAND FOLLOWED PER IT'S LATE R DECISIONS, AS IN SARDA (P.) ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 73 (SUPRA) AND MUKUNDRAY K. SHAH (SUPRA), TO ALL OF WHICH EXTENSIVE REFERENCE STANDS MADE. IN FACT, PER THESE DECISIONS ITSELF TH E APEX COURT HAS NOTED WITH APPROVAL SEVERAL DECISIONS BY THE HONBLE HIGH COUR TS CITED BEFORE IT, EVEN AS IT, IN EACH CASE, AFFIRMED THE DECISION BY THE HON' BLE HIGH COURT, UNDER CHALLENGE BEFORE IT. THE MATTER STANDS DISCUSSED AT LENGTH IN THIS ORDER (REFER PARAS 4.1 THRO 4.10), TO WHICH THEREFORE REGARD IS TO BE HAD. WE MAY, WHILE CONCLUDING OUR ORDER, EXTRACT FROM THE DECISION IN SARADA (P.) (SUPRA) (PG. 448), I.E., APART FROM ADVERTING SIMILAR EXTRACTS IN THE FOREGOING PART OF THIS ORDER, IF ONLY TO EMPHASIZE THE UNANIMITY AND UNAMBIGUITY IN THE LAW AS CLARIFIED AND SETTLED BY THE LARGER BENCHES OF THE APEX COURT: SEC. 2(22)(E) AS IT STOOD AT THE MATERIAL TIME DE FINED DIVIDEND TO INCLUDE 'ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY.. TO THE EXTENT TO WHICH THE COMPANY... POSSESSES ACCUMULATED PROFITS'. IN THE INSTANT CASE THERE IS NO DISPUTE THAT THE APPELLANT HAD A SUBSTANTIAL INTEREST IN THE COMPANY. THE NATURE OF THE COMPANY IS ALSO NOT IN DISPUTE. FROM THE FACTS AS STATED HEREINABOVE, IT APPEARS TH AT THE WITHDRAWALS MADE BY THE APPELLANT FROM THE COMPANY AMOUNTED TO GRANT OF LOA N OR ADVANCE BY THE COMPANY TO THE SHAREHOLDER. THE LEGAL FICTION CAME INTO PLAY AS SO ON AS THE MONIES WERE PAID BY THE COMPANY TO THE APPELLANT. THE ASSESSEE MUST BE DEEMED TO HAVE RECEIVED DIVIDE NDS ON THE DATES ON WHICH SHE WITHDREW THE AFORESAID AMOUNTS O F MONEY FROM THE COMPANY. THE LOAN OR ADVANCE TAKEN FROM THE COMPANY MAY HAVE BEEN ULT IMATELY REPAID OR ADJUSTED BUT THAT WILL NOT ALTER THE FACT THAT THE ASSESSEE, IN THE E YE OF LAW, HAD RECEIVED DIVIDEND FROM THE COMPANY DURING THE RELEVANT ACCOUNTING PERIOD . IT WAS HELD BY THIS COURT IN THE CASE OF SMT. TARULATA SHYAM & ORS. VS. CIT [1977] 108 ITR 345 (SC) THAT THE STATUTORY FICTION CREATED BY S. 2(6A)(E) OF THE INDIAN IT ACT, 1922 WOULD COME INTO OPERATION AT THE TIME OF THE PAYMEN T OF ADVANCE OR LOAN TO A SHAREHOLDER BY THE COMPANY. THE LEGISLATURE HAD DELIBERATELY NO T MADE THE SUBSISTENCE OF THE LOAN OR ADVANCE, OR ITS REMAINING OUTSTANDING, ON THE LAST DATE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR A PRE-REQUISITE FOR RAISING THE STA TUTORY FICTION. THE NATURE OF TRANSACTIONS, PURELY FINANCIAL IN NAT URE, HAS BEEN FOUND TO BE RECEIPT AND PAYMENT OF MONEY, I.E., A LOAN BY DEF INITION, A TERM JUDICIALLY WELL EXPOUNDED. THIS ASPECT, DENOTING A PRIMARY FACT, IS IN FACT ADMITTED. THE GENUINENESS OF A LOAN OR ADVANCE IS NOT IN ISSUE. H OWEVER, THAT THE LOAN/ADVANCE REPRESENTS AN ACTUAL LIABILITY OF THE SHAREHOLDER, WHICH MAY HAVE BEEN REPAID ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 74 SINCE, WHICH COULD EVEN BE IN THE RELEVANT YEAR ITS ELF, DID NOT FIND FAVOUR WITH THE APEX COURT IN VIEW OF THE CLEAR, UNAMBIGUOUS LA NGUAGE OF THE PROVISION; IT FURTHER NOTING THAT THE OBJECT OF THE PROVISION HAD A RATIONAL NEXUS WITH INCOME, SO THAT THE PROVISION, WHICH IT AGREED WAS HARSH, W AS WITHIN THE LEGISLATIVE COMPETENCE OF THE PARLIAMENT AND, THEREFORE, HAD TO BE GIVEN AFFECT TO. A PARALLEL IN THIS CONTEXT STANDS DRAWN BY US WITH SE CTION 68 OF THE ACT. THE ARGUMENT OF THE SUM NOT REPRESENTING REAL INCOME, THOUGH NOT SPECIFICALLY ADVANCED BEFORE US, IS IMPLICIT IN THE ARGUMENT ADV ANCED WITH REFERENCE TO THE GENUINENESS OF THE LOAN/ ADVANCE, AND THEREFORE CON SIDERED. THE SAME WOULD NOT CARRY THE ASSESSEES CASE FURTHER, AS WOULD EVEN OT HERWISE BE APPARENT FROM THE HOST OF DECISIONS BY THE APEX COURT. AS EXPLAINED I N POONA ELECTRIC SUPPLY CO. LTD. V. CIT [1965] 57 ITR 521 (SC), THE CONCEPT OF REAL INCOM E IS SUBJECT TO THE PROVISIONS OF THE ACT. THE LOAN OR ADVANCE BEIN G BOTH WAYS WOULD NOT CARRY ANY SPECIAL SIGNIFICANCE IN THE CONTEXT OF THE PROV ISION INASMUCH AS BOTH QUALIFY, INDEPENDENTLY, TO BE A LOAN OR ADVANCE, WH ICH IN THE PRESENT CASE IS WITH INTEREST, FURTHER, ESTABLISHING, IF IT WAS REQ UIRED, THE PAYMENTS TO BE PURELY FINANCIAL TRANSACTIONS, I.E., LOAN/ADVANCE(S) SIMPLICITER , SQUARELY COVERED WITHIN THE AMBIT OF THE PROVISION, WHICH SEEKS TO PLACE RE STRICTION ON PAYMENTS TO A SUBSTANTIAL SHAREHOLDER BY A COMPANY IN WHICH PUBLI C IS NOT SUBSTANTIALLY INTERESTED NOTHING MORE AND NOTHING LESS. IN FACT , LOAN/ADVANCE BY ONE TO ANOTHER WOULD ONLY BE IF THE FUNDS ARE FOR THE TIME BEING SURPLUS WITH THE LENDING COMPANY AND, AT THE SAME TIME, REQUIRED BY THE BORROWING COMPANY, SO THAT THERE IS NO CERTAINTY UNDER SUCH AN ARRANGEMEN T, BOTH WITH REGARD WITH THE QUANTUM AND TIME OF THE SOURCE OF FUNDS FOR SUCH AN ARRANGEMENT TO BE REGARDED AS VIABLE OR A DEPENDABLE ONE, OR TO CONTEND OF THE LOAN BEING TEMPORARY. NO BUSINESS PURPOSE HAS BEEN SHOWN OR OTHERWISE STATED , SO THAT THE CONTENTION IN ITS RESPECT IS A BALD ONE. THE PERIOD OF RETENTION HAS AGAIN BEEN FOUND TO BE NOT RELEVANT. THE ASPECT OF SET OFF OF SUBSEQUENT CREDI TS (RECEIPTS), I.E., SUBSEQUENT TO REPAYMENT OF THE EARLIER RECEIPT, ADVANCED IN TARULATA SHYAM (SUPRA), THOUGH ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 75 NOT ANSWERED BY THE APEX COURT, BEING HYPOTHETICAL (REFER PG. 358 OF THE REPORTS), ALSO DO NOT ARISE IN THE INSTANT CASE AS THE REVENUE HAS BROUGHT ONLY THE PEAK CREDIT DURING THE YEAR TO TAX. IT MAY BE N OTED THAT INASMUCH AS EACH PAYMENT QUALIFYING AS A LOAN OR ADVANCE FALLS WITHI N THE AMBIT OF THE PROVISION, AND ITS SUBSEQUENT REPAYMENT HELD AS OF NO CONSEQUE NCE, THE ENTIRE PAYMENT TO (RECEIPT BY) THE SHAREHOLDER (COMPANY) WOULD STAND TO BE REGARDED AS DIVIDEND. IN FACT, A PLEA AS TO ONLY THE PEAK CRE DIT BEING REGARDED AS DIVIDEND WAS RAISED IN P.K. BADIANI (SUPRA) (REFER PG. 380), A DECISION WHICH SUBSEQUENTLY FOUND APPROVAL IN MUKUNDRAY K. SHAH (SUPRA). THAT IS, THE REVENUE HAS, IN REGARDING ONLY THE PEAK AMOUNT ADVA NCED AS THE QUALIFYING AMOUNT, ACTED AS REASONABLE AS IT COULD UNDER THE C IRCUMSTANCES, I.E., GIVEN THE SETTLED LAW IN THE MATTER, THE PAYMENT BEING REGARD ED AS DIVIDEND ONLY UNDER ITS ARTIFICIAL DEFINITION, AS EXPLAINED, PER AN IRREBUT TABLE PRESUMPTION, STATUTORILY PROVIDED. THE QUESTION OF THE GENUINENESS OF THE LO AN OR ADVANCE, IS, FOR THE SAME REASON, OF NO SIGNIFICANCE. THE DECISIONS CITE D ARE, BESIDES BEING WITHOUT REFERENCE TO BINDING JUDICIAL PRECEDENTS, DISTINGUI SHABLE ON FACTS. FURTHER, BEING NOT A REGULAR DIVIDEND, DECLARED AND PAID BY COMPAN Y, THE SAME DOES NOT FALL TO BE COVERED U/S. 10(34) AND, THUS, IS NOT EXCEPTED U /S. 56. THE SAME HAS, ACCORDINGLY, BEEN RIGHTLY BROUGHT TO TAX U/S. 2(24) (II) R/W SS. 2(22)(E) AND 56 OF THE ACT BY THE REVENUE, WHOSE ACTION IS UPHELD. THE ASSESSEE, IN THIS VIEW OF THE MATTER, FAILS. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 05, 2019 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 05.07.2019 /GP/SR/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: G. G. OILS & FATS PVT. LTD., 230 1, BHUPINDRA FLOUR MILLS, ITA NO. 508/ASR/2017 (AY 2014-15) G. G. OILS & FATS PVT. LT D. V. DY. CIT 76 AMRIK SINGH ROAD, BATHINDA (2) THE RESPONDENT: DEPUTY COMMISSIONER OF INCOME T AX, CIRCLE-1, BATHINDA (3) THE CIT(APPEALS), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER