By K. B. Bhujle
Advocate
CIT vs. Gayatri Chakraborty; [2018] 94
taxmann.com 244 (Cal); Date of Order : 3rd
May, 2018 A.
Y.: 2009-10
The
assessee was a director in a company, BAPL in which she held 25.24 per cent
equity shares. There were transactions between the assessee and BAPL of giving
money by the assessee to BAPL as well as by BAPL to the assessee. The Assessing
Officer from the ledger account of BAPL in books of the assessee, took note
only of the transactions whereby BAPL gave money to the assessee and was of the
view that the same was ‘loan or advance’ within the meaning of section 2(22)(e)
by a company (BAPL) to a person who held substantial interest in the company
(BAPL) and had to be brought to tax as deemed dividend to the extent the
company possessed accumulated profits.
The
Tribunal held that the said sum received by the assessee could not constitute
loan attracting the deeming provision contained in section 2(22)(e).
On appeal
by the Revenue, the Calcutta High Court upheld the decision of the Tribunal and
held as under:
“i) Law on this point is clear in the event
transactions between a shareholder and a company in which the public were not
substantially interested and the former had substantial stake, create mutual
benefits and obligations, then the provision of treating any sum received by
the shareholder out of accumulated profits as deemed dividend would not apply.
The company in the instant case fits the description conceived in the aforesaid
provision to come within the ambit of section 2(22)(e). The controversy which
falls for determination is whether the sum received by the assessee formed part
of running current account giving rise to mutual obligations or the payment
formed one-way traffic, assuming the character of loan or advance out of
accumulated profit.
ii) The Tribunal analysed the ledger account of
the company so far as the payment made to and received from the assessee was concerned
and found that a copy of the ledger of the assessee in the books of BAPL was
placed. A copy of the statement showing the balance after every transaction in
the assessee’s ledger in the books of BAPL was placed. A perusal of the
statement of balances of transactions between the assessee and BAPL shows that
BAPL owed assessee certain sum. BAPL paid the assessee certain sum and the
assessee owed BAPL certain sum. The amounts given in the bracket in the last
column of the enclosed balances in the running current account is the amount
which BAPL owed to the assessee. Mutual transactions go on in this fashion
throughout the previous year and as on the last date of the previous year the
account is squared i.e., neither the assessee owes BAPL nor BAPL owes assessee
any sum. The assessee was beneficiary of the sums given by BAPL at some point
of time during the previous year and BAPL was the beneficiary of the sums given
by the assessee at another point of time during the previous year. It was case
of mutual running or current account which created independent obligations on
the other and not merely transactions which created obligations on other side,
those on the other being merely complete or partial discharge of such
obligations and there were reciprocal demands between the parties and the
account was mutual.
iii) In this factual and legal perspective, payment
of the aforesaid sums to the assessee cannot be treated as dividend out of
profit. No perversity has been pointed out on behalf of the revenue so far as
such a concurrent finding of fact is concerned by the two statutory appellate
fora. One is not inclined to disturb such finding of fact, which the Tribunal
has backed with detailed analysis. If one embarks on a fresh factual enquiry
into the accounts of the assessee or that of the company involved, such
exercise would entail reappreciation of evidence. Such enquiry is impermissible
at this stage. The Tribunal’s order, thus, stands confirmed and the question
formulated is answered accordingly, in favour of the assessee.”
