Law:

Section:

Section 2(22) of the Income-tax Act, 1961 - Deemed dividend - Assessment year 1969-70 - A large number of shares in Company 'N' were owned by assessee and his family members and they had substantial interest in said company - Assessee obtained loan from a concern namely company 'I' - From accounts of company 'J', Tribunal inferred that aforesaid amount of loan was received by Company 'I' from Company 'N' and same amount was given to assessee by company I - Accordingly, Tribunal concluded that this was an indirect payment made by company 'N' meant for benefit of assessee - Whether since aforesaid finding of fact recorded by Tribunal was not challenged by assessee, it became final and, consequently, amount of loan came within mischief of section 2(22)(e) - Held, yes - Whether, therefore, said loan amount must be regarded as deemed dividends in hands of assessee - Held, yes FACTS A large number of shares in a company 'N' were owned by the assessee and the members of his family and they had substantial interest in the company within the meaning of section 2(32). During the relevant assessment year the assessee obtained two loans of Rs. 75,000 and Rs. 2,00,000 from a proprietary concern i.e.company I. From the accounts of Company I, the ITO found that on 31-8-1968, the assessee had repaid an amount of Rs. 1 lacs by cheque to company I and that on the same date the latter had issued a cheque in favour of the company 'N'. On 2-09- 1968, a sum of Rs. 4,75,000 was entered as advanced by the company 'N' to 'I' out of which a cheque for Rs. 2,00,000 was issued by the company 'I' in favour of the assessee. Subsequent repayment by the assessee was recorded and the entire loan was repaid by the 5-2-1969. The ITO came to the conclusion that the repayment of Rs. 75,000 by the assessee to company I and the corresponding repayment by company I to the company 'N' were mere book entries, the net effect of the transactions being that the loan was enhanced from Rs. 75,000 to Rs. 2,00,000. The ITO found that the said amount represented a loan advanced by the company 'N' in an indirect way to the assessee and as such was dividend within the meaning of section 2(22), in the hands of…

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