Law: Income Tax Act, 1922

Section: 2

Income-tax----Dividend---Company advancing large amounts to low paid employee---Employee advancing loans to assessee, Managing Director----Advance to employee for benefit of assessee---Loans to assessee giver by employee can be treated as dividend---"Payment", meaning of---Indian Income-tax Act, 1922, S.2(6A j(e). The assessee was the Managing Director of a company, K. an employee of the company on a low salary, obtained loans of large amounts from the company and the amounts so obtained were given in turn by K to the assessee as loans. The assessee admitted that whenever he needed money he asked, K and K obtained loans from the company and advanced the money to him as loans. The High Court held that "payment" in section 2(6A)(e) of the Indian Income-tax Act, 1922, meant the act of paying and was neither expressly nor by implication restricted to payment towards pre-existing liability or by way of discharge of an existing obligation or by way of payment by way of hire or wages to which the payee was already entitled. Since all the…

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