Law:

Section:

Section 2(22) of the Income-tax Act, 1961 - Deemed dividend - Assessment year 1983-84 - Assessee who was managing director of a private limited company and had substantial interest in it leased out premises owned by him to that company and that company in terms of agreement advanced certain sum to him for meeting cost of construction of additional floors to said premises, which income-tax authorities treated as deemed dividend within meaning of section 2(22)(e) - Whether fact that advance paid to assessee was to be set off against future rent would not alter fact that assessee in eyes of law had received dividend from company during accounting year relevant to assessment year in question which was assessable as deemed dividend under section 2(22)(e) - Held, yes CASE REFERRED TO Miss P. Sharda v. CIT [1998] 229 ITR 444/ 96 Taxman 11 (SC) [Para 4]. T.C.A. Ramanujam for the Applicant. V. Rama Chandran for the Respondent. JUDGMENT R. Jayasimha Babu, J. - The question referred to us at the instance of the Revenue is : "Whether the Tribunal was right in law and had valid materials in holding that the advance (rental) received by the assessee from the company in which he is a shareholder cannot be termed as a deemed dividend for the purpose of section 2(22)( e) ?" 2. The assessee is an individual and he is the managing director of Tip Top Plastic Industries Pvt. Ltd. The assessee has substantial interest in that company. The assessee as an individual owns a property at No. 31, Stringers St., Madras. The company of which he is the managing director was using that premises as a godown prior to 1981 in which year the building was heavily damaged in a fire accident and, thereafter, the building had to be reconstructed. The assessee on December 11, 1981, leased out the ground floor of the building which he had reconstructed by then up to the ground floor to the company on a monthly rental of Rs.1,500. In that agreement it was also provided that on completion of the other floors, those floors would also be leased out to the company. That document contained a further provision that for the purpose of meeting the cost of construction of the other three floors, the company…

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