These three appeals pertaining to same assessee and involving common issue, are disposed of by this common order in following manner: ITA Nos. 6745 & 6746 for asst. yrs. 1995-96 and 1996-97: These two Departmental appeals arise from common order dt. 11th Aug., 2003 of CIT(A)-V, Mumbai. common issue involved in both appeals is reflected from ground of appeal raised by Department for asst. yr. 1995-96, which is reproduced below: "On facts and circumstances of case and as per law, learned CIT(A) erred in deleting addition on account of deemed dividend under s. 2(22)(e) of IT Act, 1961 amounting to Rs. 8,00,000 without appreciating facts of case and law that assessee has substantial interest in M/s Om Shipping Agencies (P) Ltd." For asst. yr. 1996-97, identical ground has been raised by Department, except that relevant amount of addition is Rs. 9,00,000. common facts, stated briefly, are that: assessee is managing director of M/s Om Shipping Agencies (P) Ltd. with substantial shareholding of more than 9 5 per cent of share capital of company. During previous year relevant to asst. yr. 1995-96, company paid sum of Rs. 6,00,000 to assessee on 12th Dec., 1994 and further sum of Rs. 2,00,000 on 31st March, 1995. Earlier on 21st March, 1995, company had received sum of Rs. 2,00,000 from assessee. During previous year relevant to asst. yr. 1996-97, company paid Rs. 9,00,000 to assessee on 6th April, 1995 and further sum of Rs. 3,37,133 on 16th May, 1995. In account of assessee, as appearing in books of company, payments of Rs. 6,00,000 and Rs. 9,00,000 were said to be for purchase of land for container yard. assessee claimed before AO that aforesaid two sums were withdrawn by assessee from company solely for purchasing agricultural land on behalf of company, as company was not permitted to purchase agricultural land. company is engaged in business of shipping and agricultural land was acquired for using it as container yard. It was claimed that aforesaid amounts were given to assessee during course of normal business to be utilized on behalf of company. It was also explained before AO that in month of January, 1994, assessee entered into oral discussions with real estate dealer, Mr. Milan Nandi of M/s Jay Mata Di Real Estate for procuring 8 to 10 acres of land to be used by company. assessee was given to understand by estate dealer that he was having 9 acres of land with clean title and deal could be finalized immediately. assessee gave advance amount of Rs. 1,00,000 on 4th Oct., 1994 to estate dealer. further sum of Rs. 60,000 was paid on 1st Dec., 1994. assessee company itself entered into agreement for purchase of agricultural land with estate dealer on 1st Nov., 1994 and copy of this agreement is at p. 10 of paper book. assessee hoped that deal would be immediately finalized and therefore, sum of Rs. 6,00,000 was withdrawn by him from company on 12th Dec., 1994. However, villagers, who were owners of agricultural land, could not make ready all papers and therefore, assessee returned entire sum of Rs. 6,00,000 to company on 8th March, 1995, even though advance sum of Rs. 1,60,000 was not returned by real estate dealer. Immediately thereafter, real estate dealer contacted assessee and showed to him relevant papers and promised that deal could be finalized within two weeks. Accordingly, assessee again withdrew sum of Rs. 9,00,000 on 6th April, 1995 with hope that deal would be materialized immediately. As per agreement, company was to purchase 8.35 acres of agricultural land @ Rs. 1,10,000 per acre and thus total purchase consideration was Rs. 9,18,500. assessee explained before learned CIT(A) that during month of May, 1995, 7/12 Extracts were being obtained and search process was in progress. affidavits from land owners were also being notarized and on 30th May, 1995 clearance from CIDCO was also received. evidence was filed before learned CIT(A) to support these contentions. During next few months, assessee obtained several reports, No Objection Certificate from Urban Land Ceiling Department and various other formalities were completed. On being advised by company s lawyer, advertisement was put on 7th Sept., 1995 to find out if there was any dispute regarding land. It appears that estate dealer delayed matter and nothing happened upto November, 1995. assessee started putting pressure on real estate dealer and even threatened him with police action. In first week of December, 1995, Shri Milan Nandi, estate dealer suddenly disappeared. assessee lost hope and immediately returned Rs. 9,00,000 on 18th Dec.,1995 to company. In January, 1996 Shri Milan Nandi was apprehended and he issued cheque for Rs. 1,60,000 on 10th Jan., 1996, which bounced. Another cheque for same amount issued on 7th March, 1996, also bounced. police complaint was lodged on 2nd April, 1996 and once again Shri Milan Nandi issued another cheque for Rs. 1,00,000 on 10th Aug., 1996, which also bounced. assessee supported these contentions by filing necessary evidence before learned CIT(A). It was claimed that payments of Rs. 6,00,000 and Rs. 9,00,000 were entirely for business purposes of company and they were not in nature of loans or advances so as to attract deeming provisions of s. 2(22)(e) of IT Act. It was also contended that sum of Rs. 2,00,000 received by assessee on 31st March, 1995 was only repayment by company of amount given by assessee on 21st March, 1995 and therefore, it does not represent any loan advanced by company. learned CIT(A) has elaborately considered facts and has also referred to large number of judicial pronouncements. He decided issue in following manner at para 3 of his order, which may be reproduced below: "Submissions made by appellant as above have been considered carefully in light of various judicial pronouncements relied upon. There is no doubt that amount of Rs. 6,00,000 in asst. yr. 1995-96 and amount of Rs. 9,00,000 in asst. yr. 1996-97 was received by appellant for purchase of land for proposed container yard of company. These arrangements was done because agricultural land could not have been transferred in name of company as company was neither agriculturist nor farmer. Similarly amount of Rs. 2,00,000 in asst. yr. 1995-96 was repayment of temporary loan taken from appellant. Under these circumstances, ratio of judgment of Hon ble Bombay High Court in case of CIT vs. Nagindas M. Kapadia (1989) 75 CTR (Bom) 161: (1989) 177 ITR 393 (Bom) and apex Court judgment in case of Navnit Lal C. Javeri vs. K.K. Sen, AAC (1965) 56 ITR 198 (SC) is directely applicable. Since amount of Rs. 15,00,000 (6,00,000 + 9,00,000) were made in course of business wherein company had paid amount to appellant to purchase land for its container yard and accordingly to appellant to purchase land for its container yard and accordingly meaning of loans and advances referred to in s. 2(22)(e) of Act could not be extended to aforesaid advances/deposits and as such addition made by AO in respect of Rs. 15,00,000 in both assessment years put together stands deleted. Similarly amount of Rs. 2,00,000 paid to appellant on 31st March, 1995 is repayment of temporary loan taken on 21st March, 1995 also cannot be treated as deemed dividend as per provisions of s. 2(22)(e). This amount of Rs. 2,00,000 is also deleted. However, amount of Rs. 20,000 in asst. yr. 1995-96 and amount of Rs. 3,37,133 in asst. yr. 1996-97 cannot be treated as loans and advances given to appellant in ordinary course of business. Accordingly, addition to extent of Rs. 20,000 in asst. yr. 1995- 96 and Rs. 3,37,133 in asst. yr. 1996-97 is confirmed." From above, it is seen that learned CIT(A) accepted that amounts of Rs. 6,00,000 and Rs. 9,00,000 were only given for business purposes of company and therefore, s. 2(22)(e) does not apply. With regard to Rs. 2,00,000, he recorded finding that this was only return of money taken by company and therefore, it is not loan or advance. He, therefore, deleted addition of Rs. 8,00,000 for asst. yr. 1995-96 and addition of Rs. 9,00,000 for asst. yr. 1996-97. addition of Rs. 3,37,133 was confirmed for asst. yr. 1996-97, against which assessee is not in appeal. In backdrop of above mentioned facts, learned Departmental Representative, Shri Dilip Sharma forcefully contended before us that relevant sums of Rs. 6,00,000 and Rs. 9,00,000 have been rightly considered by AO as deemed dividend. It is submitted that assessee retained money with him for long time and thus he used money for his own purposes. If assessee company wanted to purchase agricultural land, relevant amounts could have been withdrawn by assessee as and when deal was finalized and time for payment of money was ripe. It is argued that assessee is managing director of company, having more than 95 per cent of shareholding and therefore, he has complete and unchallenged control over company. assessee was free to withdraw any amount from company as and when required. It is, therefore, contended that amounts paid by company are in nature of loans and advances chargeable to tax under s. 2(22)(e). learned counsel appearing for assessee, Shri H.S. Raheja supported order of CIT(A). He contended that learned CIT(A) has correctly appreciated factual position and has recorded finding that amounts of Rs. 6,00,000 and Rs. 9,00,000 were paid by company for its own business purposes and not for benefit of assessee. learned CIT(A) has referred to several judicial pronouncements including several Bombay High Court s judgments to hold that s. 2(22)(e) does not apply to business transactions. We have given careful consideration to rival submissions vis-a-vis relevant facts narrated above. We see no reason to interfere with finding of learned CIT(A) on this issue. facts clearly show that sole and only object for withdrawing amounts of Rs. 6,00,000 and Rs. 9,00,000 by assessee was to purchase agricultural land for business purposes of company. Advance was given to real estate dealer and agreement was entered into by company itself for purchase of 8.35 acres of agricultural land @ Rs. 1,10,000 per acre. All these evidences clearly establish bona fides of assessee. In our view, there is hardly any basis to conclude that monies paid by company to assessee were in nature of loans and advances falling under mischief of s. 2(22)(e). sum of Rs. 2,00,000 paid by company on 31st March, 1995 is obviously repayment of same amount received by company from assessee on 21st March, 1995. This cannot be said to be any loan. Considering entire facts and circumstances, we confirm order of learned CIT(A) on this issue. ITA No. 13 for asst. yr. 1998-99: This appeal has been filed by assessee against order dt. 20th March, 2002 of CIT(A)-V, Mumbai. appeal is delayed by 220 days and assessee has filed application for condonation of delay on 3rd Feb., 2004. In this application, it is stated that order of learned CIT(A) for asst. yr. 1998-99 was received by assessee on 27th March, 2002. issue involved was taxability of deemed dividend of Rs. 73,00,000. assessee s advocate, who represented before learned CIT(A), conveyed to assessee that it would be fruitless to pursue matter further before Tribunal as issue was correctly decided by CIT(A). assessee was misguided and could not file appeal. Subsequently assessee found that penalty proceedings under s. 271(1)(c) were initiated and even penalty of Rs. 43,30,000 was levied by AO on 29th Oct., 2002. assessee filed appeal to CIT(A) on 20th Nov., 2002 and at that time, he realised that this advocate had misguided him.. assessee engaged another advocate, who advised him that in asst. yr. 1998- 99, dividend income was exempt under s. 10(33) and therefore, assessee had good case for filing appeal to Tribunal. In these circumstances, assessee presented appeal, which is delayed by 220 days. It is requested that in interest of justice, appeal may be entertained and issue decided on merit. submissions made are supported by affidavit of assessee. learned counsel appearing for assessee reiterated same submissions and contended that there was sufficient cause for delay in filing appeal before Tribunal and therefore, delay deserves to be contended. learned Departmental Representative opposed request. After considering entire facts and circumstances as mentioned above, we feel that in interest of justice, delay should be condoned. Accordingly, delay is condoned and appeal entertained. only issue pertains to confirmation by learned CIT(A) of addition of Rs. 73,00,000 as deemed dividend under s. 2(22)(e) of IT Act. facts are simple and clear. assessee received loan of Rs. 73,00,000 from company M/s Om Shipping Agencies (P) Ltd. This loan had remained outstanding as on 31st March, 1998. AO called upon assessee to explain why aforesaid sum of Rs. 73,00,000 be not added as deemed dividend. assessee filed reply, which is reproduced at pp. 3 and 4 of AO s order. However, no plausible explanation was given with result that AO added impugned sum to assessee s income. Before learned CIT(A), it was argued that sum of Rs. 73,00,000 was not in nature of loan or advance and that amount represented only temporary borrowing. Not convinced by these submissions, learned CIT(A) confirmed AO s order. learned counsel appearing before us on behalf of assessee was fair enough to concede that strictly speaking, provisions of s. 2(22)(e) would be applicable to payment of Rs. 73,00,000. However, he contended that with effect from asst. yr. 1998-99, s. 10(33) has been inserted in IT Act. By virtue of this provision, dividends referred to in s. 115-O have been exempted from charge of income-tax. It is, therefore, submitted that if dividend income has been exempted from levy of income-tax by legislature, even deemed dividend under s. 2(22)(e) has to be treated as fully exempted from charge of tax and therefore, no addition can be made under s. 2(22)(e). Alternatively, learned counsel submitted that sum of Rs. 3,37,133 has already been treated as deemed dividend for asst. yr. 1996-97 and such addition has also been confirmed by learned CIT(A). assessee did not come up before Tribunal in further appeal. It is submitted that sum of Rs. 3,37,133 was subsequently repaid by assessee to company. During present year, company has again paid sum of Rs. 73,00,000 to assessee. It is contended that to extent of Rs. 3,37,133, advance has already been treated as deemed dividend, which has been brought to charge of tax. It is submitted that this amount should be deducted from Rs. 73,00,000 and only balance can be treated as deemed dividend. It is argued that if this adjustment was not made, assessee would be subjected to double taxation on same amount. learned counsel relied on Bombay High Court s decision in case of Tata Iron & Steel Co. Ltd. vs. N.C. Upadhyaya (1974) 96 ITR 1 (Bom). relevant part of ratio of this case may be reproduced below from headnote: "Further, petitioner company had received deposit of Rs. 20 lakhs from its subsidiary company, B.R. Ltd. on 21st Dec., 1962, which was treated by ITO as loan and as deemed dividend under s. 2(22)(e) for asst. yr. 1963-64 and was taxed. For asst. yr. 1965-66, B.R. Ltd. declared dividend of Rs. 17,29,647 as payable to petitioner. This was adjusted against deposit or loan of Rs. 20 lakhs. This was treated by authorities not to be dividend by virtue of proviso (iii) to s. 2(22)(c). petitioner did not include amount in total income in return of income. In original assessment, ITO, however, granted to petitioner relief under then existing s. 85 of Act under which dividend attributable to income from new industrial undertaking was exempt from taxes. B. R. Ltd. was incorporated in 1959 and was new industrial undertaking at that time. On basis of s. 85, out of aforesaid dividend sum of Rs. 14,12,954 was held exempt from taxes in hands of petitioner. Later, after issuing notice under s. 154, ITO, by order dt. 28th Feb., 1972, rectified assessment order for that year on ground that relief under s. 85 was wrongly given to petitioner since dividend adjusted against deposit was not treated as dividend or included in total income. petitioner challenged this rectification order also: Held, that rectification order of ITO was correct. amount of Rs. 17,29,647 was not dividend by virtue of proviso (iii) to s. 2(22)(e) and as such it was not included in total income under Chapter VII. In fact, no income-tax was paid on it. There was, therefore, no question of petitioners getting relief under s. 85 in respect of said amount. This relief was granted to petitioner in original assessment obviously due to mistake which IT authorities were entitled to rectify." learned counsel submitted that in present case sum of Rs. 3,37,133 has been already taxed as deemed dividend and this amount was subsequently repaid by assessee. Therefore, this should be adjusted against further loan of Rs. 73,00,000. learned Departmental Representative submitted before us that exemption under s. 10(33) is available only with regard to dividends referred to in s. 115-O. Secs. 115-O, 115P and 115Q are contained in Chapter XII-D of IT Act. It is pointed out by learned Departmental Representative that at end of chapter, following Explanation is incorporated: "Explanation. For purposes of this chapter, expression dividends shall have same meaning as is given to dividend in cl. (22) of s. 2 but shall not include sub-cl. (e) thereof." learned Departmental Representative pointed out that for purposes of Chapter XII-D, deemed dividend under s. 2(22)(e) is excluded. Thus exemption under s. 10(33) is not applicable in respect of deemed dividend. Regarding alternative claim of learned counsel that sum of Rs. 3,37,133 should be set off against loan of Rs. 73,00,000, learned Departmental Representative relied on Bombay High Court s decision in case of Walchand & Co. (P) Ltd. vs. CIT (1993) 204 ITR 146 (Bom). He invited our attention to facts and ratio of this case which may be reproduced below from headnote: "The Supreme Court observed in Laxmipat Singhania vs. CIT (1969) 72 ITR 291 (SC) that it is fundamental rule of law of taxation that, unless otherwise expressly provided, same income cannot be taxed twice. It is obvious from guarded way in which proposition has been laid down that, if legislative intent is clear, even if it amounts to double taxation, there is no absolute bar or prohibition against it (see p. 151D, E). legislature has artificially defined dividend as inclusive of loan or advance made to shareholder of specified type of company. Even where loan has been fully repaid, inclusive provision in s. 2(6A)(e) of Indian IT Act, 1922 [s. 2(22)(e) of Act of 1961] would squarely apply. only relief in such situation is conferred by legislature by mechanism of exclusion clause, which excludes certain categories of dividends from definition. These are specifically enumerated in clauses (i), (ii) and (iii). Unless assessee qualifies for relief by falling within stipulations contained in any of these clauses, legislature intended that no relief was due to assessee (see p. 153A - D). Held, that, in present case, assessee had taken loan on 10th Sept., 1957, and repaid it fully on 26th Oct., 1957. It was thus clear that amount of loan/advance had been fully repaid before dividend was declared b y company and, therefore, it was not possible to invoke exclusion provision in sub-cl. (iii) of s. 2(6A)(e) of Indian IT Act, 1922, and s. 2(22)(e) of IT Act, 1961. Hence, amount was rightly taxed in asst. yrs. 1958-59 to 1968-69 (see p. 152G, H)." learned Departmental Representative also invited our attention to observations made by Hon ble Bombay High Court at p. 153 of report as reproduced below: "In this view of matter, we are unable to agree with assessee s contention that it is entitled to relief merely upon general principle of construction against double taxation. As we have already pointed out, that principle is subject to qualification that, if intent of legislature is otherwise clearly discernible, then double taxation is permissible. We think that this is one of those harsh cases where, apart from sympathy, assessee can get no relief from Court." learned Departmental Representative submitted that Bombay High Court s decision in case of Tata Iron & Steel Co. Ltd. (supra) is not applicable to facts of assessee s case. It is contended that by virtue of latter Bombay High Court s decision in case of Walchand & Co. (P) Ltd. (supra) no adjustment can be made as alternatively claimed by learned counsel for assessee. We have given careful consideration to rival submissions made before us and have gone through relevant facts and also judicial pronouncements cited before us. first issue on which we have been called upon to adjudicate is, as to whether by virtue of s. 10(33) r/w s. 115-O of IT Act, deemed dividend under s. 2(22)(e) has to be treated as exempt from levy of income-tax. Sec. 10(33), as mentioned above, mandates that dividends referred to in s. 115-O shall not be included in total income of assessee. This provision has been brought on statute book w.e.f. 1st April, 1998 and accordingly, would be applicable to assessment year under appeal. There is no ambiguity in provisions of s. 10(33), which clearly stipulate that dividends referred to in s. 115-O shall be exempt from charge of tax. Therefore, we have to refer to provisions of s. 115-O for deciding as to which dividends are exempt under s. 10(33). Sec. 115-O is part of Chapter XII-D, which is headed "Special provisions relating to tax on distributed profits of domestic companies". Sec. 115-O levies tax on profits distributed by domestic companies by way of dividends. Chapter XII-D comprises of only three sections, viz., ss. 115-O, 115P and 115Q, followed by Explanation. With view to appreciate arguments put before us by both parties, it is necessary to produce below aforesaid sections of Chapter XII-D and Explanation: "115-O. Tax on distributed profits of domestic companies. (1) Notwithstanding anything contained in any other provision of this Act and subject to provisions of this section, in addition to income-tax chargeable in respect of total income of domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after 1st day of April, 2003, whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at rate of twelve and one- half per cent. (2) Notwithstanding that no income-tax is payable by domestic company o n its total income computed in accordance with provisions of this Act, tax on distributed profits under sub-s. (1) shall be payable by such company. (3) principal officer of domestic company and company shall be liable to pay tax on distributed profits to credit of Central Government within fourteen days from date of (a) declaration of any dividend; or (b) distribution of any dividend; or (c) payment of any dividend, whichever is earliest. (4) tax on distributed profits so paid by company shall be treated as final payment of tax in respect of amount declared, distributed or paid as dividends and no further credit therefor shall be claimed by company or by any other person in respect of amount of tax so paid. (5) No deduction under any other provision of this Act shall be allowed to company or shareholder in respect of amount which has been charged to tax under sub-s. (1) or tax thereon. P. Interest payable for non-payment of tax by domestic companies. Where principal officer of domestic company and company fails to pay whole or any part of tax on distributed profits referred to in sub-s. (1) of s. 115-O, within time allowed under sub-s. (3) of that section, he or it shall be liable to pay simple interest at rate of [one] per cent for every month or part thereof on amount of such tax for period beginning on date immediately after last date on which such tax was payable and ending with date on which tax is actually paid. Q. When company is deemed to be in default. If any principal officer of domestic company and company does not pay tax on distributed profits in accordance with provisions, then, he or it shall be deemed to be assessee-in-default in respect of amount of tax payable by him or it and all provisions of this Act for collection and recovery of income-tax shall apply. Explanation. For purposes of this chapter, expression dividends shall have same meaning as is given to dividend in cl. (22) of s. 2 but shall not include sub-cl. (e) thereof." main or rather only plank of arguments submitted by learned counsel for assessee is that s. 10(33) has exempted dividends from levy of income-tax with effect from asst. yr. 1998-99 and such exemption extends to deemed dividend also, because for all purposes such deemed dividend has to be assumed as "dividend only". On other hand, learned Departmental Representative has kly relied on Explanation at end of Chapter XII-D, which stipulates that for purposes of this chapter, expression "dividends" shall not include deemed dividend referred to in s. 2(22)(e). learned counsel for assessee, in his rejoinder, has forcefully argued that aforesaid Explanation is under s. 115Q and therefore, it has application only with regard to s. 115Q. According to him Explanation cannot be made applicable to s. 115-O. It has been contended that said Explanation assumes relevance only when company is deemed to be in default. After due consideration, we are not convinced by arguments advanced by learned counsel for assessee. said Explanation is at end of Chapter XII-D and it opens with words "for purposes of this chapter". Apparently, Explanation applies to chapter as whole and is therefore, relevant for all sections, which form part of chapter. It is significant that expressions "dividends" or "dividend" occur only in s. 115-O and these expressions are conspicuously absent in ss. 115P and 115Q. This further strengthens conclusion that Explanation is fully applicable to s. 115-O. As already mentioned above, by virtue of Explanation, deemed dividend referred to in s. 2(22)(e) has been excluded from ambit of Chapter XII-D. In other words, under said chapter, tax is not levied on company with regard to deemed dividend. Consequently exemption provided under s. 10(33) is not applicable to "deemed dividend" referred to in s. 2(22)(e). We, therefore, uphold order of learned CIT(A) on this issue. Coming to alternative claim of assessee that amount of Rs. 3,37,133 should be set off against deemed dividend of Rs. 73,00,000 and only balance can be brought to charge of tax, learned counsel for assessee has kly relied on Bombay High Court decision in case of Tata Iron & Steel Co. Ltd. (supra). We have carefully gone through this case and we find that decision of Bombay High Court was rendered in context of proviso (iii) to s. 2(22)(e) which reads as under: "But dividend does not include (iii) any dividend paid by company which is set off by company against whole or any part of any sum previously paid by it and treated as dividend within meaning of sub-cl. (e), to extent to which it is so set off;" From above, it is clear that there is specific provision that dividend actually paid subsequently has to be adjusted against "deemed dividend". In our view, this Bombay High Court decision does not apply to facts of assessee s case. learned Departmental Representative has relied on Bombay High Court s decision in case of Walchand & Co. (P) Ltd. (supra). It was held by Bombay High Court that wherever loan to shareholder has been treated as deemed dividend and such loan is repaid before declaration of dividend, such repayment cannot be deducted from actual dividend paid. Hon ble Bombay High Court was well aware that this may amount to double taxation, but they have observed that when intent of legislature is clear, then double taxation is permissible. In such case, assessee may suffer hardship, but apart from sympathy, assessee cannot get any relief. In our view, provisions of law are very clear and any repayment of earlier loan in our view cannot be adjusted against advancement of fresh loan, which has been deemed to be dividend under s. 2(22)(e) of IT Act. We, therefore, confirm order of learned CIT(A). In result, all three appeals stand dismissed. *** INCOME TAX OFFICER, 5(1)/(4) v. KALYAN GUPTA