IN HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) Original Side Present : Hon ble Justice Girish Chandra Gupta And Hon ble Justice Arindam Sinha 8th April, 2015 ITA 48 of 2007 C.I.T Kolkata-XII Vs. Mahesh Chandra Mantri Mr. P.K. Bhowmick, Advocate for appellant Mr. R. Murarka, Advocate with Ms. Sutapa Roy Chowdhury, Advocate for respondent Court :- question for consideration formulated at time of admission of appeal pertaining to Assessment Year 2001-02 reads as follows :- Whether on facts and in circumstances of case Income Tax Appellate Tribunal was justified in law in deleting addition made by Assessing Officer under Section 2(22)(e) of Income Tax Act, 1961? provisions contained in Section 2(22)(e) of Income Tax Act provides as follows :- any payment by company, not being company in which public are substantially interested, of any sum (whether as representing part of assets of company or otherwise) made after 31st day of May, 1987, by way of advance or loan to shareholder, being person who is beneficial owner of shares (not being shares entitled to fixed rate of dividend whether with or without right to participate in profits) holding not less than ten per cent of voting power, or to any concern in which such shareholders is member or partner and in which he has substantial interest (hereafter in this clause referred to as said concern) or any payment by any such company on behalf, or for individual benefit, of any such shareholder, to extent to which company in either case possesses accumulated profits . It is apparent from language of clause quoted above that before any payment can take character of dividend within meaning of aforesaid provision it has to be shown that there were accumulated profits lying with company which made payment. In case before us it was never contention of revenue that any accumulated profit was lying with company. Their case is that company was having reserve created from out of share premium. How is money received by company, on account of share premium, is to be accounted for and how can that money be spent has elaborately been provided for in Section 78 of Companies Act, 1956. Mr. Bhowmick, learned Advocate appearing for appellant did not dispute that there were no accumulated profits lying with company. His contention is that there was reserve created from out of share premium. Therefore, according to him Section 2(22)(e) should be applied to any advance or loan made by company. In support of his contention he relied upon judgment of Apex Court in case of Bharat Fire And General Insurance Ltd. v. C.I.T, New Delhi reported in (1964) Vol.LIII 108. facts and circumstances in that case were altogether different. What had happened in that case was assessee received sum of Rs. 50,787/- by way of dividend from Rohtas Industries Ltd.. Rohtas Industries Ltd. in year 1945 had created Capital Reserve from out of moneys received on account of share premium. aforesaid reserve was applied for declaring dividend. Companies Act of 1913 did not contain any prohibition as regards application of share premium money in declaring dividend. But 1956 Act does not permit declaration of dividend from out of money collected on account of share premium. Therefore, judgment in case of Bharat Fire And General Insurance (supra) has no manner of application to facts and circumstances of case. In case before us provisions contained in Section 78 of Companies Act, 1956 are applicable. It is interesting to note that it was not also case of revenue that from out of moneys received on account of share premium dividend was declared as was done in case of Bharat Fire And General Insurance (supra). For aforesaid reasons question formulated at time of admission of appeal is answered in affirmative and against revenue. appeal is, therefore, dismissed. (Girish Chandra Gupta, J.) (Arindam Sinha, J.) ANC. Commissioner of Income-tax, Kolkata-XII v. Mahesh Chandra Mantri