INCOME TAX ACT, 1961

--Dividend--Deemed dividend under section 2(22)(e) Amount advanced towards construction of house property--Assessing officer made additions in terms of section 2(22)(e) treating the advances taken by the assessee towards construction of house property from the company in which he was having substantial stake as deemed dividend. According to Commissioner (Appeals), advances given by the company to assessee could not be considered as gratuitos loans or advances, attracting the provisions of section 2(22)(e) as the advances given by the company were in return of an advantage availed by the company on account of mortgazing of the personal properties of the assessee. Held: Not rifhtly so as the assessee had not produced any documents to prove the fact that the personal properties of the assessee was actually mortgaged with the bank for the sake of availing loans by the company. Moreso, the assessee had also not produced any correspondence made either with the bank or with the company towards release of the properties mortgaged. As the language of section 2(22)(e) is clear and unambiguous had to be interpreted strictly in accordance with the spirit of the language contained, therefore, the payments made by the company towards advances to the assessee fulfilled all the characteristics of dividend in section 2(22)(e) and the same had to be treated as deemed dividend. Held: In the facts of the present case, it is not disputed that all the conditions attracting the provisions of section 2(22)(e) exist. It is the case of the assessee that since it has mortgaged its property with the bank to enable the company to avail finance facilities from the bank, the advance by the company is not a gratuitous loan or advance, but in return for an advantage which the company has already availed on account of mortgaging of properties done by the assessees. However, it is a fact on record that the assessees have not produced any documents to prove the fact that the personal properties of the assessees were actually mortgaged with the bank for the sake of availing loans by the company. The letter dated 31-5-2008 of the Andhra Bank, submitted in the paper-book does not establish the fact that the properties were mortgaged with the bank. The assessees have also not produced any correspondence made either with the bank or with the company towards release of the properties mortgaged, as was the fact in the case of Pradip Kumar Malhotra before the Hon'ble Calcutta High Court. In the absence of conclusive evidence to prove the fact of mortgage and also the fact that the assessee has not requested the bank for release of the mortgage, the ratio of the decision in the case of Pradip Kumar Malhotra will not apply to the facts of the present case. That apart, the language of section 2(22)(e) is clear and unambiguous and does not leave any scope for interpreting it in a different manner. The said provision being a deeming provision, it has to be interpreted strictly in accordance with the spirit of the language contained therein. The payments made by the company towards advances to the assessee fulfils all the characteristics of 'dividend' as envisaged in section 2(22)(e) of the Act. Therefore, there cannot be any other conclusion excepting to consider the advances given by the company to the assessees as deemed dividend at the hands of the assessee. [Para 12]