Kantawala, C.J:— This is undoubtedly a harsh case but that does not permit us to lay down incorrect law. The reference relates to the assessment year 1957-58 for which the corresponding previous year is the year ending March 31, 1957. The assessee is a private limited company whose main business is to manage other companies. It held shares in various managed companies as also in other companies. It is a shareholder in another company by name Share Investment Trust Private Ltd. (hereinafter referred to as “the trust company”). It held 54 shares out of 200 shares of the trust company. The main object of the trust company was to hold shares in other companies. It was also authorised to advance or loan moneys on security of shares, stocks, etc., and also to receive moneys on deposit, interest, or otherwise, and to lend moneys to other persons with or without security and on such terms as it was expedient and in particular to customers and all other persons having dealings with it. In the year of account 1956-57, it had a current account with the trust company. There are very few entries in this account though it is described as a current account in the statement of the case. It opened with a credit balance of Rs. 5 in favour of the assessee and it was squared off at the end of the year. On March 6, 1957, the assessee received an amount of Rs. 1,70,000 from the trust company and it repaid the amount to the trust company on March 29, 1957. Thus, the amount was retained for a short period of only 22 or 23 days. Interest of Rs. 543 was charged to the assessee which was also paid on or before March 29, 1957. The trust company had reserves to the extent of Rs. 4,59,014. These reserves included an amount of Rs. 2,96,750 being adjustment on account of bonus shares received in earlier years. The balance of Rs. 1,62,264 was either on account of profits as per the profit and loss account of earlier years or profits on sales of shares transferred to the reserve.

2. During the assessment year in question, question arose that, in view of receipt of Rs. 1,70,000 by the assessee from the trust company, whether that amount or any part thereof could be regarded as dividend within the meaning of section 2(6a)(e) of the Act. The Income-tax Officer treated the amount of Rs. 1,69,685 which was outstanding in the assessee's account as on March 6, 1957, with the trust company as dividend under the definition of that word in section 2(6a)(e) of the Act. Before the Income-tax Officer it was admitted by the assessee that the trust company kept moneys with the assessee in the form of a current account. The Income-tax Officer held that as the case was not covered by the exemption in the definition clause the amount should be regarded as income by way of dividend within the meaning of the Act. This decision of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner and in further appeal by the Tribunal. The Tribunal, inter alia, pointed out that the fact that the amount was kept by the assessee for a short time was not a relevant factor. In the opinion of the Tribunal the scheme of the section was that any use of accumulated profits of a company made by shareholders must attract the charge; that this was not a case which was covered within the language of the exemptions contained in the clause which defines the word “dividend”, and in the reserve account, as the sum of Rs. 1,62,264 was the amount representing the accumulated profits, it retained that figure as the amount of dividend for the purpose of the Act. On these facts the question that has been referred to us for our determination is whether, on the facts and in the circumstances of the case, the sum of Rs. 1,62,264 has been rightly treated as dividend under section 2(6a)(e) chargeable in the hands of the assessee for the assessment year 1957-58.

3. Mr. Mehta on behalf of the assessee urged that in order to treat a payment to the assessee as dividend within the definition of section 2(6a)(e) the payment should be more or less of a permanent character and not a mere temporary advance or loan. He also stated that as there was a current account between the assessee and the trust company it was neither an advance nor loan within the definition of that section.

4. The relevant part of the definition of the word “dividend” for the present purpose is as under:

“2. (6A) ‘dividend’ includes—…..

(e) any payment by a company, not being a company, in which the public are substantially interested within the meaning of section 23A, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder or any payment by any such company on behalf or for the individual benefit of a shareholder, to the extent to which the company in either case possesses accumulated profits;

but ‘dividend’ does not include—…..

(ii) any advance or loan made to a shareholder by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the company…..”

5. This part of the definition of the word was introduced by the Finance Act of 1955. It has the effect of bringing to tax as dividend in the hands of the shareholders three types of payments made by a company, namely:

(a) any payment of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder;

(b) any payment on behalf of a shareholder; and

(c) any payment for the individual benefit of a shareholder.

6. A payment in any of the three cases is regarded as dividend only to the extent to which the company possesses accumulated profits and this sub-clause (e) applies only to companies in which the public are not substantially interested within the meaning of section 23A. There are certain exceptions to the above rule and the only relevant exception that we have to consider is what is contained in sub-clause (ii) above quoted. It applies where two cumulative conditions are fulfilled: (1) the loan must have been made in the ordinary course of business; and (2) money-lending must be a substantial part of the company's business.

7. It is not disputed before us that the sum of Rs. 1,62,264, which is treated as dividend income of the assessee for the relevant year, represented the accumulated profits of the trust company. It is equally not disputed that the trust company is a company in which the public are not substantially interested within the meaning of section 23A. For the purpose of the present case the only thing that we have to consider is whether there was any payment by the trust company as a sum by way of an advance or loan to a shareholder. It is not disputed that the assessee is a shareholder of the trust company, though undoubtedly in the statement of case it is stated that during the relevant assessment year there was a current account but if regard be had to the nature of that account there are only isolated entries therein during the relevant year. The account is annexed as annexure “A” to the statement of case. It started with a credit balance of Rs. 5 on April 1, 1956. There was a further deposit of Rs. 78,090 on April 28, 1956, by the assessee with the trust company. As against this on May 15, 1956, the assessee received from the trust company a sum of Rs. 13,000 and on September 13, 1956, a sum of Rs. 65,110. So far as the credit side is concerned there is also an entry of Rs. 335 under date March 5, 1957. If regard be had to these entries then there was a negligible credit balance in favour of the assessee in the account with the trust company. On March 5, 1957, the assessee received from the trust company a sum of Rs. 1,70,001.50 and it repaid to the trust company on March 28, 1957, a sum of Rs. 1,70,224.56. At the end of the closing year on March 31, 1957, the assessee paid to the trust company a sum of Rs. 543.06 by way of interest at the rate of 5% per annum. It appears that at the end of the year the account was completely squared, off. Though it is described as a current account in the statement of case, the nature of the account as indicated above clearly shows that there are only a few isolated transactions.

8. The first question that we have to consider is whether a temporary advance or loan by a company is capable of falling within the definition of the word “dividend” under section 2(6a)(e). The argument of Mr. Mehta was that if regard be had to the scheme and the object of this section then it was not the intention of the legislature to include within the definition of the word “dividend” a mere temporary advance or loan for a few days. He submitted that a temporary loan or advance which is repaid within a few days is only a casual transaction and was not intended by the legislature to be a payment by way of advance or loan, because the benefit of it was not received by the assessee permanently or for a fairly long time and for this purpose he invited our attention to clauses (a) to (d) of the definition of the word “dividend” in section 2(6A). Undoubtedly, if regard be had to the items in clauses (a) to (d) of the definition of the word “dividend” in section 2(6A) they refer to permanent distribution of the amount by the company. The provisions of clause (e) are entirely different. As indicated above, by introduction of clause (e) the intention of the legislature was that in the case of a company, in which the public are not substantially interested within the meaning of section 23A, any payment by such company of a sun by way of loan or advance to a shareholder or any payment by such company on behalf of such shareholder or for the individual benefit of such shareholder is to be treated as dividend. For the purpose of clause (e) it cannot be read as ejusdem generis with the provisions of clauses (a) to (d) because there is no common genus. Clauses (a) to (d) deal with permanent distribution of moneys while clause (e) deals with payment on behalf of a shareholder or payment to a shareholder by way of advance or loan irrespective of the duration of such loan or advance.

9. The argument of Mr. Mehta further was that this amount could not be treated as an advance because that expression means something which is due to the assessee and which is paid to it ahead of the time when it is due and for this reliance was placed by him upon the observations of the Madras High Court in Commissioner of Income-tax v. K. Srinivasan [1963] 50 ITR 788, 797 Mad.. Undoubtedly, the Madras High Court has accepted that this is the meaning of the word “advance”, but what we have to consider in the present case is whether it is a loan. The fact that it is a loan is made amply clear by the fact that interest has been paid at the end of the year on the amount due under the account even though it has been repaid within a short period of 22 or 23 days.

10. By its objects clause the trust company was, inter alia, authorised to advance or loan moneys on security of shares, stocks, etc., and also to receive moneys on deposit, interest or otherwise and to lend moneys to other persons with or without security and on such terms as it was expedient and in particular to customers and all other persons having dealings with it. Under the exception contained in sub-clause (ii) any advance or loan made to a shareholder by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the company, is not included within the definition of the word “dividend”, but in the present case, notwithstanding such being one of the objects of the trust company, it is not established that giving of loan or advance was in the ordinary course of business of the trust company or whether lending of money is a substantial part of its business. So the exception contained in sub-clause (ii) is not available to the assessee in the present case. Thus, in our opinion, the Tribunal was right in taking the view that the sum of Rs. 1,62,264 should be regarded as dividend in the hands of the assessee for the relevant assessment year.

11. Accordingly, our answer to the question referred is in the affirmative. The assessee will pay the costs of the revenue.

12. Question answered in the affirmative.