9911796707
TMI Blog1986 (2) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... l shares of 1,50,100. Thus, the loan should be taken as deemed dividend under section 2(22)(e) and should be treated as assessee's income. The assessee objected to the above proposal stating that she was not a person having substantial interest in the company and she has gifted Rs. 11,000 to her daughter's minor children on 20-11-1978. The Income-tax Officer rejected the assessee's objection. He held that the shares were registered by the company only on 25-10-1980. In the original return filed on 27-8-1979, the dividend income from the shares was included and the value of it was also included in the wealth-tax assessment for 1979-80 though in the revised return both for inocme-tax and wealth-tax it was excluded. An affidavit of Shri K. Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, was not a person substantially interested in the company within the meaning of section 2(32). Thus, he deleted the sum of Rs. 6,25,000. 3. The learned departmental representative strongly urged that transfer was effected in the company's books only on 25-10-1980 and the gift if any should be from that date. He urged that there is no genuine gift on 20-11-1978 as no transfer has taken place on that date. In the original income-tax return as well as in the wealth-tax return for the assessment year 1979-80 the assessee has included the income and the wealth in respect of the transferred shares though in the revised return they were excluded. In the cash flow statement the entire dividend received from 40,600 shares was shown. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rified. He submitted that there was controversy as to whether the shares in the names of the minors could be registered. In this connection he referred to Shri A. Ramaiya's Guide to the Companies Act, 10th Edition, page 128. He then submitted that once shares are transferred by the company it relates beck to the date of the execution of the transfer application. For this proposition he relied on a case reported in CIT v. Smt. Suraj Bai [1972] 84 ITR 774 (Raj.) the observations in Shri A. Ramaiya's Guide to Companies Act and Killick Nixon Ltd. v. Bank of India 1982 Tax LR 2547 (Bom.). He submitted that the shares are movable property. They can be transferred without any formality. Registration under the Companies Act is a rule of evidence. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advocate by name Shri G. Krishnan Nair in his letter dated 28-2-1980 was of the view that the shares can be registered in the names of minors. It is thereafter the shares were registered in the names of the minors. With regard to the controversy whether a company can register the shares in the names of minors there are certain observations at page 128 in A. Ramaiya's Guide to the Companies Act, 10th Edn. There is reference to an order of the Company Law Board favouring registration. The learned author was of the view that that order requires reconsideration. Thus from the above, it is clear that there was some controversy whether the company can register the shares in the name of minors. This is also evident from the opinions of the two adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (P.) Ltd. [1983] 54 Comp. Cas. 432 (Bom.). 7. Thus in our view, though the company has registered the shares on 25-10-1978 when the transfer of shares was executed. Thus 11,000 shares gifted by the assessee to his daughter's minor children do not belong to the assessee as they were gifted on 20-11-1978 and they have to be excluded from the assessee's shareholding. If they are excluded then the balance of the shareholding held by the assessee would be less than 20% of the voting power and the assessee would not come within the meaning of section 2(32) as a person who has substantial interest in the company. Hence, the loan of Rs. 6,25,000 cannot be treated as deemed dividend under section 2(22)(e) as the assessee is not a person who has s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
