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TMI Blog2011 (10) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 11,89,050/- made by the ld. Assessing Officer, by invoking provisions of Section 2(22)(e) of the I.T. Act, 1961. (b) That, the ld. CIT(A) grossly erred in not considering the material fact that the appellant was neither a registered shareholder nor a beneficial shareholder of M/s. Makhija Projects Pvt. Ltd. and therefore the provisions of Section 2(22)(e) of the Act were not applicable in the instant case. (c) That without prejudice to the above, the ld. CIT(A) grossly erred in confirming the impugned addition without considering the material fact that the payments erred by the appellant company from M/s. Makhija Projects Pvt. Ltd. were not in the nature of advance or loan and therefore, the provisions of Section 2(22)(e) were not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts are that the assessee is a civil contractor borrowed Rs. 11,89,500/- from Makhija Projects Pvt. Ltd. The Assessing Officer treated the amount of loan as deemed dividend u/s 2(22)(e) of the Act. The contention of the assessee is that the aforesaid provision is not applicable to the facts as the loan was taken for the benefit of the shareholders and placed reliance upon the decision from Hon'ble Apex Court in the case of CIT v. Mukund Ray K. Shah 8 ITJ 601. Shri Purshottam Makhija, partner of the assessee firm is holder of its 25% shares. He held 69100 shares out of 1 lac shares in M/s. Makhija Projects Pvt. Ltd., thus, his shareholding was 69.10% in M/s. Makhija Projects Pvt. Ltd. The ld. Assessing Officer was of the view that M/s. Mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholder then the provisions of Section 2(22)(e) will not apply. Similarly, if a person is a beneficial shareholder but not a registered shareholder then also the first limb of provision of Section 2(22)(e) will not apply. The provisions of Section 2(22)(e) as amended by Finance Act, 1997 w.e.f. 1.4.98, do not say in whose hands the dividend has to be brought to tax, whether in the hands of the "concern" or "the shareholder". The intention behind enacting the provisions of Section 2(22)(e) arose from the fact that closely held companies which are controlled by a group of members, would not distribute such profit as dividend because dividend would become taxable in the hands of the shareholders, instead, companies distribute them as loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) while coming to a particular conclusion also considered the decisions in CIT v. Hotel Hilltop [2009] 313 ITR 116 (Raj.), CIT v. Moon Mills Ltd. [1966] 59 ITR 574 (SC), CIT v. Nalin Behari Lal Singha [1969] 74 ITR 849 (SC), ITO v. Ch. Atchaiah [1996] 218 ITR 239 (SC), Union of India v. Wazir Singh AIR 1980 Raj. 252 (Para 30) etc. No contrary decision was brought to our notice by the revenue. In view of the facts and the judicial pronouncements, this ground of the assessee is allowed. 5. So far as the last ground 3(a) & 3(b) with regard to confirming the addition of Rs. Rs. 88,134/- on account of disallowance out of petrol expenses is concerned, we find that the ld. Assessing Officer disallowed Rs. 88,134/- out of Rs. 3,33,993/- claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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