9911796707
TMI Blog2011 (11) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company is holding more than 20% share in both the donor & donee companies? 2.2 Whether learned ITAT erred in deleting the addition of Rs. 37,66,432/- made by the Assessing officer under section 2(22)(e) of Act, being deemed dividend?" 2. The assesse-respondent is a private limited company and the assessment year involved is 2006-07. In the assessment made u/s.143(3) of the Act, the Assessing Officer had made an addition of Rs. 37,66,432/-by invoking sec.2(22)(e) of the Act for the following reason, that the above sum was received by the assessee as unsecured loan from another sister-concern by the name of MCC Imaging Pvt. Ltd. ("MIPL") and that one Ajay Mehta was the major common shareholder in both MIPL and the assessee company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e received a loan or an advance cannot be treated as covered by the definition of the word "dividend" as contained in sec.2(22)(e) of the Act. It has been held :- "24. The intention behind enacting provisions of section 2(22)(e) is that closely held companies (i.e. companies in which public are not substantially interested), which are controlled by a group of members, even though the company has accumulated profits would not distribute such profit as dividend because if so distributed the dividend income would become taxable in the hands of the shareholders. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have substantial interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and such dividend cannot be given to non-members. The second category specified under section 2(22)(e) of the Act, viz., a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of "deeming shareholder", then the Legislature would have inserted deeming provision in respect of shareholder as well, that has not happened. Most of the arguments of the learned counsels for the Revenue would stand answered, once we look into the matter from this perspective." 6. In the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
