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TMI Blog2013 (5) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... aid companies, hence the said amount cannot be treated as deemed dividend u/s. 2(22)(e) of the Act as held by Special Bench in case of ACIT vs. M/s. Bhaumik Colours P. Ltd. 313 ITR (AT) 46 (Mum) (SB). 2. The CIT (A) erred in upholding the addition u/s.2(22)(e) of Rs 14,70,183/- in respect of funds received from M/s. Vulcan Distilleries P. Ltd. and Alfa Distilleries P. Ltd. which were in nature of incorporate deposit." 2. The briefly, the facts are as under. The assessee-company is engaged in the Processing and Trading of Iron Ore. The assessee filed the return of income for the A.Y. 2006-07 on 21.11.2006 declaring the total income of Rs. 71,33,775/-. The return of income filed by the assessee was selected for the scrutiny and assessment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 918/- Rs 14,70,183/- 3. The A.O. finally made the addition of Rs. 14,70,183/- as a 'deemed dividend' u/s.2(22)(e) of the Act. The assessee challenged the said addition before the Ld. CIT (A) but without success. Now, the assessee is in appeal before us. 4. We have heard the Ld. D.R. None was present for the assessee. We have perused the orders of the authorities below. In our opinion, the addition made by the A.O. and confirmed by the Ld. CIT (A) has to be deleted as present issue is squarely covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court and also by the decision of the Hon'ble Special Bench of ITAT Mumbai in the case of Bhaumik Colours P. Ltd. 313 ITR (AT) 46 (Mum) (SB). In the case of Bhaumi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following components emerge (a) dividend is a share of profits of the company (b) paid to its shareholders. Section 2(22) of the Act artificially extends the scope of dividend from being more than only a distribution of profits to cover certain other types disbursements such as loans paid, etc. (the first ingredient mentioned above). It does not however alter the second component of its natural meaning, viz., paid to its shareholder. In other words all that section 2(22) seeks to do is to expand the various types payments that may be regarded as dividend. The apex court while considering what can come within the artificial definition of dividend under section 2(22) in the case of CIT v. Nalin Behari Lall Singha [1969] 74 ITR 849 (SC) de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any such shareholder is treated by cl. (e) to be included in the expression 'dividend' by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition does not alter the legal position that dividend has to be taxed in the hands of the shareholder. Consequently, in the present case, the payment, even assuming that it was a dividend, would have to be taxed not in the hands of the assessee but in the hands of the shareholder. The Tribunal was, in the circumstances, justified in coming to the conclusion that, in any event, the payment could not be taxed in the hands of the assessee. We may in concluding note that the basis on which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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