9911796707
TMI Blog2015 (6) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... Sheet, Profit and Loss Account and Shareholding pattern of this company. On perusal of such details the AO observed that assessee company and M/s. Shree Ram Vessel Scrap Pvt. Ltd. had common shareholding pattern as follow:- S.No. Name of the shareholder No. of shares & % share in Shree Ram Shipping Industries Pvt. Ltd No. of shares & % share in Shree Ram Vessel Scrap Pvt. Ltd. 1 Ranjanben Mukesbhai Patel (AEOPP 1384 G) 4,95,000 shares 44.2% 5,00,000 shares 16.67% 2 Mukeshbhai Balabhai Patel (AAPPP 8456 N) 1,25,000 shares 11.16% 15,62,500 shares 52% Since the common shareholders were having substantial interest in both the concerns, the AO invoked the provisions of section 2(22)(e) and require the assessee to explain as to why the loan obtained by the assessee company should not be considered to be taxed as deemed dividend. In reply it was submitted that since the assessee company is not registered shareholder, applying the ratio of Special Bench decision in the case of ACIT Vs. Bhaumik Colour Pvt. Ltd. 313 ITR 146 (AT) and the decision in the case of CIT Vs. Universal Medicare Pvt. Ltd. (324 ITR 263) the amount obtained by the assessee could not be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as dividend. What is also then included is a payment made by a company to its shareholders. That is by way of advance or loan to him. This is included so as to visit the shareholder with a liability to pay tax. It is eventually, the shareholder who will pay tax on the same. The shareholder cannot escape that liability merely becaue the loan or advance has been over to any concern in which such shareholder is a member or a partner and in which he has substantial interest. Earlier, legislature noted that the shareholder would receive the sum from a company and which is not strictly falling within the concept of "dividend" . Firstly, because that was received by way of advance or loan, secondly, an attempt was made to show that the advance or loan is not to the shareholder who is registered as such but to a concern in which he is a member or a partner and in which he may have a substantial interest but that cannot b termed as advance or loan to the shareholder. With a view to take care of such stand of the shareholders and not allow them to escape the liability to pay tax that the definition came to be broadly worded by indicating therein the reference to any concern. Equally, any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with the legal position noted by us hereinabove. We are of the further view that this court merely restated this principle and which remains unaltered throughout from the case of Rameshwarlal Sanwarmal Vs. Commissioner of Income Tax reported in 1980 (122) ITR Page 1 (SC). The Hon'ble Supreme Court held that it is only where a loan is advanced by the company to the registered shareholder and other conditions set out in section 2(6A)(e) of the then prevailing I.T. Act 1922 are satisfied that the amount of the loan would be liable to be regarded as deemed dividend within the meaning of that provision. The loan granted to the beneficial owner of the share, who is not registered shareholder would not fall within the meaning of section 2(6A)(e) of the IT Act. What the section is designed to strike at is advance or loan to a shareholder and the work shareholder can mean only the registered shareholder. The Hon'ble Supreme Court following the judgment in the case of Commissioner of Income Tax Vs. C.P. Sarathy reported in 1972 (83) ITR 170 (SC) held that the beneficial owner of shares whose name does not appear in the registered of the shareholders of the company cannot be said t be a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies namely companies in which public are not substantially interested which are controlled by a group of members, even though having 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 end, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have V substantial interest or make any payment on behalf of or for the individual benefit of such shareholder. In such an event, by the deeming provision, such payment by the company is treated as dividend. The purpose is to tax dividend in the hands of the shareholder. We do not see how such a view taken by the Delhi High Court and which reaffirms that of this Court in Universal Medicare can be said to be contrary to the legal fiction or the intent and purpose of the legislature in enacting it. The view taken by the Delhi High Court in the Commissioner of Income Tax Vs. Ankitech Pvt Ltd (supra) has thus our respectful concurrence. We do not reference to the other judgments because this line of reasoning has been followed in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
