9911796707
TMI Blog2013 (6) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany from M/s Rajrani Exports Private Limited, can be said to be dividend income of the Respondent Assessee Company, in terms of Section 2(22) (e) of the Income Tax Act, 1961. The Respondent Assessee Company is a member of the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) and carries on business of trading in shares and securities. M/s Rajrani Exports Private Limited mainly carries on business of processing and exporting rice, tea, coffee and of trading in iron ore and other materials. There were some common shareholders of the Respondent Assessee Company and M/s Rajrani Exports Private Limited namely Sampad Kr. Bubna who held 13.54% shares in M/s Rajrani Exports Private Limited and 17.68% shares in the Respondent Assessee Company, Sashi Kant Bubna who held 13.54% shares in M/s Rajrani Exports Private Limited and 18.66% shares in the Respondent Assessee Company, Santosh Kr. Bubna who held 13.54% shares in M/s Rajrani Exports Private Limited and 18.66% shares in the Respondent Assessee Company and Surendra Kr. Bubna who held 13.54% shares in M/s Rajrani Exports Private Limited and 18.66% shares in the Respondent Assessee Company. On or about 28th Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include (i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets; [(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964 [and before the 1st day of April, 1965];] (ii) any advance or loan made to a shareholder [or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company; (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is set off; [(iv) any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A of the Companies Act, 1965 (1 of 1956); (v) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance from group concern, Rajarani Exports (P) Ltd. in F.Y. 2004-05 .. 2.1. There is reserve and surplus of Rajrani Exports Pvt. Ltd. as on 31 March, 2005 and it amounts to ₹ 7,36,43,696/- and the said reserve and surplus consists of accumulated profit only. The main business of M/s Rajrani Exports Pvt. Ltd. is processing and exporting of rice, tea, coffee and trading in iron ore and other materials. So, as per the provisions of section 2(22)(e) of Income Tax Act, 1961, loan/advance of ₹ 1,50,00,000/- received by assessee should be assessed as income in its hands for the F.Y. 2004-05 .. .. 2.3. The assessee stated in its submission dated 10.12.2010 the said advances received from Rajrani Exports P Ltd. also falls within the ambit of the said exclusion clause . .. 2.5. the main business of assessee is not lending or advancing of money. Hence, the provisions of section 2(22)(e) of Income Tax Act, 1961 are squarely applicable in the assessee s case and accordingly, in view of observations made above, a sum of ₹ 1,50,00,000/- is treated as deemed dividend income in the hand of the assessee. Being aggrieved, the Respondent Assessee Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf of the assessee, cited the judgment of the Bombay High Court in Commissioner of Income Tax versus Universal Medicare Private Limited reported in [2010] 324 ITR 263 (Bom) where a Division Bench of Bombay High Court held that Section 2(22)(e) would have to be taxed in the hands of the shareholder who obtained the benefit and not in the hands of the assessee. The Bombay High Court further held: In our view, the finding that there was advance or loan is a pure finding of fact which does not give rise to any substantial question of law. However, even on the second aspect which as weighed with the Tribunal, we are of the view that the construction which has been placed on the provisions of section 2(22)(e) is correct. Section 2(22)(e) defines the ambit of the expression dividend . All payments by way of dividend have to be taxed in the hands of the recipient of the dividend namely the shareholder. In Commissioner of Income Tax Vs. Ankitech P. Ltd. reported in [2012] 340 ITR 14 (Delhi) also cited by Mr. Khaitan, a Division Bench of Delhi High Court considered the provisions of Section 2(22)(e) of the Income Tax Act, 1961, relied upon Universal Medicare Private Limited (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share holder holding at least 10 percent of the voting power in the company making the payment or alternatively to a company in which the shareholder has at least 20 percent voting power or to a concern (other than company) in which the shareholder has at least 20 percent interest, and the payment of the loan and/or advance is not in the ordinary course of business activities of the company making the payment. The definition of dividend has been enlarged by a legal fiction which does not extend to shareholder . In the instant case, the Respondent Assessee Company is not a shareholder of M/s Rajrani Exports Private Limited. It is true that there are common shareholders who held shares both in Respondent Assessee Company and M/s Rajrani Exports Private Limited. While the four shareholders named above each held 13.54% shares in M/s Rajrani Exports Private Limited, none of the shareholders held 20% shares in the Respondent Assessee Company. As per the findings of the Assessing Officer the percentage of shares held by the common shareholders Sampad Kr. Bubna, Sashi Kant Bubna, Santosh Kr. Bubna and Surendra Kr. Bubna in the Respondent Assessee Company is 17.68%, 18.66%, 18.66%, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
