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TMI Blog2018 (8) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... ark Maintenance Services Ltd., assessee holds shares without any voting rights. Therefore the condition of 10% of holding in the lender company fails. Secondly the assessee must hold more than 20% in M/s Madhur Housing and development Co. In fact the assessee holds 15% noncumulative preference shares of ₹ 10 each with a fixed rate of dividend in that company. Thus in our considered opinion assessee cannot be said to be holder of 20% or more in equity shares of the borrowing company. Further the shares held by assessee on behalf of the partnership firm are also without any voting right. No infirmity in the order of the Ld. CIT (A). Accordingly the grounds raised by revenue stands dismissed. - ITA No. 5472/Del/2014 - - - Dated:- 31-5- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30/3/2013 after recording reason that one company M/s Beverly Park Operation and Maintenance Services Pvt.Ltd., has given loan of ₹ 1,87,85,000/ to another company which has accumulated profit of ₹ 73,64,08,868/ , where assessee is holding 32.3% shares through holding companies. It was also observed that in the borrowing company, assessee holds 10200 ordinary shares of ₹ 100/-, each out of the total equity of 17,502. Ld. AO observed that, as it was held by Hon ble Delhi High Court vide order dated 12/05/2011 in the case of Madhur Housing Development Company, that deemed dividend is required to be taxed in the hands of shareholder of the company, to tax the above amount the case of assessee was reopened. 3. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accumulated profits of the lender company is more than the amount of loan received by M/s Madhur Housing Company, entire loan is liable to be taxed as deemed dividend. 4. Aggrieved by the order of the Ld. AO assessee preferred appeal before the Ld. CIT (A) who dealt with the whole issue in detail in para 4 to 5.9 at pages 3- 22 of his order. For the sake of brevity the same is not reproduced herein however we refer to and relied upon the same. 5. The Ld. CIT (A) held that assessee is not a specified shareholder in the lending company but holding 32.3% of ordinary shares through holding companies. He further noted that in Madhur Housing Development Co, assessee is holding 3648 Preference shares of ₹ 100/-,which are entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... everly Park maintenance services Ltd. He stated that assessee also hold 3648 shares out of total 4648 shares being 15% noncumulative preference shares of ₹ 100/- each paying the fixed rate of dividend. It was further stated that assessee holds on behalf of the partnership firm M/s General Marketing Corporation 10,200 equity shares out of the total 17502 equity shares which do not have any voting rights. He submitted that the essential conditions of section 2 (22) (e) provides that provisions are hit only if assessee holds 10% shares with voting rights in the payer company and 20% shares with voting rights in the recipient company. In the present case both these conditions are not fulfilled therefore deemed dividend cannot be taxed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case there is a loan to a shareholder or any other concern. It is also triggered in case of a company making any payment on behalf of or for the individual benefit of such shareholder. The maximum cap of such deemed dividend is the accumulated profit possessed by the company making the payment or giving the loan. Therefore according to that provision to attract provisions of section 2 (22) (e) of the act in case of a loan given to shareholder following conditions must be satisfied. i. There must be a loan or advance to a shareholder of a Company other than a company-covered u/s 18 of the act. ii. Shareholder must be the beneficial owner of the shares. iii. Such shares should not be entitled to a fixed rate of dividend. iv. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch shareholding shall not be less than 10 % of the total voting power. d.Assessee must also be the beneficial shareholder of the borrowing company holding shares which are not entitled to a fixed rate of dividend and should have minimum 20 % voting right in the borrowing company. 11. In the lender company M/s Beverly Park Maintenance Services Ltd., assessee holds shares without any voting rights. Therefore the condition of 10% of holding in the lender company fails. Secondly the assessee must hold more than 20% in M/s Madhur Housing and development Co. In fact the assessee holds 15% noncumulative preference shares of ₹ 10 each with a fixed rate of dividend in that company. Thus in our considered opinion assessee cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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