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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 ..... The CIT(A) has erred in deleting the addition of Rs. 18785000/- made by the ld AO u/s 2(22)(e) on account of deemed dividend. (ii) The CIT(A) has erred in holding that the assessee is not a shareholder in M/s. Bravely Park Operation and Maintenance Services P Ltd without appreciating that the assessee was substantial shareholder through various companies. (iii) The CIT(A) has erred in holding that the assessee was not having any substantial interest in M/s. MHDC without appreciating the fact that he is registered shareholder of the said company." 2. The brief facts of the case is that assessee is an individual who filed return of income for assessment year 2006-07 on 30/10/2006 at Rs. 4.09,77,144/-. Subsequently assessment under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the receiving company. According to assessee, none of these conditions were satisfied. It was further stated that assessee does not hold any shares in payer company in his individual capacity for the relevant period consequently assessee did not hold any voting power in the payer company much less holding beneficially at least 10% of the voting power. Hence, in case of the assessee the above condition is not satisfied. It was also submitted that assessee do not hold requisite number of shares in either the lender company or borrower company, therefore the provision of section 2 (22) (e) of the Act does not apply. The Ld. AO rejected contentions of assessee and held that that loan given by Beverly Park operation and maintenance services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olds shares in fiduciary capacity. Accordingly Ld. CIT (A) held that the transaction does not satisfy the basic condition of section 2 (22) (e) of the Act to tax the amount of Rs. 1,87,85,000/- of loan given by one company to another company to be taxed in the hands of assessee. 6. Aggrieved with the order of the Ld. CIT (A) revenue preferred appeal before us. 7. The Ld. CIT DR relied upon the order of the Ld. AO and submitted that assessee is a beneficial shareholder of company to whom loans have been given and also holding substantial interest in shares of lending company. He submitted that even indirect shareholding also needs to be considered for deemed dividend. 8. The Ld. AR supported the order of the Ld. CIT (A) and submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilled as per the provisions of section 2 (22) (e) it cannot be applied in the present facts of case. 9. We have perused the submissions advanced by both the sides in the light of the records placed before us. According to provisions of section 2 (22) (e) of the Act any payment made by a company other than a public limited company by way of advance or loan to a shareholder , being a person who is the beneficial owner of shares, which are not shares entitled to a fixed rate of dividend or without a right to participate in profits, holding not less than 10% of the voting power or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest to the extent of which the company possess accumula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be a member, a partner, or a person having substantial interest in that concern. iv. Substantial interest in AOP, BOI, Firm or HUF means, assessee must be beneficially entitled to not less than 20 % of its income. Substantial interest in case of a company is defined u/s 2(32) of the act. According to that person must be beneficial owner of shares. v. Such shares in the borrowing company should not be entitled to a fixed rate of dividend and must carry minimum 20 % of the voting power. 10. Therefore to tax the loan from lender company to the borrowing company in the hands of the assessee following conditions must be satisfied. a.Assessee must be the beneficial owner of the shares of the lender company. b.Such shares should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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