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TMI Blog2021 (5) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... illed, in our considered view Ld. A.O has rightly invoked the provisions of Section 2(22)(e) of the Act and made addition for deemed dividend. However the addition for deemed dividend should have been made at 2,19,74,818/- as against the addition of 2,20, 87,842/- made by the Ld. A.O as the addition for deemed dividend cannot exceed the accumulated profits of the lender company as appearing in the books before giving such loan and advance. We thus set aside the finding of Ld. CIT(A), confirm the addition u/s 2(22)(e) of the Act at 2,19,74,818/- and partly allow Revenue s Appeal Ground No.1. X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Representative apart from relying on the detailed finding of Ld. A.O also submitted that the issue raised in this appeal is squarely covered in favour of the revenue by the judgment of Hon'ble Supreme Court of India in the case of National Travel Services V/s CIT, Delhi (2018) 89 taxmann.com 332 (SC) order dated 18.1.2018. Ld. Sr. DR has also submitted that the Hon'ble Apex Court has also considered the judgment of Hon'ble High Court of Delhi in the case of Ankitech's (P) Ltd ITA 462/2009. 7. On the other hand Ld. Counsel for the assessee submitted that no addition in the hands of assessee company is called for since it is not the share holder of lender companies. Healso made following written submissions:- Regarding deemed dividend u/s 2(22)(e) 1. Ld. A.O added deemed dividend from three companies:- Sr. No Name of Company Common shareholding Loan given during the year (Rs.) Accumulated profit of lender company Amount added 1 Rajkamal Builders P Ltd. (RBPL) Our share holders hold 100%in RBPL 86,95,000 on which repaid ₹ 30,75,000 6,06,91,862 86,95,000 2 Vimal Sneh Pvt Ld (VSPL) Our share holders hold 36.85% in VSPL 1,00,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in form of dividend to its shareholders/ members and such dividend cannot be given to non-members- Held, yes. 4 PB 140-143 CIT vs Hotel Hilltop 18 taxmann.com 308 (Raj.) Where assessee firm had received an advance from a company and it was assessee's partners who were share holders in said company and not assessee-firm, such an advance could not be taxed as deemed dividend in hands of assessee-firm. 5 CIT Vs Daisy Packers P Ltd 220 Taxman 331 (Guj.) Where assessee-company had received a deposit from a company but did not own any share of that company it could not be treated as deemed dividend u/s 2(22)(e). 6 CIT vs Suram Holding P Ltd 220 Taxman 327 (Raj.) Where assessee company received share application money from another company, the amount in question could not be taxed as deemed dividend in its hands as the M/s Ryder Trans International Pvt.Ltd assessee was not a registered share holder of said company. 8. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred and relied by the Ld. Counsel for the assessee as well as Ld. CIT(A). Keeping the facts straight we find that Mr. Punyapal Surana is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits ; but "dividend" does not 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 so set off; (iv) any pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has not contended that it falls under any of the exclusions. So for adjudicating the issue in hand we need to confine our adjudication to examine that whether the case of the assessee falls under any of the 3 limbs provided u/s 2(22)(e) of the Act. 14. The applicability of Section 2(22)(e) of the Act is satisfied if one of the three conditions is satisfied. First Limb - (a) to a shareholder being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits ) holding not less than ten percent of the voting power. Second Limb (b) or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest hereafter in this case referred to as the said concern) Third Limb (c ) or any payment by any such company on behalf of or for the individual benefit, of any such shareholder, to the extent to which the company is either case possesses accumulated profits. 15. Examining the facts of the instant case we find that the first limb is not applicable since it is applicable to the amount received by the share holder which is not the case before us. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten percent 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 (hereafter in this clause referred to as the said concern), or any payment by any such company on behalf or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits'" Explanation 2. - the expression "accumulated profits", in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation, {but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficially entitled to 20 per cent of the income of such concern. With a view to avoid the hardship in cases where advances or loans have already been given, the new provisions have been made applicable only in cases where loans or advances are given after 31st May, 1987." These amendments will apply in relation to assessment year 1988-89 and subsequent years." 12) A reading of the amended definition would indicate that, after 31.05.1987, a "shareholder" is now a person who is the beneficial owner of shares holding not less than 10% of the voting power of the Company. Also, a new category has been added to the definition by introducing concerns in which such shareholder is a member or partner and in which he has a substantial interest. Explanation (3) of the amended provision states that "concern" means Hindu Undivided Family, firm, association of persons, body of individuals, or a Company and further goes on to state that a person shall be deemed to have a substantial interest in a concern other than a Company if he is, at any time during the previous year, beneficially entitled to not less than 20% of the income of such concern. 17. The judgment of Hon'ble Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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