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2013 (11) TMI 228 - AT - Income TaxDeemed dividend - section 2(22)(e) - deemed shareholder - Conditions for invoking the provisions of section 2(22)(e) - Transaction can give benefit to the Assessee because the two individuals viz., Mr.Shanbhag and Mr.Sampathkumar hold the entire shares of VPSPL which in turn held 66% of shares of the Assessee – Held that:- A loan or advance given by a company to the shareholders or to a concern would not qualify as dividend. It has been made so by legal fiction created under s. 2(22)(e). This legal provision relates to "dividend" and it is the definition of dividend which is enlarged by this deeming provision. Definition of shareholder is not enlarged by any fiction. The loan or advance given under the conditions specified under s. 2(22)(e) has to be treated as dividend. Fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. Intention behind the provisions of s. 2(22)(e) is to tax dividend in the hands of shareholders. A concern which is given loan or advance by a company cannot be treated as shareholder/member of the latter simply because a shareholder of the lender company holding voting power of 10 per cent or more therein has substantial interest in such concern. If the intention of the legislature was to tax such loan or advance as deemed dividend at the hands of "deeming shareholder", it would have inserted deeming provision in respect of shareholder as well - None of the conditions for invoking the provisions of section 2(22)(e) of the Act were present in the instant case – Deleted the addition – Decided against the Revenue.
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