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2017 (5) TMI 1365 - AT - Income TaxDeemed dividend u/s 2(22)(e) - loan & advanced to the shareholders in the guise of share application money to the another concern / company - taxability in the hands of shareholders - Held that:- The intention of the legislature is clarified in circular issued by the CBDT as at the time of amendment of clause (e) of sub section (22) of sec. 2 is further fortified by the fact that for deduction of tax at source. Sec. 194 provide that such deduction of tax has to be made in the case of the payments of the nature mentioned in clauses (a), (b), (c), (d) and (e) of sub section (22) of Section 2 only in a case where such payments were made to a shareholder. Section 199 also indicates that adjustment of TDS would be provided in the assessment of shareholder only. The very fact that the provision for deduction of tax at source and adjustment of tax is only in respect of the payments to the' shareholder would clearly indicate that even after the amendment, the effect of clause (e) of sub section (22) of Sec. 2 would apply only when the payment is made to shareholder. Wherever, the tax is to be deducted at source from a dividend or deemed dividend and the consequential effect of giving effect to such deduction of tax at source, etc., reference was made only to the payments to the shareholder. This would indicate clearly that clause (e) would apply only in case of payments to the shareholder and not to others. In view of the foregoing discussion and following the special bench decision of Mumbai Tribunal in the case of ACIT Vs. Bhaumic Colour Pvt. Ltd. [2008 (11) TMI 273 - ITAT BOMBAY-E] as well as the decision of the Hon’ble Delhi High court in the case of CIT Vs. Ankitech P. Ltd.[2011 (5) TMI 325 - DELHI HIGH COURT ], we hold that the dividend income is taxable in the hands of shareholders and not in the hands of the concern. Accordingly, we dismiss the assessee’s ground on this issue. Once we find that the loan or advance is not taxable in the hands of such concern and should be taxed in the hands of shareholder and that is a correct legal position according to us, such a circular would be of no use. Further, Circulars are not binding on the courts. Accordingly, we dismiss this ground of assessee. Unable accept the contention of the AR that the deemed dividend should be assessed in the hands of the assessee proportionately to the extent of assessee’s shareholding in the recipient company. Therefore, we dismiss the ground raised by the assessee on this issue. - Decided against assessee.
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