TMI Blog2006 (1) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-9-1990 with Payal Investment Trading Ltd., under which the assessee advanced a loan of Rs. 93,50,000 by way of loan which was interest-free. Clause 2 of the agreement provided that the said loan shall be utilised by the borrower only for the purpose of purchasing equity shares to be issued by LML Ltd. of Kanpur. Clause 6 provided that borrower shall pay to the assessee 50 per cent of the amount of dividend received by it from LML Ltd. from time to time in respect of equity shares to be purchased. The borrower of the loan purchased the shares of LML Ltd. but did not receive any dividend till assessment year 1997-98. However, in the year under consideration, the dividend was re ceived in respect of such shares and 50 per cent of the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. He drew our attention to various terms of the agreement to point out that the amount was advanced by the assessee with the specific purpose i.e. , for purchase of shares of LML Ltd. Instead of getting interest, the assessee entered into agreement with the borrower to the effect that 50 per cent of the dividend income earned on such investment would be paid by the borrower to the assessee. Thus, the assessee had an overriding title over the dividend income earned by Payal Investment Trading Ltd. In view of the same, it was pleaded that the income so received should be considered as dividend income. He also referred to rule 30A in support of his contention. On the other hand, the Learned Departmental Rep- resentative has supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est except as provided in clause 3. Clause 5 provides that such loans shall be repaid by the borrower in 10 years in 40 equal instalments of Rs. 2,33,750. Clause 6 provides that assessee shall be entitled to 50 per cent of the amount of dividend received by the borrower from LML Ltd. from time to time. Clause 9 provides that in the event of default by the borrower, the assessee shall be entitled to demand immediate repayment of the entire amount of loan. All these clauses read together lead to only conclusion that the transaction under the agreement was merely a loan transaction and the consideration was 50 per cent of the dividend income instead of regular payment of interest. It is not necessary for us to record a finding whether there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners. These are the cases where the concept of beneficial ownership may arise. But in the present case, the shares were not purchased on behalf of the assessee. On the other hand, the shares were purchased by Payal Investment Trading Ltd., in its own right and there was no clause in the agreement which may put fetter on the right of Payal Investment Trading Ltd. to dispose of the shares. The borrower was free to dispose of the shares without the consent of the assessee. The assessee was only entitled to the refund of the loan amount, in case 50 per cent of the dividend income was not paid by the borrower to the assessee or where instalments were not paid in time. No right vested in assessee in the shares purchased by the borrower. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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