TMI Blog2012 (10) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... would have to be taxed not in the hands of the assessee but in the hands of the shareholder Thus the addition made by the AO on account of deemed dividend u/s 2(22)(e) is to be deleted on the ground that the assessee not being shareholder of M/s Max Print System (Bom) Pvt. Ltd., the loan amount received by it from the said company could not be treated as deemed dividend in its hands - in favour of assessee. - I.T.A. No. 6158/Mum/2011 - - - Dated:- 31-7-2012 - SHRI P.M. JAGTAP AND SHRI AMIT SHUKLA, JJ. Respondent by : Ms. Anu Krishna. ORDER PER P.M.Jagtap, A.M: This appeal is preferred by the Revenue against the order of learned CIT (Appeals)-22, Mumbai dated 30-6-2011 and in the solitary ground raised there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend u/s 2(22)(e). After considering the submissions made on behalf of the assessee as well as material available on record, the learned CIT(Appeals) deleted the addition made by the AO on account of deemed dividend u/s 2(22)(e) on the ground that the assessee not being shareholder of M/s Max Print System (Bom) Pvt. Ltd., the loan amount received by it from the said company could not be treated as deemed dividend in its hands. For this conclusion, he relied, inter alia, on the decision of Hon ble Bombay High Court in the case of CIT vs. Universal Medicare Pvt. Ltd. 190 Taxman 144. Aggrieved by the order of the learned CIT(Appeals), The Revenue has preferred this appeal before the Tribunal. 4. At the time of hearing before us, none ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat has been prescribed as an additional condition under the 1961 Act. It is a principle of interpretation of status that where once certain words in an Act have received a judicial construction in one of superior Courts, and the legislature has repeated them in a subsequent statute the legislature must be taken to have used them according to the meaning which a Court of competent jurisdiction has given them. In the 1961 Act, the word shareholder is followed by the following words being a person who is the beneficial owner of shares . This expression used in s. 2(22)(e), both in the 1961 Act and in the amended provisions w,e,f, 1st April, 1988 only qualifies the word shareholder and does not in any way alter the position that the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant provision. This expression only refers to the shareholder referred to in the earlier part of s. 2(22)(e), viz., a registered and a beneficial holder of shares holding 10 per cent voting power. (c) The very same person referred to in (b) above must also be a member or a partner in the concern holding substantial interest in the concern viz., when concern is not a company, he must at any time during the previous year, be beneficially entitled to not less than twenty per cent of the income of such concern; and where the concern is a company he must be the owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to particular in profits, carrying not less than twenty per cent of the voting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company has accumulated profits would not distribute such profit as dividend because if so distributed the dividend income would become taxable in the hands of the shareholders. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have substantial interest or make any payment on behalf of or for the individual benefit of such shareholder. In such as event, by the deeming provisions, such payment by the company is treated as dividend. The intention behind the provisions of s. 2(22)(e) is to tax dividend in the hands of shareholder. The deeming provision as it applies to the case of loans or advances by a company to a concern in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholder viz., the concern. CBDT Circular No. 495, dt. 22nd Sept, 1987, to the extent not benevolent is not binding. In the event of the payment of loan or advance by a company to a concern being treated as dividend and taxed in the hands of the concern then, the benefit of set off as per s. 2(22)(e)(iii) cannot be allowed to the concern, because the concern can never receive dividend from the company which is only paid to the shareholder, who has substantial interest in the concern. The provisions of sub-cl. (iii) of s. 2(22)(e) also therefore contemplate deemed dividend being taxed in the hands of a shareholder only. CIT vs. Hotel Hilltop (2008) 217 CTR (Raj) 527 followed. In addition to the aforesaid decision of Mumbai Special Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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