TMI Blog2012 (10) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... m for the company and for which the amount was outstanding. - As in the present case also even assuming requirement of the first part of the Section has been complied with, and that advance could be treated as dividend, it had to be taxed not in the hands of the assessee but in the hands of the shareholder - in favour of assessee. A deeming provision can also be subject to rebuttal. In the present case from the finding of fact such deeming provision was rebutted by the assessee and that findings to that effect have been accepted by the ITAT, which we do not find to be either illegal, arbitrary or perverse. - Income Tax Appeal No. 695 of 2012 - - - Dated:- 13-8-2012 - Sunil Ambwani and Aditya Nath Mittal, JJ Shambhu Chopra f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Limited which exceeded the deposits of the partners with Khandelwal Cables Limited. The combined cop-y of account of the appellant firm and its 2 partners in the books of Khandelwal Cables Limited was furnished by the appellant during ass4essment proceedings (Annexure to this order) and has been discussed in detail in the assessment order. The Assessing Officer has refuted the above claim of the appellant referring to the appellant's individual account independent of its partners' accounts with M/s Khandelwal Cables Limited. However, this view of the Assessing Officer is not justified for the reasons that:- As argued by the appellant, a partnership firm is a compendious name of all the partners. Hence, the transactions of the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grated consideration of transactions between the creditor company and the debtor concern linked through the common shareholder. Bay this rationale, all the transactions fo the appellant firm and its partners with M/s Khandelwal Cables Limited warrant consideration in a composite manner. 4.6 Thus, since the consolidated balance in all the accounts of the appellant and its partners in Khandelwal Cables Limited (refer Annexure) is adequate to cover the appellant's withdrawals receipts from Khandelwal Cables Limited, no deemed dividend as per section 2 (22) (e) of the Act arises in the appellant's hands. Hence, the addition of Rs.48,20,549/- is not sustainable and accordingly deleted." 4. We do not find that any discussion in the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect that deemed dividend would be taxed in the hands of a concern where all the following conditions are satisfied: (i) where the company makes the payment by way of loans or advances to a concern. (ii) where a member or a partner of the concern holds 10 per cent of the voting power in the company; and (iii) where the member or partner of the concern is also beneficially entitled to 20 percent of the income of such concern. 2. Whether the Ld ITAT is justified in holding that under provisions of S.2 (22) (e), where the payment by way of loan or advance is made to the firm in which the shareholder is partner, the dividend should be assessed in the hands of the shareholder and not the recipient firm, even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court observed in para 11 as follows:- "11. We find merit in this civil appeal. The companies having accumulated profits and the companies in which substantial voting power lies in the hands of the person other than the public (controlled companies) are required to distribute accumulated profits as dividends to the share-holders. In such companies, the controlling group can do what it likes with the management of the company, its affairs and its profits. It is for this group to decide whether the profits should be distributed as dividends or not. The declaration of dividend is entirely within the discretion of this group. Therefore, the Legislature realized that though funds were available with the company in the form of prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to any concern of which such shareholder is a member or partner, subject to the fulfillment of the requirements which are spelt out in the provision. Similarly, a payment made by a company on behalf, or for the individual benefit, of any such shareholder is treated by clause (e) to be included in the expression "dividend". The effect of clause (e) of section 2 (22) is to broaden the ambit of the expression "dividend" by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition does not alter the legal position that dividend has to be taxed in the hands of the shareholder. 12. In the present case also even assuming require ..... X X X X Extracts X X X X X X X X Extracts X X X X
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