TMI Blog2012 (10) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... , partner had 6% only. The share of the assessee i.e. M/s Octave Apparels was 1.07% and in such circumstances, the provisions of Section 2(22)(e) could not be resorted to. The Tribunal was, thus, right in concluding in favour of the assessee. - ITA No.132 of 2012 (O&M) - - - Dated:- 11-9-2012 - MR. AJAY KUMAR MITTAL AND MR. GURMEET SINGH SANDHAWALIA JJ. Present: Mr. Rajesh Katoch, Advocate for the appellant. Ajay Kumar Mittal, J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 27.1.2012, Annexure A. III passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh (for brevity, the Tribunal ) in ITA No.31/CHD/2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was variation in the signatures of the workers and language of the signatures was also different. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), [CIT(A)] who vide order dated 8.10.2010 deleted the total addition of Rs. 2,30,86,070/- on account of deemed dividend income and disallowance of wages and bonus for Rs.4,49,967/-. The revenue filed appeal against the order before the Tribunal. Vide order dated 27.1.2012, Annexure A.III impugned herein, the appeal was dismissed by the Tribunal Hence this appeal by the revenue. 3. The issue herein is whether any loan amount advanced by M/s Octave Apparels Private Limited to the respondent-assessee would fall under Section 2(22) (e) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossesses accumulated profits. 6. The aforesaid provision came up for consideration before the Rajasthan High Court in Commissioner of Income Tax v. Hotel Hilltop, (2009) 313 ITR 116. It was held that following four conditions are sine qua non for attracting provisions of Section 2(22) (e) of the Act:- (i) the assessee should be a shareholder of the company; (ii) the company should be a closely held company in which the public are not substantially interested; (iii) there must be payment by way of advance or loan to a shareholder or any payment by the company on behalf of or for the individual benefit of the shareholder; and (iv) there must be sufficient accumulated profits in the hands of the company up to the date of such payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion dividend' by providing an inclusive definition. In order that the first part of clause (e) of Section 2 (22) is attracted, the payment by a company has to be by way of an advance or loan. The advance or loan has to be made, as the case may be, either to a shareholder, being a beneficial owner holding not less than ten per cent of the voting power or to any concern to which such a shareholder is a member or a partner and in which he has a substantial interest. The Tribunal in the present case has found that as a matter of fact no loan or advance was granted to the assessee, since the amount in question had actually been defalcated and was not reflected in the books of account of the assessee. The fact that there was a defalcation s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbit 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 . Consequently in the present case the payment, even assuming that it was a dividend, would have to be taxed not in the hands of the assessee but in the hands of the shareholder. The Tribunal was, in the circumstances, justified in coming to the conclusion that, in any event, the payment could not be taxed in the hands of the assessee. We may in concluding note that the basis on which the assessee is sought to be taxed in the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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