TMI Blog2013 (11) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Counsel appearing for the Appellant and Shri Rivonkar, learned Counsel appearing for the Respondent. 2. The above Appeal filed under Section 260-A of the Income Tax Act, 1961, seeks to challenge the Order dated 14.09.2012, passed by the Income Tax Appellate Tribunal, Panaji, whereby the Appeal preferred by the Appellants came to be dismissed. 3. Briefly, the facts of the case are that the assessee, the Respondent herein, filed the return of income declaring a total income of Rs.9,88,598/-, which was made under Section 143(1) of the Income Tax Act, 1961. During the course of the search at the office of M/s. Goa Golf Club Pvt. Ltd., from the ledger extract, it was found that M/s. Goa Golf Club Pvt. Ltd., advanced loan to M/s. Brito Amu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that it had borrowed funds from M/s. Goa Golf Club Pvt. Ltd., and that the assessee failed to provide any explanation substantiating the claim that the money was received as a normal business transaction. Being aggrieved by the said Order passed by the CIT(A), the Respondents filed an Appeal before the Income Tax Appellate Tribunal, Panaji, which was disposed of by Order dated 01.10.2012. The Income Tax Appellate Tribunal allowed the Appeal of the Respondents by coming to the conclusion that in the Order passed under Section 253 for the assessment year 2003-2004 in the case of M/s. Goa Golf Club Pvt. Ltd., the amount paid to the assessee company of Rs.2,23,94,763/-, is treated as revenue expenditure. However, the ledger account in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated profits in the said Company and as Mr. William Britto was a beneficial shareholder with more than 10% voting rights in M/s. Goa Golf Club Pvt. Ltd., and has a substantial interest therein, the amount of advance is to be construed to be deemed dividend in his hands. Learned Counsel further pointed out that as the material on record establishes that Dr. Britto has a substantial interest in the said Company the advance is to be continued to be deemed divident. Learned Counsel has taken us throuogh the Judgment of the Income Tax Appellate Tribunal and pointed out that the Tribunal has erroneously come to the conclusion that advances cannot be considered as deemed dividends in terms of Section 2(22)(e) of the Income Tax Act of 1961. 5. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that it is undisputed fact that the Assessing Officer applied the provisions of Section 2(22)(e) in respect of the payments made by M/s. Goa Golf Club Pvt. Ltd., to M/s. Britto Amusement Pvt. Ltd. The Tribunal so noted that it is an undisputed fact that M/s. Britto Amusement Pvt. Ltd., is not a shareholder of M/s. Goa Golf Club Pvt. Ltd. In order to consider whether such amount can be held to be deemed dividend in the hands of a person other than a shareholder, it would be appropriate to examine the provisions of Section 2(22)(e) of the Income Tax Act, of 1961, as amended with effect from 01.04.1988 which reads as under : (e) Any payment by a company, not being a company in which the public are substantially interested, of any sum (w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent-assessee is neither a registered nor a beneficial holder of the shares. The learned Tribunal has also taken note of the Judgment of this Court and noted that the provisions of Section 2(22)(e) of the said Income Tax Act of 1961, cannot be applied in the case of the assessee. The learned Tribunal also considered the Judgment of the Special Bench and found that it had taken the same view that deemed dividend cannot be assessed in the hands of a person who is not a shareholder of the Company. The learned Tribunal, as such, set aside the Order of the Commissioner of Income Tax and deleted the additions made by the Assessing Officer as deemed dividend in the hands of the assessee who is not the shareholder of M/s. Goa Golf Club Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantial question of law. However, even on the second aspect which has weighed with the Tribunal, we are of the view that the construction which has been placed on the provisions of Section 2(22)(e) is correct. Section 2(22)(e) defines the ambit of the expression 'dividend'. All payments by way of dividend have to be taxed in the hands of the recipient of the dividend namely the shareholder. The effect of Section 2(22) is to provide an inclusive definition of the expression dividend. Clause (e) expands the nature of payments which can be classified as a dividend. Clause (e) of Section 2(22) includes a payment made by the company in which the public is not substantially interested by way of an advance or loan to a shareholder or to any con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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