TMI Blog2015 (2) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 10,91,340/- made by the AO u/s. 2(22)(e) of the I.T. Act, 1961. 2. The order of the CIT(A) is erroneous and is not tenable on facts and in law. 3. The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal. 2. The facts in brief are that the return declaring NIL income was filed on 28.11.2006. Subsequently, the case of the assessee has been selected for scrutiny. First notice u/s. 143(2) dated 27.11.2007 was sent by Speed Post. Thereafter, notices u/s. 142(1) and u/s. 143(2) were issued on 3.10.2008 and duly served upon the assessee company. In response to statutory notices issued upon the assessee company, Assessee s representatives appeared from time to time and furnished the requisite details. Thereafter, after considering the details, AO has completed the assessment vide his assessment order dated 31.12.2008 u/s. 143(3) of the I.T. Act, 1961 thereby making the additions. Being aggrieved with the aforesaid assessment order, assessee appealed before the Ld. CIT(A), who vide impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd (2011) 16 Taxmann.com 292(Delhi) ii. CIT vs. Marketing P. Ltd (2011)16 Taxmann.com411 (Delhi) 5.3 I have carefully considered the views of the Assessing Officer as contained in the assessment order and the submission made by the appellant. The facts of this case are reproduced on para 2 above. The appellant company is not a shareholder in M/s. Sunglow Overseas Pvt. Ltd. who had given the said loan to the appellant. This controversy has received judicial notice and has been settled by the decisions of the jurisdictional High Court in some recent judgment. The Special Bench of ITAT in the case ACIT, Mumbai V. Bhaumik Colour (P.)Ltd [2009] 118 ITD 1 (MUM)(SBLhas held that the expression shareholder being a person who is the beneficial owner of shares referred to in first limb of section 2(22)(e) refers to both a registered shareholder and beneficial/shareholders. If a person is a registered shareholder but not the beneficial shareholder than the provisions of section 2(22) (e) will not apply. Similarly if a person is a beneficial shareholder but not a registered shareholder than also the first limb of provisions of section 2(22) (e) will not apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is enlarged. Legal fiction does not extend to 'shareholder'. When we keep in mind this aspect, the conclusion would be obvious, viz, loan or advance given under the conditions specified under section 2(22) (e) of the Act would also be treated as dividend. The fiction has, to stop here and is not to be extended further for broadening the concept of shareholders by way legal fiction. It is a common' use that any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to non- members. The second category specified under section 2(22)(e) of the Act. Viz, a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the intention of the Legislature as to tax such loan or advance as deemed dividend at the hands of deeming shareholder' then the Legislature would have inserted deeming provision in respect of shareholder as well, that has not happened. Most of the arguments of the learned counsels for the revenue would stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors. (A.Y. 2006-07) wherein the Tribunal has adjudicated the matter as under:- 21. We have heard the both parties and perused the relevant record available with us specially the impugned order passed by the Revenue Authorities; Paper Book filed by the assessee, we find considerable cogency in the contention of the ld. Counsel of the assessee that the issue raised in ground no. 3 raised in the Revenue s Appeal is squarely covered by the Order of the Hon ble Delhi High Court in the case of CIT vs. M/s Ankitech Pvt. Ltd. (340 ITR 14) and also reported in [2011] 11 Taxmann.com 100 (Delhi) vide order dated 11.5.2011 wherein the Hon ble Court has held as under:- According to section 2(22)(e) of the Income Tax Act, 1961, the following conditions are to be satisfied : (i) the payer company must be a closely held company; (ii) it applies to any sum paid by way of loan or advance during the year to the following persons : (a) a shareholder holding at least 10 of the voting power in the payer company; (b) a company in which such share holder has at least 20 per cent of the voting power; (c) a concern (other than company) in which such share holder has at least 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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