Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (5) TMI 7 - GUJARAT HIGH COURT

2015 (5) TMI 7 - GUJARAT HIGH COURT - TMI - Deemed dividend under Section 2(22)(e) - Appellate Tribunal deleting the addition on the ground that assessee company is not a registered share holder of the lender company - Held that:- As decided in Ankitech Pvt. Ltd. [2011 (5) TMI 325 - DELHI HIGH COURT] if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under Section 2(22)(e) of the Act

What is provided under .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

learned Tribunal in deleting the addition made by the Assessing Officer invoking Section 2(22)(e) of the Act. - Decided in favour of assessee. - Tax Appeal No. 253 of 2015 - Dated:- 16-4-2015 - M. R. Shah And S. H. Vora,JJ. For the Appellant : Mr Manish Bhatt, Adv. For the Respondent : Mrs Mauna M Bhatt, Adv. ORDER (Per : Honourable Mr. Justice M. R. Shah) 1.0 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Tax Appellate Tribunal, Mumbai Bench .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

registered as well as beneficial shareholders?" 2.0 The assessee who was dealing in the ship breaking activity filed the return of income for the Assessment Year 2009-10 declaring the total income at ₹ 1,50,59,920/-. The return of income was duly processed under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the "Act") on 02/08/2010 and the case was selected for scrutiny and notice under Section 143(2) of the Act was issued and served upon the assesse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ficer observed that the assessee-Company and M/s. Shree Ram Vessel Scrap Pvt. Ltd. had common shareholding pattern as below; Sr. No.Name of the shareholderNo. of shares & % share in M/s. Shree Ram Vessel Scrap Pvt. Ltd. No. of shares & % share in M/s. Shree Ram Vessel Scr 1Ranjanben Mukeshbhai Patel4,95,000 shares 44.2% 5,00,000 shares 2Mukeshbhai Balabhai Patel (AAPPP8456N)1,25,000 shares 11.16% 15,62,500 shares 52% 2.1 On perusal of the said chart, the Assessing Officer observed that S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ot be considered to be taxed as deemed dividend. In reply it was submitted that the assessee-Company is not a registered shareholder and, therefore, the amount obtained by the assessee from M/s. Shree Ram Vessel Scrap Pvt. Ltd could not be treated as deemed dividend, however, the Assessing Officer did not accept the said submission of the assessee and added a sum of ₹ 4,14,71,946/-, which represented the amount shown as reserved and surplus in the books of M/s. Shree Ram Vessel Scrap Pvt. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

learned Tribunal and by the impugned judgment and order the learned Tribunal relying upon the decision of the Bombay High Court in the case of CIT Vs. Impact Containers Pvt. Ltd and Ors. in ITA No.114/2012 and the decision of the Delhi High Court in the case of CIT Vs. Ankitech Pvt. Ltd. reported in 340 ITR 14 (Del.) allowed the said appeal and deleted the addition made by the Assessing Officer invoking Section 2(22)(e) of the Act. 2.4 Feeling aggrieved and dissatisfied with the impugned judgmen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

invoking Section 2(22)(e) of the Act. In paras 24 to 27, the Delhi High Court in the case of Ankitech Pvt. Ltd.(Supra) has held and observed as under; "24. The intention behind enacting the provisions of Section 2(22)(e) is that closely-held companies (i.e. companies in which public are not substantially interested), which are controlled by a group of members, even though the company has accumulated profits would not distribute such profit as dividend because if so distributed the dividend .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o tax dividend in the hands of shareholders. The deeming provisions as it applies to the case of loans or advances by a Company to a concern in which its shareholder has substantial interest, is based on the presumption that the loans or advances would ultimately be made available to the shareholders of the Company giving the loan or advance. 25. Further, it is an admitted case that under the normal circumstances, such a loan or advance given to the shareholders or to a concern, would not qualif .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. It is a common case 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/mem .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

erspective. 26. In a case like this, the recipient would be a shareholder by way of deeming provision. It is not correct on the part of the Revenue to argue that if this position is taken, then the income "is not taxed at the hands of the recipient". Such an argument based on the scheme of the Act as projected by the learned Counsel for the revenue on the basis of Sections 4, 5, 8, 14 and 56 of the Act would be of no avail. Simple answer to this argument is that such loan or advance, i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version