9911796707
TMI Blog2015 (6) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... ld, therefore, be application in a case where a shareholder has 10 per cent or more of the equity capital. Further, 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 the member or partner of the concern is also beneficially entitled to 20 per cent of the income of such concern. With a view to avoid the hardship in the cases where advances or loans have already been given, the new provisions have been made applicable only in cases where loans or advances are given after 31st MaY,1987. These amendments will apply in relation to assessment Year 1988-89 and subsequent years." 2. During the assessment proceedings, the Assessing Officer noted that M/s Medley Laboratories Pvt. Ltd. (MLPL) has given advance of Rs. 91,85,874/- to its sistern concern M/s Oryx Fisheries Pvt. Ltd. The said company M/s MLPL was having closing balance on 31.03.2007 as accumulated profits at Rs. 99,86,874/-. The Assessing Officer further noted that the assessee is having share holding of 15% in M/s MLPL (the lending company) and 45% share holding in Oryx Fisher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative has submitted that the addition if any u/s 2(22)(e) should in proportionate to the share holding of the assessee in the borrowing company. In support of his contention he has relied upon the decision of Kolkata Benches of this Tribunal dated 11.07.2013 in the case of Shri Subrata Banik Vs. CIT In ITA No. 821 to 830 of Mumbai 2011. 6. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. There is no dispute regarding the fact that the assessee is holding 15% shares in M/s MLPL, (the lending company) and 45% of share holding in M/s Oryx Fisheries Pvt. Ltd. (the borrowing company). The provisions of section 2(22)(e) expand the definition of dividend and includes certain loan and advances by a company as deemed dividend in the hands of the share holder. For ready reference, we quote section 2(22)(e) as under:- Section 2(22) "dividend includes- *********************** *********************** " (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [made after the 31st day of May, 1987 , by way of advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p to the date of distribution or payment referred to in those sub- clauses, and in subclause (c) shall include all profits of the company up to the. date of liquidation, 4 but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place]. Explanation 3.- For the purposes of this clause,- (a) " concern" means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company; (b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern;] 7. Clause (e) of section 2(22) of Income Tax Act contemplates that any payment by a company (not being a company in which the public are substantially interested ) was by way of advance or loan to a share holder who is the beneficial owner of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, such person is at any time during the previous year, the beneficial owner of shares carrying not less than 20% of the voting powers. In the case in hand, the assessee is having 45% of share holding of the borrowing company, therefore, by applying the parameters as per section 2(32) and Explanation to section 40A(2) as well as any other parameters in general, the assessee is having substantial interest in the borrowing company i.e. M/s Oryx Fisheries Pvt. Ltd. The Hon'ble Jurisdictional High Court in the case of CIT. vs. Universal Medicare Private Limited. (324 ITR 263) while dealing with the issue of applicability of section 2(22)(e) has observed at page 268 as under:- ""10 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 of 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 gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is sought to be taxed in the present case in respect of the amount of Rs. 32,00,000 is that there was a dividend under section 2(22) (e) and no other basis has been suggested in the order of the Assessing Officer." 9. Since the assessee is a share holder of the lending company and also having a substantial interest in the borrowing company, therefore, the condition as prescribed u/s 2(22)(e) are satisfied to include the payment in question in the ambit of dividend tobe taxed in the hands of the assessee. We do not agree with the contention of Ld. Authorized Representative that only a proportionate of the amount of loan received by the borrowing company can be assessed as dividend in the hands of the assessee to the extent of his share holding in the borrowing company due to the simple reason that as per provisions of section 2(22)(e) the two conditions are required to be fulfilled viz. the person having not less than 10% of voting power in the lending company and a substantial interest in the borrowing concern. Both these conditions are satisfied, therefore, in the absence of any such provision of proportionate addition nothing can be read in between the unambiguous lang ..... X X X X Extracts X X X X X X X X Extracts X X X X
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