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2015 (8) TMI 2 - ITAT MUMBAI

2015 (8) TMI 2 - ITAT MUMBAI - TMI - Addition as deemed dividend u/s 2(22)(e) - AO noticed that the assessee has taken a loan from M/s Wire & Wireless Satellite Network Pvt. Ltd. and that the shareholdings of assessee and M/s. Wire & Wireless Satellite Network Pvt. Ltd., is with common shareholdings - Held that:- The assessee company is not a shareholder of M/s. Wire & Wireless Satellite Network Pvt. Ltd. Merely because, the shareholdings of both the companies are with common shareholders would .....

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idend can be received or deemed to have been received only by shareholder of the company, therefore, the provisions of section 2(22)(e) enlarging the scope of dividend under the express deemed "dividend" cannot be invoked in case of a person who is not a shareholder of the company who has advance the loan. Thus no addition can be made on account of deemed dividend under section 2(22)(e) of the Act in the hands of the assessee who is not a shareholder of the company provided loan. See case of UNI .....

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he assessee has raised following grounds : "1. Addition ofRs. 90,70,143/- made u/s 2 (22) (e): On the facts and circumstances of the case, it is submitted that the Hon. Commissioner of Income Tax Appeals, Mumbai erred in making the addition of ₹ 90,70,1431- as deemed dividend u/s 2(22)(e) as the Appellant company is neither a registered shareholder nor a beneficial shareholder in M/s. Wire & Wireless Satellite Network Pvt. Ltd., the lending company. The Appellant submits that addi .....

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not have any substantial interest in the borrowing company as they are not registered and beneficial shareholders of more than 20% shares in the Appellant company and therefore, the provisions of section 2 (22) (e) do not apply in respect of money advanced by lending company to the Appellant company. 3. Money advanced in course of normal business activity: On the facts and circumstances of the case, it is submitted that the Hon. Commissioner of Income Tax Appeals, Mumbai erred in treating the a .....

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rejudice to the above; on the facts and circumstances of the case, it is submitted that the Hon. Commissioner of Income Tax Appeals, Mumbai erred in not considering the opening balance in the account of lending company in the books of Appellant Company as not the Loans & Advances given during the year to Appellant Company for' the reason that they were not produced before the Assessing Officer. The Appellant submits that the opening balance to be excluded while computing the Loans & .....

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of ₹ 1,08,71,574/- from M/s Wire & Wireless Satellite Network Pvt. Ltd.. The AO found that the shareholdings of assessee and M/s. Wire & Wireless Satellite Network Pvt. Ltd., is with common shareholdings. Accordingly, the AO was of the view that the shareholders are dummy in nature and these companies are holding shares of each other and thus loan taken by the assessee from M/s. Wire & Wireless Satellite Network Pvt. Ltd., attract the provisions of section 2(22)(e) of the Act. .....

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#39;ble Jurisdictional High Court in the case of CIT V/s UNIVERSAL MEDICARE PRIVATE LIMITED [2010] 324 ITR 263 (Bom) as well as the decision in the case of CIT V/s IMPACT CONTAINERS P. LTD. [2014] 367 ITR 346 and submitted that the Hon'ble High Court has confirmed the view taken by the Special Bench in the case of ACIT V/s BHAUMIK COLOUR P. LTD.( 2009] 313 ITR (A.T.) 146 (ITAT[Mum]) . 5. On the other hand, the ld. DR relied on the orders of authorities below and submitted that when the 99% s .....

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on shareholders would not make the assessee company the shareholder of the M/s. Wire & Wireless Satellite Network Pvt. Ltd.. The provisions of section 2(22)(e) is a deeming provision and expand the ambit of expression "dividend" if the shareholder of the company has availed the benefit of loan and the company was having the sufficient funds of received and surplus then the shareholder who is having more than 25% equal capital of the company and availed the loan would be treated as .....

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der 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 wa .....

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ding of fact which does not give rise to any substantial 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 .....

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