TMI Blog2015 (8) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 reserve the deemed dividend. The dividend 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 hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant Company having substantial interest in the appellant company. The Appellant submits that the said shareholders do 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 advances which are made in the normal course of business by the lending company to the Appellant company as Loans and A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs 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. The assessee challenged the action of the AO before the ld. CIT(A) but could not succeed. 4. Before us, the ld.AR referred the shareholding pattern of the assessee company as well as M/s. Wire Wireless Satellite Network Pvt. Ltd., and submitted that the assessee is not a shareholder of M/s. Wire Wireless Satellite Network Pvt. Ltd., therefore, the addition u/s 2(22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholder who is having more than 25% equal capital of the company and availed the loan would be treated as reserve the deemed dividend. The dividend 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. The Hon'ble Jurisdictional High Court in the case of UNIVERSAL MEDICARE PRIVATE LIMITED (supra) has held in para 10 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes a payment made by the company in which the public are not substantially interested by way of an advance or loan to a shareholder or to any concern of which such shareholder is a member or partner, subject to the fulfilment of the requirements which are spelt out in the provision. Similarly, a payment made by a company on behalf, or for the individual benefit, of any such shareholder is treated by clause (e) to be included in the expression dividend . Consequently, the effect of clause (e) of section 2(22) is to broaden the ambit of the expression dividend by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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