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

2015 (11) TMI 733 - ITAT DELHI

2015 (11) TMI 733 - ITAT DELHI - TMI - Deemed dividend u/s 2(22)(e) - Held that:- For qualifying any loan or advance as deemed dividend, it must fulfill all the conditions of the section 2(22)(e) of the Act, on the date of such loan or advance received by that person. Therefore, in view of above, we hold that the loan/ advance obtained from the company by assessee till the date of sale of shares, when he ceased to be beneficial owner of shares not less than 10% of voting powers, was liable for t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

terial difference in present case. Thus finding of the AO and the ld CIT(A) as regards to considering the advance of ₹ 9.83 lakhs as deemed dividend , is not based on the correct appreciation of the law as well as facts and therefore, we hold that the loans/ advances given by the company to the assessee during the year under consideration till the date of sale of shares by the assessee, should only be considered for deemed dividend. Accordingly, we remit the matter back to the file of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

looking the family size of the assessee and living standard, the house hold withdrawals are sufficient and therefore addition made by the AO is deleted - Decided in favour of assessee. - ITA No.4945/Del./2011 - Dated:- 30-9-2015 - Sh. A. T. Varkey, JM AND Sh. O.P.Kant, AM For The Appellant : Sh.Rajeev Sachdeva, CA For The Respondent : Sh. P. Dam Kanunjna, Sr. DR ORDER PER O.P.KANT, A.M. This appeal of the assessee is directed against the order dated 03.08.2011 of learned Commissioner of Income- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

been wrongly construed and erroneously invoked. 3. On facts and circumstances of the case the AO and the CIT Appeals was not justified in enhancing ₹ 80,000/- on account of low household withdrawals during the year by treating as undisclosed source of income in the total income of the petitioner. 2. In ground Nos.1 and 2, the assessee has challenged the action of the learned Commissioner of Income-tax( Appeals)[in short CIT(A)‟] in confirming the addition of the deemed 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

ces . The assessee filed its return of income on 31.03.2009 declaring total income of ₹ 1,29,570/-. The case was selected for scrutiny under Computerised Assisted Selection of Scrutiny (CASS). The assessee was director of the Company i.e. M/s. CASCO Electronics Pvt. Ltd. (in short company‟) at the beginning of the year i.e. on 1st April 2007 and was holding 1,22,500 equity shares in the company, against total paid up share capital of ₹ 2,41,080/- shares , which constituted 50.8 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2007. Thereafter, the assessee received loan/advances from the company from June, 2007 upto 24.09.2007. However, the assessee sold the shares of the company owned by him and also resigned from the post of director during the concerned previous year i.e. 2007-08. As the ld AO noticed the fact of assessee being beneficial owner of more than 10 % shares having voting power, so he was of view that the whole loan/ advance received from the company was liable for the deemed dividend in the hands of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

according to the assessee, was ₹ 81,000/-only. However, the ld AO on verification of the ledger account of the assessee in the books of the Company, found that the assessee received total advance of ₹ 9.83 lakhs from the company upto 24.09.2007, which remained up to the end of the previous year, hence, he held that same was liable for considering as deemed dividend. Further, the ld AO computed the accumulated profit of the company till 24.09.2007 to ₹ 6,36,117/- and therefore , .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/ advance received by the assessee from the company was not liable for considering as deemed dividend. The ld. CIT(A) distinguished the facts of case cited by the assessee and confirmed the action of the ld. AO in considering the advance as deemed dividend limited to ₹ 6,36,117/- and also confirmed the addition of ₹ 80,000/- made by the ld. AO against the low household withdrawals. Aggrieved, the assessee is before us. 4. At the time of hearing, learned authorized representative (in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, he relied on the judgement of the Hon‟ble Kerala High Court in the case of Commissioner of Income-tax Vs. Smt S Parvathavarthini (supra) and the decision of Income-tax Appellate Tribunal, Delhi , C Bench, in the case of Victor Aluminum Industries (P) Ltd. Vs. ACIT (2006) 9 SOT 197. As regards to the house hold withdrawals , the ld. AR submitted in his submission that wife and father of the assessee have also contributed to the family expenses and if same is taken into account, the house .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

advance received by the assessee from the company is liable for treating as deemed dividends in the hands of the assessee, the following three conditions must be fulfilled: 1. Whether M/s. CASCO Electronics Pvt. Ltd. (CEPL) was not a company in which public was not substantially interested? 2. Whether, the assessee was a beneficial owner of shares ( other than shares entitled to fixed rate of dividend) holding not less than 10% of the voting power 3. Whether the company i.e. M/s. CASCO Electroni .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng during the year, so the question arises for our consideration is whether the advance received after the sale of shares will continued to be considered as deemed dividend ? 7. To find the answer of above question, we need to look into the language of the section 2(22)(e) of the Act. The relevant part of the section is reproduced as under: 2(22) dividends includes………………………. (a)………………… .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

areholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Hon‟ble Kerela High Court in the case of CIT Vs. PV John (1990) 181 ITR 1. The Hon‟ble High Court of Allahabad in the case of CIT Vs. HK Mittal (1996) 219 ITR 420 has held that the chief ingredient is that one should be a share holder on the date the loan is advanced to the him and where such ingredient is not established, the advance could not be taken as deemed dividend under section 2(22)(e) of the Act. The ld. AR in his submission relied on judgement of the Hon‟ble Ker .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gistered except on production of instrument of transfer. The said statutory provision prohibits the company from registering a transfer of shares, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee as per the particulars stated therein. On facts again there is not even a whisper that the application form which was submitted had any defects and, therefore, it can be safely seen that the applications were submitt .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he cart before the horse to lead to a conclusion that because the application was not found to be defective there must have been a proper gift deed. Reference is for the purpose of required satisfaction that the applications would have to be understood as submitted in accordance with the provisions thereof and in the process of consideration of the situation on the basis of probabilities, again in the absence of any material to show that there was any defect in the matter of applications, we wil .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an obtained by assessee from O as on 1st April, 1997, would be deemed dividend under s. 2(22) (e) but loan obtained thereafter will not be so treated. 10. From the above judicial pronouncements, it is ample clear that, for qualifying any loan or advance as deemed dividend, it must fulfill all the conditions of the section 2(22)(e) of the Act, on the date of such loan or advance received by that person. Therefore, in view of above, we hold that the loan/ advance obtained from the company by asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ase of the assessee. As regards to the date of sale of shares, the ld. AR has filed written submission, the relevant part of which is reproduced as under: That as the appellant has given the transfer deed on 30-07-2007 in respect of ₹ 1,22,500/- equity shares in respect of sale of the said shares to Sarika Khanna which is evident from the share transfer deed as per Page No.19 of the paper book . Please note that the transfer deed dated 30/07/2007 was filed by the AR of the petitioner befor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

been held by the various courts that as and when the share transfer deed was given to the purchaser that is the date of sale………………… 12. Before us, the assessee has filed a copy of transfer deed i.e share transfer form at page no. 19 of the paper book bearing a stamp of the Registrar of Company. On perusal of the share transfer form, it is evident that the assessee has applied for transfer of share on 27.07.2007. The said share transfer form contai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, the assessee in its submission has mentioned the date of share transfer deed as 30.07.2007, So even if we taken 30.07.2007 as date of transfer of shares, it does not make any material difference in present case. After careful consideration of all the documentary evidence submitted before us and the precedents relied upon by the ld AR, we are of the considered opinion that finding of the AO and the ld CIT(A) as regards to considering the advance of ₹ 9.83 lakhs as deemed dividend , is not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y of accumulated profit of the company. 14. As regard to ground No.3 of the assessee the ld. AO in his order has held that keeping in view the economic status and size of the family of the assessee, household withdrawal of ₹ 1,20,000/- shown by the assessee were not sufficient and therefore he made further addition of ₹ 80,000/- to the household withdrawal already declared by the assessee. Before the ld CIT(A), the ld AR of the assessee pleaded that the assessee was having simple liv .....

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