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TMI Blog2015 (12) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... e that Shri Puneet Bhagat was director in M/s Aesthete Exim Pvt. Ltd. and M/s Aesthete International Ltd. The other director in these companies was Ms. Sunita Bhagat, the share holding patterns of these two directors in the companies were as under: S No. Name of Shareholder M/s Aesthete Exim Pvt. Ltd. M/s Aesthete International Ltd. Amount of shareholding as on 31.03.2007 % of shareholding Amount of shareholding as on 31.03.2007 % of shareholding 1. Sunita Bhagat 5,00,000/- 50% 11,56,100/- 46.11% 2. Puneet Bhagat 5,00,000/- 50% 13,50,100/- 53.85% 3. Thus, both Shri Puneet Bhagat and Smt. Sunita Bhagat were holding more than 20% shares in these companies. The AO has pointed out that during the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputation for making the addition in the hands of the two shareholders has been prescribed, either under the Income tax Act or in the ruling of Ankitech Pvt. Ltd. (supra). Therefore, it was not clear as to how much income was to be assessed as deemed dividend in the hands of Puneet Bhagat and Sunita Bhagat. Further, it was submitted that in the absence of any mechanism for computation of income in the hands of share holders, the charging provisions would also fail and no addition could be made in such a case. The assessee relied on the decision of Hon'ble Supreme Court in the case of CIT Vs. B.C. Srinivasa Setty (1981) 5 Taxmann 1 (SC), wherein it was, inter alia, held as under: "....... A transaction to which those provisions cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided and added to the income of the assessee. He, therefore, made addition of Rs. 5 lacs each in the hands of the two directors. 5. Before ld. CIT(A) the assessee reiterated the submissions and, inter alia, pointed out that M/s Aesthete Exim Pvt. Ltd. had given loan of Rs. 10 lacs to M/s Aesthete International Ltd. and Shri Puneet Bhagat was common share holder along with Smt. Sunita Bhagat in both the said companies, but, there was different share holding pattern in both the companies. Therefore, the addition on account of the deemed dividend was against the principles laid down by Hon'ble Supreme Court in the case of B.C. Srinivasa Setty (supra). Ld. CIT(A) confirmed the AO's action following the decisions of Hon'ble Jurisdictional High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittle analysis of relevant provision makes it clear that this argument cannot be accepted. 9. Section 2(22)(e) reads as under: "2(22)(e): 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 advance or loan to a shareholder, 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerns are also contemplated in the section itself and, therefore, it would be too technical to hold that legislature visualized only one shareholder in the concern. 12. The section clearly states that the shareholder may be a member of the concern or a partner, which implies that the interest of the shareholder in the concern is to be determined with reference to the percentage of shareholding of the directors/ partners in the said concern. It is not necessary that in every case the detailed mechanism should be provided for computing the income and, if, by reasonable construction of the section, the income can be deduced then merely on the ground that specific provision has not been provided, it cannot be held that the computation provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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