TMI Blog2015 (12) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... s well settled law that the construction which advances the object of legislation should be made and not the one which defeats the same. The percentage of shareholding in the concern to which loan is given, is the determining factor of the deemed dividend in case of shareholder. In the present case, since in M/s Aesthete International Ltd., Mr. Puneet Bhagat had 53.85 shareholding. Therefore, ₹ 5,38,500/- should have been assessed as dividend in the hands of Shri Puneet Bhagat and ₹ 4,61,100/- should have been taxed as deemed dividend in the hands of Mrs. Suneeta Bhagat. Since in case of Mr. Puneet Bhagat, this will lead to enhancement of income, uphold the addition of ₹ 5 lakhs only in his case. - Decided against assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- 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 assessment proceedings of M/s Aesthete International Ltd. for AY 2007-08, the then AO noticed that M/s Aesthete International Ltd. had received an amount of ₹ 10 lacs from its sister concern M/s Aesthete Exim Pvt. Ltd. and this amount of loan was treated as deemed dividend u/s 2(22)(e) in the hands of M/s Aesthete International Ltd. However, the said addition was deleted by ld. CIT(A), inter alia, observing that the amount could be brought to tax only in the hands of share holder of lender company i.e. Shri Puneet Bhagat and Smt. Sunita Bhagat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 applied must be regarded as never intended by section 45 to be the subject of charge. This inference flows from the general arrangement of the provisions in the Income-tax Act, where under each head of income the charging provision is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus, the charging section and the computation provision together constitute an integrated code. When there is a case to whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 Court in the case of CIT Vs. Ankitech (P) Ltd. (supra) and CIT Vs. Navyug Promoters Pvt. Ltd. 6. Ld. counsel for the assessee submitted that, in the facts of the case, the addition u/s 2(22)(e) in the hands of two directors cannot be disputed because both the directors have substantial shareholdings in the two concerns, However, no mechanism has been provided in the Act regarding computation of deemed dividend in the hands of the two directors. 7. Ld. DR relied on the orders of authorities below. 8. I have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares 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 (herein 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 shareholder, to the extent to which the company in either case possesses accumulated profits. 10. The ingredients of the section are as under:- I. Payment to individual shareholder:- (A) The payment should be by a company (not being company in which public is substantially interested). (B) The payment can be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very 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 provisions fails. It is well settled law that the construction which advances the object of legislation should be made and not the one which defeats the same. The percentage of shareholding in the concern to which loan is given, is the determining factor of the deemed dividend in case of shareholder. In the present case, since in M/s Aesthete International Ltd., Mr. Puneet Bhagat had 53.85 shareholding. Therefore, ₹ 5,38,500/- should have been assessed as dividend in the h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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