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2015 (12) TMI 1178 - ITAT DELHI

2015 (12) TMI 1178 - ITAT DELHI - TMI - Addition on deemed dividend - Held that:- 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 .....

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nternational 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 - ITA No. 3025 to 3026 /Del/2015 - Dated:- 16-12-2015 - Shri S. V. Mehrot .....

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e are 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/- 4 .....

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n 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 and not in the hands of company, which is not a registered share holder of the lender company. Accordingly, the assessee was show caused as to why loan advanced to M/s Aesthete International Ltd. by M/s Aesthete Exim Pvt. Ltd. should not .....

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he two directors in M/s Aesthete Exim Pvt. Ltd. was 50% each, whereas in M/s Aesthete International Ltd. it was 53.85% (Puneet Bhagat) and 46.11% (Smt. Sunita Bhagat). It was further pointed out that no manner of computation 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 Bh .....

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d 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. .....

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e entire conspectus of provisions pertaining to each head on income. 4. The AO, after considering the assessee s submissions, concluded that the loan was to be treated as deemed dividend in the hands of individual directors and since Shri Puneet Bhagat and Smt. Sunita Bhagat were equal beneficiary of share to the tune of 50% each in M/s Aesthete International Ltd., the company which had received the loan, therefore, the amount of loan of ₹ 10 lacs was to be equally divided and added to the .....

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on 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 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 dire .....

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here is no dispute that cumulative reserves of M/s Aesthete Exim Pvt. Ltd. as on 31-3-2007 were ₹ 14,51,212/- and, therefore, the amount of ₹ 10 lacs given as loan to M/s International Ltd. was taxable as deemed dividend in the hands of two directors as both the directors were common shareholders in the two companies holding more than 20% shares of these companies. The contention of ld. counsel is that had the loan was given to one shareholder, the same could be computed as per law b .....

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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 has a subst .....

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rt of the assets of the company. (C) The payment should be in the nature of avance or loan to a shareholder who is holding at lest 10% shares beneficially. (D) The above payment to the extent of accumulated profits of the lender company would be treated as deemed dividend in the hands of shareholder qualifying the criteria of holding 10% beneficial holding of shares. II. Payment to concerns: In this case all the conditions of payments in case of individual shareholder noted above have to be fulf .....

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