TMI Blog2011 (2) TMI 1478X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(22)(e) of the Act. ITA No. 514/Chandi/2011 AY 2007-08 Revenue s appeal 2.The brief and undisputed facts, as culled out from the record revealed that the assessee had filed return of income, for the Assessment Year 2007-08, on 15.11.2007, showing income at ₹ 29,65,142/-. The return was processed u/s 143(1) of the Act at an income of ₹ 29,65,142. The case was selected for scrutiny and assessment was framed u/s 143(3) of the Act at ₹ 1,57,87,650/-. 3. In the course of assessment proceedings, the AO invoked provisions of sec 2(22)(e) of the Act and made an addition of ₹ 1,12,44,952/-, on the foundation of observation that the assessee had resorted to colourable device with a view to evading tax. The AO pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is substantial and decisive in decision making of the company. The loan from M/s Arora Fabrics Pvt Ltd to the assessee is, therefore, a loan to a concern in which the share holders have substantial interest. In this case the combined substantial share holding of 85.71% actually satisfies the condition that M/s Arora Fabrics Pvt Ltd. Has diverted its accumulated profits to you since the above mentioned four share holders have a substantial share holding in the recipient assessee company. Therefore it is the same setup of share holders who have the requisite voting power and substantial share holding in both the entities. 4. The ld. CIT(A), after due appreciation of the submissions filed by the assessee and the case laws cited therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricted to an amount of ₹ 1,12,44,452/- being the amount of reserve and surplus of M/s AFPL as on 31.3.2006 as against loans and advances of ₹ 4,43,00,000/-. Assessee, however, has objected to the above addition in eh written submissions reproduced above primarily on the following grounds: (i) That only the share holders can be assessed on account of deemed dividend and not the company u/s 2(22)(e) of the Act. (ii) The business transactions are not covered u/s 2(22)(e) of the Act. (iii) There can not be any clubbing of the individual, HUF, Minor and wife for the purpose of Sec 2(22)(e) of the Act. 4.1 As far as assessee s contention regarding that only share holders can be assessed on account of deemed di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company and Ms. Harjit Kaur has 58.84% (actually it is 9.26%) in the assessee company. As noted in the written submissions, none of the share holder who is the beneficial owner of share holding not less than 10% of the voting power in the assessee company holdsl substantial interest in M/s AFPL. Ms. Neena Arora is holding 58.84% in the assessee company but she is holding only 9.32% shares in M/s AFPL which is below 10%. Her share holding in AFPL and is also holding 9.26% share holding in assessee company which is below 20% which is necessary to decide the holding of substantial interest in a company to whom the loans and advances have been given. It is thus, seen that conditions laid down in section 2(22)(e) with regard to minim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order, in respect of colourable device resorted to by the assessee. 6. Ld. AR for the assessee submitted paper book and cited many decisions therein but placed reliance on the following cases and, further, vehemently contended that the core issue is squarely covered by the following decisions: 1 CIT v. Universal Medicare P Ltd (2010) 190 Taxman 144 (Bom) 2 SB decision in the case of Bhaumik Colours Pvt Ltd (2009) 313 ITR (AT) 146 Mumbai (SB) 3 CIT V. Hotel Hilltop (2009) 313 ITR 116 (Raj) 7 We have carefully perused the facts of the case, rival submissions and relevant paper book filed by the assessee. A bare perusal of the facts reveals that the issue is covered by the above decisions relied upon by the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on behalf of or for the individual benefit of any such shareholder. , obviously the provision is intended to attract the liability of tax on the person, on whose behalf or for whole individual benefit the amount is paid by the company whether to the shareholder or to .concerned firm. In which event, it would fall within the expression deemed dividend . Obviously income from dividend is taxable as income from other sources under Sec 56 and in the very nature of things, the income has to be of the person earning the income. The assessee in the present case is not shown to be one of the persons being shareholder. Of course the two individuals being R and D are the common persons, holding more than requisite amount of shareholding and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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