TMI Blog2018 (10) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... de that since assessee was neither the beneficial nor the registered shareholder of the company, the amount so received is not liable to be taxed as deemed dividend. Moreover, the transaction between two group concerns were in the nature of current account and inter banking account containing both types of entries i.e., receipts and payments, the same cannot be brought in the purview of loans and advances so as to attract Section 2(22)(e). - Decided in favour of assessee. - ITA No.3157/Mum/2018 - - - Dated:- 5-10-2018 - SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM For The Assessee : Shri Vimal Punmiya For The Revenue : Shri Purushottam Tripuri ORDER PER R.C.SHARMA (A.M): This is an appeal filed by assessee against the order of CIT(A)-21, Mumbai dated 06/03/2018 for A.Y.2013-14 in the matter of order passed u/s.143(3) of the IT Act. 2. The following grounds have been taken by the assessee:- 1. The Ld CIT(A) erred in confirming and treating ₹ 10,82,10,904/- on account of Deemed Dividend under section 2(22)(e) of the Income Tax Act, 1961 and thereby erred in adding the same to the total income of the assessee. 2. The LD. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 (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 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 shareholder, to the extent to which the company in either case possesses accumulated profits; but dividend does not include-{i) a distribution made in accordance with sub- clause (c) or sub- clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets; But dividend does not include- (i) A distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 2(22)(e) could not be apply. For this purpose, reliance was placed on M/s. Shell Business (P) Ltd. Vs. ITO, ITA No,1737/K/07, Tanuj Holdings (P) Ltd., V/s. DCIT (2017) 88 Taxmann.com 385 (Kol-Trib) Shri Jhamu U. Sughand v/s. CIT 2006 284 ITR 83 Mum. 7. It was also contention of learned AR that 2(22)(e) is not applicable as assessee is not even a share holder of EIPL. 8. From the record, we observe that pattern of Share Holding of NHBPL and EIPL is as under: S N. Name of Share Holder % Holding 1. Paras Gundecha HUF 10 2. Gundecha Builders Pvt Ltd 15 3. Paras Devraj Gundecha 20 4. Waves Hotel Estate Pvt Ltd 10 5. Deepak Paras Gundecha 20 6. Poonam Paras Gundecha 20 7. Devraj Investment Pvt Ltd 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is not shareholder, the provisions of Section 2(22)e cannot be applied. Hon ble Supreme Court further observed as under:- Having perused the judgment and having heard arguments, we are of the view that the judgment is a detailed judgment going into Section 2(22)(e) of the Income Tax Act which arises at the correct construction of the said Section. We do not wish to add anything to the judgment except to say that we agree therewith . 11. Hon ble Bombay High Court in the case of Impact Containers Ltd., (2014) 48 Taxman.com 294 observed that where certain companies advanced money to assessee-company in which one director of assessee was holding more than 10 per cent equity shares, since assessee itself was not shareholder of those lending companies, impugned addition made by Assessing Officer by invoking provisions of section 2(22)(e) was not sustainable. 12. Hon ble Karnataka High Court in the case of Sarva Equity (P) Ltd., (2014) 44 Taxmann.com 28 observed as under: Whether in terms of section 2(22)(e), it is only person whose name is entered in Register of shareholders of company as holder of shares who can be said to be a shareholder qua company and- not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- Whether where Assessing Officer made addition to assessee's income Under section 2(22)(e) in respect of loan given by one company to another company by taking a view that assessee was holding substantial interest i.e. more than ten per cent shareholding in both companies, in view of fact that transactions were in form of current accommodation entries and there was movement of funds in both ways on need basis, amount in question could not be regarded as deemed dividend and, consequently, impugned addition was to be deleted - Held, yes. 16. Delhi Tribunal in the case of Saamag Developers (P) Ltd., (2018) 90 taxmann.com 20 observed as under:- Transactions between group concerns being current and inter banking accounts, additions made to assessee's income under section 2(22)(e) in respect of amounts received from various group companies could not be considered as loans and advances as contemplated under section 2(22)(e), hence, no additions could be made as deemed dividend under section 2(22)(e). 17. In view of the above judicial pronouncements since transaction between group companies were carried as inter banking accounts containing both the types ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. It is clear from the above order that all the parties have clearly held that HUF was real beneficial owner of the company, accordingly amount so received was correctly held to be deemed dividend. However, in the present case assessee neither a registered nor beneficial share holder of EIPL which is not disputed by the revenue authority. Hence, decision of Gopal and Sons HUF will not apply in present case. But it supports the contention of assessee that .addition cannot be made in assessee s hand because NHBPL is not a beneficial shareholder of EIPL. 22. In the case of National Travel Services [2018] 89 taxmann.com 332 (SC), the assesses is a partnership firm consisting of three partners, namely, Mr. Naresh Goyal, Mr. Surinder Goyal and M/s Jet Enterprises Private Limited having a profit sharing ratio of 35%, 15% and 50% respectively. The Assessee firm had taken a loan of ₹ 28,52,41,516/- from M/s Jetair Private Limited, New Delhi. In this Company, the Assessee subscribed to the equity capital of the aforesaid Company in the name of two of its partners, namely, Mr. Naresh Goyal and Mr. Surinder Goyal totaling 48.19 per cent of the total shareholding. Thus Mr. Naresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 26. In view of the above, the decision of the Hon ble Supreme Court as on today established binding. Under Article 141 of the Constitution, ratio of decision of the Hon ble Supreme Court and principle underlying decision is binding. It is most crucial to note that in that case matter was referred to reconsider the earlier decision with their observation that for applying deemed dividend provision it is sufficient if the shareholder is beneficial shareholder. It need not be necessary that shareholder must be registered shareholder. Because as per earlier decision for applying deemed dividend shareholder must satisfy both character of shareholder i.e. Registered as well as beneficial shareholder. Thus, as per observation of this decision also shareholder needs to be beneficial Shareholder. If the shareholder is not a beneficial shareholder then as per this observation also provisions of deemed dividend will not apply. Hence, all the decision supports the contention of assessee that deemed divided cannot be apply in assessee s hand as it is neither registered nor beneficial shareholder of EIPL. 27. In view of the above discussion, we can safely conclude that since assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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