TMI Blog1997 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... business to ply lorries or advance monies for purchase of lorries and the money of the company had been diverted for non-business use. He held that the assessee is a shareholder substantially interested in the affairs of the company and, therefore, a sum of Rs. 87,000 overdrawn by the assessee during the year of account was treated as a loan or advance to a shareholder substantially interested in the affairs of the company and assessed the same as deemed dividends invoking the provisions of section 2(22)(e) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The assessee carried the matter by way of appeal to the Appellate Assistant Commissioner against the inclusion of the sum of Rs. 87,000 as deemed dividend. The Appellate Assistant Commissioner found that the payment could be regarded as advance. However, the Appellate Assistant Commissioner held that the assessee is not a person substantially interested in the affairs of the company during the relevant previous year on the ground that the shares held for the benefit of three minors by their guardian one T. P. S. H. Selva Saroja should also be included in the total number of shares to determine the question whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oting power. The definition is relevant in considering the applicability of section 2(22)(e) of the Act, as the said provision would apply only in the case of advance or loan made by a company in which the public are not substantially interested to a person having a substantial interest in the company. The assessee had 793 shares in his name and one Selva Saroja had 1,694 shares. The case of the Revenue is that the shares held in the name of three minor children, viz., 2186 shares, should completely be excluded on the ground that the minors have no voting right. As already seen, the said shares were held by Selva Saroja as guardian, and the finding of the Tribunal is that it is not the minors who held the shares, but the guardian. Section 153 of the Companies Act, 1956, provides that no notice of any trust, express, implied or constructive, shall be entered on the register of members or of debenture-holders. The register would show that the guardian is the shareholder and the company is not to take notice of any such relationship of the trustee and the beneficiary. Gower in his book Gower's Principles of Modern Company Law, 4th edition, at page 431, observed as under : "The reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n recover sums he has paid the company in respect of the shares provided that there was a total failure of consideration. If the shares were of any value he cannot recover money which he has paid although he can resist any further calls." Until repudiation either by the company or the minor, a minor has the full powers of membership. It is also profitable to refer to a passage from the Guide to the Companies Act by A. Ramaiya (Twelfth edition) wherein the learned author observes as under: "When a guardian of a minor applies to be a member of a company, the company cannot enter the name of a minor in the share register, because a person's name may be registered as a shareholder only if he agrees in writing to be a member of the company. If the shares are registered in the name of the guardian, the guardian alone is the shareholder by virtue of section 153 of the Companies Act." The position of shares held by the minors has been the subject-matter of consideration in several decisions, but it is not necessary to consider those cases, as in the instant case, the finding of the Tribunal is that the guardian is found to be the shareholder. Therefore, if the shares are registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was nothing on record to show that the guardian was entertained as a subscriber of the company. This court, therefore, held that in the absence of any evidence that any of his money was used for the said purpose, the guardian cannot be treated as a subscriber. However, the question whether the natural guardian can be regarded as a contributor or not, need not be examined as the facts of the case clearly show that the shares were standing in the name of Selva Saroja. It is also not disputed that she is the natural guardian and under section 153 of the Companies Act, it is not open to the company to recognise any trust and when in the register of members the name of Selva Saroja is shown, she must be regarded as a shareholder and, consequently, the company is not concerned with the relationship between the shareholder and the minor children in the matter of exercise of voting rights by her. It is, therefore, obvious that Selva Saroja, as a shareholder, can exercise the right of voting in respect of shares belonging to the minors and it is not possible to hold that those shares have no voting power. In addition, there is no provision of law which would deprive the shareholder from e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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