TMI Blog2019 (8) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Assessee : Shri Anil Lohia, Ld. AR For the Revenue : Chaudhury Arun Kumar, Ld. DR ORDER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1.1 As per the provisions of Section 2(22)(e) of the Income Tax Act, 1961 [in short Act ], dividend includes any payment of any sum, by a company (not being a company in which the public are substantially interested), by way of advance or loan to a shareholder, being the person who is the beneficial owner of shares holding not less than 10% 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 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 . However, any advance or loan to a shareholder or the said concern by a company in the ordinary course of its business, where lending of money is a substantial part of business of the company would not constitute dividend. As per Explanation-3, the term concern would include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is included so as to visit the shareholder with a liability to pay tax. It is eventually, the shareholder who will pay tax on the same. The shareholder cannot escape that liability merely because the loan or advance has been made over to any concern in which such shareholder is a member or a partner and in which he has substantial interest. Earlier, legislature noted that the shareholder would receive the sum from a company and which is not strictly falling within the concept of dividend . Firstly, because that was received by way of advance or loan, secondly, an attempt was made to show that the advance or loan is not to the shareholder who is registered as such but to a concern in which he is a member or a partner and in which he may have a substantial interest but that cannot be termed as advance or loan to the shareholder. With a view to take care of such stand of the shareholders and not allow them to escape the liability to pay tax that the definition came to be broadly worded by indicating therein the reference to any concern. Equally, any payment made by such company on behalf of the shareholder or for individual benefit of any shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Percentage of shareholding 1. Shri Nandan Damani 64.24% 2. Mrs. Shreelekha Damani 32.91% TOTAL 97.16% Admittedly, Shri Nandan Damani hold substantial interest in both the entities within the meaning of Section 2(22)(e). It is also undisputed fact that accumulated reserves of lender company are quite sufficient to cover the said loans. Another undisputed fact is that the assessee is neither beneficial not registered shareholder of the lender company. During the course of hearing before Ld. Assessing Officer, the assessee, inter-alia, drew attention to the fact that substantial loan was received by the assessee, before Shri Nandan Damani became shareholder of the assessee company. However, disregarding the same and invoking the provisions of Section 2(22)(e), Ld. Assessing Officer treated the amount of loan as deemed dividend and added the same to the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions by relying upon the decision of jurisdictional High Court. Nothing on record suggest that the aforesaid decision is not applicable to the facts of the present case. 4. The revenue, during the course of hearing, has placed on record the decisions of Hon ble Supreme Court rendered in National Travel Services V/s CIT [89 Taxmann.com 332] Gopal Sons HUF V/s CIT [77 Taxmann.com 71] to submit that the provisions of Section 2(22)(e) has rightly been invoked on given factual matrix. However, we find that both the decisions are distinguishable on facts which is evident from the orders of this Tribunal rendered in Neha Home Builders Pvt. Ltd. V/s DCIT [98 Taxmann.com 465 05/10/2018] DCIT V/s Gilbarco Veeder Root India (P.) Ltd. [96 Taxmann.com 262 20/06/2018]. 5. The relevant observation of Tribunal in Neha Home Builders Pvt. Ltd. V/s DCIT [supra], for ease of reference, could be extracted in the following manner: - 18. Now we deal with the decisions relied by the CIT(A) for holding that amount received by the assessee is liable to be taxed as deemed dividend. 19. In the case of Gopal And Son ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Goyal and Mr. Surinder Goyal are shareholders on the Company's register as members of the Company. They hold the aforesaid shares for and on behalf of the firm, which happens to be the beneficial shareholder. 23. However, in the present case assessee is neither registered shareholder nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 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 natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the company were held by the karta of the HUF. It is in this context that the Hon'ble Supreme Court upheld the addition in the hands of the HUF as factually the HUF was the beneficial shareholder. The fact-situation in the case before us stands on an entirely different footing inasmuch as the assessee-recipient of money is neither the registered nor the beneficial shareholder of the payer company, i.e. Portescap. Ostensibly, the common registered as well as beneficial shareholder of assessee-company and Portescap is Kollmorgen and not the assessee-company. Therefore, the decision of the Hon'ble Supreme Court in the case of Gopal and Sons (HUF) (supra) is inapplicable to the facts of the present case. In fact, the learned representative for the respondentassessee has correctly placed reliance on the judgment of the Hon'ble Madras High Court in the case of Ennore Cargo Container Terminal (P.) Ltd. (supra), which has been rendered in a somewhat identical situation. In order to elaborate the point, the following discussion in the judgment of the Hon'ble Madras High Court, which is reproduced hereinafter, would show that in the present circumstances before us, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in this context that the Supreme Court came to the conclusion that HUF was the beneficial shareholder. 5.2 In the instant case, however, both the registered and beneficial shareholders are two individuals and not the assessee-company. Therefore, in our view, the judgment of the Supreme Court does not rule on the issue which has come up for consideration in the instant matter. 12. Thus, in view of the aforesaid discussion, we hereby affirm the decision of CIT (A) and Revenue fails in its appeal. 13. In the result, appeal of the Revenue is dismissed. In both these decisions, the decisions cited by the revenue has been distinguished on facts and found to be not applicable on given factual matrix. 7. Therefore, respectfully following the binding judicial precedent in the shape of decisions of Hon ble Bombay High Court and the decision of coordinate bench of the Tribunal, we confirm the stand of Ld. first appellate authority in deleting the impugned addition and dismiss revenue s appeal. Consequently, the assessee s cross-objections become infructuous. 8. Resultantly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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