TMI Blog2022 (6) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 dated 22.09.1997 issued by CBDT is concerned, such observations are not binding on the Courts. Once it is found that such loan or advance cannot be treated as deemed dividend at the hands of such a concern which is not a shareholder, and that is the correct legal position, such a circular would be of no avail. The definition of shareholder is not enlarged by any fiction. We are of the view that this issue is covered by the decision of Hon ble Supreme Court MADHUR HOUSING AND DEVELOPMENT COMPANY [ 2017 (10) TMI 1279 - SUPREME COURT] wherein it is held that as per provisions of section 2(22)(e) of the Act, the concern like the assessee which has received loan from M.Ct.M Corporation P Ltd., which is giving loan or advance is not a shareholder or member of the receiver company. Therefore, under no circumstances the assessee could be treated as shareholder, member receiving dividend. Hence, the assessment of this loan received by assessee cannot be treated as deemed dividend u/s.2(22)(e) of the Act. Hence, we delete the addition and allow this issue of assessee s appeal. Disallowing VRS payment claimed - As argued this amount was added back by the AO notwithstanding the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 2(22)(e) are applicable to the transaction, the L'd CIT(A) ought to have found that the same would be taxable only in the hands of the shareholders and not the receiving company. 3. Brief facts are that the assessee company filed its return of income by filing audit report in Form No.3CD u/s.44AB of the Act. This return was processed u/s.143(1) of the Act and thereafter notice u/s.147 r.w.s. 148 of the Act was issued. The reasons recorded for reopening of assessment was that the assessee company has received a loan of Rs.71 lakhs from M.Ct.M Corporation P Ltd. As the assessee company s shareholders who are having substantial interest are having 10% voting power in the above said company, the loan is to be treated as deemed dividend in the hands of the assessee company as per the provisions of section 2(22)(e) of the Act. The assessee during the course of assessment proceedings stated that the provisions of section 2(22)(e) of the Act would not apply to loan amount of Rs.71 lakhs received from M.Ct.M Corporation P Ltd, as none of the shareholders who beneficially hold substantial interest holds also more than 10% in the lending company i.e., M.Ct.M Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the sections 2(22)(e) 2(32) of the Act uses the beneficial ownership tests only. None of the shareholders who beneficially hold more than 10% shares carrying voting rights in the lending company. The assessee before us and even the same before the AO and CIT(A) filed details of share holding pattern as under:- As on 01st April 1999 Name of the Shareholder No. of Shares Percentage held M Ct Muthiah 2,500 50% Kamala Muthiah 2,500 50% TOTAL 5,000 100% As on 31st March 2000 Name of the Shareholder No. of Shares Percentage held M Ct Muthiah 60,500 51% Kamala Muthiah 17,500 15% Arti Meenakshi 15,300 13% Nandini Valli 15,300 13% Art Meenkashi Trust 5,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument is that such loan or advance, in the first place, is not an income. Such a loan or advance has to be returned by the recipient to the company, which has given the loan or advance. Precisely, for this very reason, the Courts have held that if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under Section 2(22)(e) of the Act. Insofar as reliance upon Circular No. 495 dated 22.09.1997 issued by CBDT is concerned, such observations are not binding on the Courts. Once it is found that such loan or advance cannot be treated as deemed dividend at the hands of such a concern which is not a shareholder, and that is the correct legal position, such a circular would be of no avail. The definition of shareholder is not enlarged by any fiction. 6. In view of the above, we are of the view that this issue is covered by the decision of Hon ble Supreme Court wherein it is held that as per provisions of section 2(22)(e) of the Act, the concern like the assessee which has received loan from M.Ct.M Corporation P Ltd., which is giving loan or advance is not a shareholder or member of the receiver company. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
