TMI Blog1993 (2) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... family was 5,300 equity shares. The ITO noticed that in assessee's accounts, the company had shown an advance of loan of Rs. 66,931 at the end of the year. He also noticed that the company had a reserve and surplus of Rs. 1,17,700. The assessee being a director of the company and the reserves and surplus being more than the amount advanced to the company, the ITO applied the provisions of section 2(22)(e) of the Act and treated the amount of Rs. 66,931 as deemed dividend received by the assessee and added the same to her income. 3. Before the DCIT(A), the assessee submitted that she was not substantially interested share-holder ; that the amount represented the interest outstanding on the earlier loan of Rs. 7,80,000 repaid during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N.A. Kazi were heard and their rival submissions considered. Section 2(22)(e) deems the following as dividend : " 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) by way of advance or loan to a shareholder, being a person who has a substantial interest in the company, 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" This clause apparently applies only to a shareholder who has a substantial interest in the company. In other words, it deems the payment of a sum by way of advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a person having substantial interest. The total share holding of the three (5,300) being more than 20 per cent of the entire equity of the company (14,700). Here again, I find that there is nothing in section 2(22)(e) of the Act or section 2(32) of the Act to suggest that the holding or ownership of voting rights of the shares held by the family can be taken into consideration for determining the question as to whether a person is substantially interested in the company or not. The words are " shareholder, being a person who has a substantial interest in the company " as appearing in section 2(22)(e) of the Act and " a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or witho ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
