Individual Shareholders Liable for Dividend Tax, Not Company Receiving Share Application Money

The High Court dismissed the revenue's appeal, upholding the ITAT decision that deemed dividend tax liability applies to individual shareholders, not the company receiving share application money. As the assessee company was not a registered shareholder, the appeal was deemed devoid of merit.

---

---

Issues involved: Interpretation of Sec. 2(22)(e) of IT Act, 1961 regarding deemed dividend in the case of share application money received by a company.

Summary:
1. The revenue filed an appeal against the ITAT order based on a previous judgment in CIT v. Hotel Hilltop. The assessee received &8377; 23.00 lacs as share application money from M/s. Japanwala Jewellers, treated as unsecured loan and deemed dividend u/s 2(22)(e). The Commissioner of Income-tax Appeals held that deemed income cannot be taxed in the hands of non-shareholders, benefit of set off not allowed to the concern, and deemed dividend should be considered in the hands of the individual shareholder, not the company.

2. The revenue appealed to the ITAT, which also held that liability of tax as deemed dividend applies to individuals being shareholders, not the firm. Since the assessee company was not a registered shareholder of M/s. Japanwala Jewellers, the appeal of the Revenue was dismissed.

3. The High Court found no substantial question of law requiring interference and dismissed the appeal, stating it was devoid of merit.

---