TaxTMI 
TaxTMI 
2015 (2) TMI 951
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.... tax and secondly on merits the applicability of Section 2 (22) (e), in the circumstances of the case. 2. Theses appeals concern the Assessment Years 1999-2000, 2000-01 and 2001-02. Ms. Harjit Kaur, concededly a shareholder of M/s Pure Drinks (New Delhi) Ltd. had borrowed amounts from C.J. International Hotels Pvt. Ltd. i.e., the assessee. The Assessing Officer (AO) sought to bring them to tax under Section 2 (22) (e) reasoning that since she had more than 10% stake in the assessee company, and that the other conditions spelt out in Section 2 (22) (e) were satisfied, it had to be treated as deemed dividend. The assessee contended in the appeal that the initiation of proceedings under Section 201 was barred; it was contended on merits....
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....ese matters were carried in appeal by special leave to the Supreme Court, the issue was left open. In the absence of compelling reasons, this Court should follow the ruling in NHK Japan (supra). 5. So far as the question on merits is concerned, learned counsel relies upon the Division Bench ruling in Commissioner of Income Tax v. National Travel Service, (2012) 347 ITR 305 (Del) and CIT Vs. Ankitech (P) Ltd. (2012) 340 ITR 14 to say that the requirement of Section 2 (22) (e) is fulfilled only if both the pre-conditions are met with. 6. It is evident from the above discussion that the assessee was sought to be proceeded against Section 201 as one in default, after the period of four years. This Court is conscious that the text of the provi....
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....with retrospective effect, from 1.4.1966. The provision underwent legislative changes on different occasions. The decision in NHK Japan was rendered on 23.04.2008. The Revenue's appeal was rejected on 3.7.2014. Although, the Supreme Court had granted special leave and has apparently stated in its final order rejecting the Revenue's appeal that the question is left open, the mere circumstance that the Parliament did not spell out any time limit before it did eventually in 2009 - and subsequently in 2014 - would not lead to the sequitur that this Court's ruling in NHK Japan requires consideration. In that judgment, the Division Bench had given various reasons, including the application of the rationale in Bhatinda District (supra). In NHK Jap....
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....the Act which did not prescribe the period of limitation and left it to the discretion of the AO to decide on being satisfied that such proceedings were required to be initiated, the Court limited such discretion in the following terms: "44. In the result, we hold that for the purpose of Section 158BD of the Act a satisfaction note is sine qua non and must be prepared by the assessing officer before he transmits the records to the other assessing officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under Section 158BC of the Act; (b) along with the assessment proceedings under....
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....ividend". Thus, by a deeming provision, it is the definition of dividend which is enlarged. Legal fiction does not extend to "shareholder". When we keep in mind this aspect, the conclusion would be obvious, viz., loan or advance given under the conditions specified under section 2 (22) (e) of the Act would also be treated as dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. It is a common case that any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to non-members. The second category specified under section 2 (22) (e) of the Act, viz., a concern (like the assessee her....