TaxTMI 
TaxTMI 
2015 (5) TMI 7
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.... substantial question of law; "Whether the Appellate Tribunal has substantially erred in deleting the addition on the ground that assessee company is not a registered share holder of the lender company, when the definition of deemed dividend under Section 2(22)(e) clearly includes registered as well as beneficial shareholders?" 2.0 The assessee who was dealing in the ship breaking activity filed the return of income for the Assessment Year 2009-10 declaring the total income at Rs. 1,50,59,920/-. The return of income was duly processed under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the "Act") on 02/08/2010 and the case was selected for scrutiny and notice under Section 143(2) of the Act was issued and served u....
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.... should not be considered to be taxed as deemed dividend. In reply it was submitted that the assessee-Company is not a registered shareholder and, therefore, the amount obtained by the assessee from M/s. Shree Ram Vessel Scrap Pvt. Ltd could not be treated as deemed dividend, however, the Assessing Officer did not accept the said submission of the assessee and added a sum of Rs. 4,14,71,946/-, which represented the amount shown as reserved and surplus in the books of M/s. Shree Ram Vessel Scrap Pvt. Ltd. 2.2 Feeling aggrieved and dissatisfied with the aforesaid addition made by the Assessing Officer invoking the provisions of Section 2(22)(e) of the Act, the assessee preferred appeal before the learned CIT(A) and the learned CIT(A) dismiss....
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....mpanies (i.e. companies in which public are not substantially interested), which are controlled by a group of members, even though the company has accumulated profits would not distribute such profit as dividend because if so distributed the dividend income would become taxable in the hands of the shareholders. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have substantial interest or make any payment on behalf of or for the individual benefit of such shareholder. In such an event, by the deeming provisions, such payment by the Company is treated as dividend. The intention behind the provisions of Section 2(22)(e) of the Act is ....
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....ompany. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of "deeming shareholder", then the Legislature would have inserted a deeming provision in respect of shareholder as well, that has not happened. Most of the arguments of the learned Counsel for the revenue would stand answered, once we look into the matter from this perspective. 26. In a case like this, the recipient would be a shareholder by way of deeming provision. It is not correct on the part of the Revenue to argue that if this position is taken, then the income "is not taxed at the hands of the recipient". Such an argument based on ....