TaxTMI 
TaxTMI 
2015 (8) TMI 2
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.... Appeals, Mumbai erred in making the addition of Rs. 90,70,1431- as deemed dividend u/s 2(22)(e) as the Appellant company is neither a registered shareholder nor a beneficial shareholder in M/s. Wire & Wireless Satellite Network Pvt. Ltd., the lending company. The Appellant submits that additions of Rs. 90,70,143/- be deleted. 2. Provisions of Section 2 (22) (e) do not apply to the Appellant company: On the facts and circumstances of the case, it is submitted that the Hon. Commissioner of Income Tax Appeals, Mumbai erred in treating the shareholders of the lending company having shareholding of more than 10% in the lending company as the shareholder of the Appellant Company having substantial interest in the appellant company. The ....
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....ening balance to be excluded while computing the Loans & Advances given during the year- for the purpose of computing deemed dividend u/s 2 (22) (e). 5. The Learned Hon. Commissioner of Income Tax Appeals has erred in not considering and admitting the Additional Evidence and Additional Grounds raised before her for the first time." 3. Ground No.1-5 are regarding the addition on account of deemed dividend u/s 2(22)(e) of the Act. The assessee company is engaged in the business of cable TV services. The AO noticed that the assessee has taken a loan of Rs. 1,08,71,574/- from M/s Wire & Wireless Satellite Network Pvt. Ltd.. The AO found that the shareholdings of assessee and M/s. Wire & Wireless Satellite Network Pvt. Ltd., is with common....
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....ns of section 2(22)(e) of the Act. 6. Having considered the rival submissions as well as relevant material on record, we note that the assessee company is not a shareholder of M/s. Wire & Wireless Satellite Network Pvt. Ltd. Merely because, the shareholdings of both the companies are with common shareholders would not make the assessee company the shareholder of the M/s. Wire & Wireless Satellite Network Pvt. Ltd.. The provisions of section 2(22)(e) is a deeming provision and expand the ambit of expression "dividend" if the shareholder of the company has availed the benefit of loan and the company was having the sufficient funds of received and surplus then the shareholder who is having more than 25% equal capital of the company and avai....
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....or loan is a pure finding of fact which does not give rise to any substantial question of law. However, even on the second aspect which has weighed with the Tribunal, we are of the view that the construction which has been placed on the provisions of section 2(22)(e) is correct. Section 2(22)(e) defines the ambit of the expression " dividend" . All payments by way of dividend have to be taxed in the hands of the recipient of the dividend namely the shareholder. The effect of section 2(22) is to provide an inclusive definition of the expression " dividend" . Clause (e) expands the nature of payments which can be classified as a dividend. Clause (e) of section 2(22) includes a payment made by the company in which the public are not substantia....