TaxTMI 
TaxTMI 
2011 (8) TMI 1236
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....as "the Act". The revenue has raised seven grounds of appeal but in sum and substance the same revolve around single core issue of deletion by the ld. CIT(A) u/s 2(22)(e) of the Act. ITA No. 514/Chandi/2011 - AY 2007-08 - Revenue's appeal 2. The brief and undisputed facts, as culled out from the record revealed that the assessee had filed return of income, for the Assessment Year 2007-08, on 15.11.2007, showing income at Rs. 29,65,142/-. The return was processed u/s 143(1) of the Act at an income of Rs. 29,65,142. The case was selected for scrutiny and assessment was framed u/s 143(3) of the Act at Rs. 1,57,87,650/-. 3. In the course of assessment proceedings, the AO invoked provisions of sec 2(22)(e) of the Act and made an additio....
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....lding in the company. These four persons have a combined shareholding of 85.71% and Ms. Harjit Kaur has 58.84% shareholding in M/s Arora Knit Fab Pvt Ltd. which is substantial and decisive in decision making of the company. The loan from M/s Arora Fabrics Pvt Ltd to the assessee is, therefore, a loan to a concern in which the shareholders have substantial interest. In this case the combined substantial shareholding of 85.71% actually satisfies the condition that M/s Arora Fabrics Pvt Ltd. Has diverted its accumulated profits to you since the above mentioned four shareholders have a substantial shareholding in the recipient assessee company. Therefore it is the same setup of shareholders who have the requisite voting power and substantial sh....
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....rest and therefore after giving an opportunity to the assessee treated the same as dividend u/s 2(22)(e) of the Act. However, addition was restricted to an amount of Rs. 1,12,44,452/- being the amount of reserve and surplus of M/s AFPL as on 31.3.2006 as against loans and advances of Rs. 4,43,00,000/-. Assessee, however, has objected to the above addition in eh written submissions reproduced above primarily on the following grounds: (i) That only the shareholders can be assessed on account of deemed dividend and not the company u/s 2(22)(e) of the Act. (ii) The business transactions are not covered u/s 2(22)(e) of the Act. (iii) There can not be any clubbing of the individual, HUF, Minor and wife for the purpose o....
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....lusion that provisions of section 2(22)(e) are applicable on the ground that the family as a whole and Ms. Meena Arora have substantial shareholding in the assessee company and Ms. Harjit Kaur has 58.84% (actually it is 9.26%) in the assessee company. As noted in the written submissions, none of the share holder who is the beneficial owner of shareholding not less than 10% of the voting power in the assessee company holdsl substantial interest in M/s AFPL. Ms. Neena Arora is holding 58.84% in the assessee company but she is holding only 9.32% shares in M/s AFPL which is below 10%. Her shareholding in AFPL and is also holding 9.26% shareholding in assessee company which is below 20% which is necessary to decide the holding of substantial int....
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....r and drew our attention, to the shareholding pattern of the assessee. He supported the findings of the AO on the basis of case-laws cited in the assessment order, in respect of colourable device resorted to by the assessee. 6. Ld. 'AR' for the assessee submitted paper book and cited many decisions therein but placed reliance on the following cases and, further, vehemently contended that the core issue is squarely covered by the following decisions: 1 CIT v. Universal Medicare P Ltd (2010) 190 Taxman 144 (Bom) 2 SB decision in the case of Bhaumik Colours Pvt Ltd (2009) 313 ITR (AT) 146 Mumbai (SB) 3 CIT V. Hotel Hilltop (2009) 313 ITR 116 (Raj) 7 We have carefully perused the facts of the case, rival submiss....
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....st or any payment by any such company on behalf or for the individual benefit of any such shareholder..." Thus, the substance of the requirement is that the payment should be made on behalf of or for the individual benefit of any such shareholder. , obviously the provision is intended to attract the liability of tax on the person, on whose behalf or for whole individual benefit the amount is paid by the company whether to the shareholder or to ....concerned firm. In which event, it would fall within the expression "deemed dividend". Obviously income from dividend is taxable as income from other sources under Sec 56 and in the very nature of things, the income has to be of the person earning the income. The assessee in the present case is no....