TaxTMI 
TaxTMI 
2017 (2) TMI 226
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....ed dividend under Section 2(22)(e) of the Act, the Revenue has preferred present Tax Appeal with the following proposed question of law. "Whether the Appellate Tribunal is right in deleting the addition of deemed dividend Rs. 41,25,289/- for AY 2005-06 and Rs. 40,26,933/- for AY 2007-08 u/s 2(22)(e) of the Act despite the fact that the assessee held more than 90% shares of the lending company keeping in view the intention of the legislature? 2.0. The facts leading to the present appeal in nutshell are as under: 2.1. That the assessee filed return of income for AY 2007-08. That the assessee was having 40% share holding in Biotech Opthaimic Pvt Ltd (BOPL for short) and also having 94.92% in Biotech Vision Care Pvt Ltd (BVCPL for short) g....
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....l with the aforesaid proposed question of law. 3.0. Shri Manish Bhatt, learned counsel for the revenue has vehemently submitted that in the facts and circumstances of the case, the learned Tribunal has materially erred in deleting the addition made by the AO of Rs. 40,26,933/- treating the same as deemed dividend under Section 2(22)(e) of the Act. It is submitted that while making the deletion of aforesaid addition made by the AO, the learned Tribunal has not properly appreciated the scope and ambit of Section 2(22)(e) of the Act. 3.1. It is further submitted by Shri Manish Bhatt, learned counsel for the revenue that the learned Tribunal has not properly appreciated the fact that the assessee was common shareholder both in BOPL and BVCPL ....
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....se of CIT vs. Ankitech Pvt Ltd reported in 340 ITR 14 (Del), the Division Bench has confirmed the deletion made by the learned Tribunal by holding that from whom loan and advance was taken by the assessee must be shareholder in the assessee company. In para para 3 & 4, the Division Bench has observed and held as under: [3.0] We have heard Shri Manish Bhatt, learned Counsel appearing on behalf of the revenue at length. We have also considered and gone through the impugned judgment and order passed by the learned Tribunal; the assessment order as well as the order passed by the learned CIT(A) making the addition of Rs. 4,14,71,946/- made by the Assessing Officer invoking Section 2(22)(e) of the Act. In paras 24 to 27, the Delhi High Court in....
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....) of the Act. We have to keep in mind that this legal provision relates to dividend. 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 nonmembers. The second category specified under ....
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....dering the provisions of Section 2(22)(e) of the Act, we are in complete agreement with the view taken by the Delhi High Court. [4.0] Shri Bhatt, learned Counsel appearing on behalf of the revenue has as such tried to justify the decision of the Delhi Court in the case of Ankitech Pvt. Ltd. (Supra) and has vehemently submitted that the Delhi High Court has not considered the third category i.e. shareholder in the assessee-Company holding not less than 10% of the voting power in the Company from whom the loan or advance is taken. However, on considering Section 2(22) (e) of the Act, we are not at all impressed with the aforesaid. If the contention on behalf of the revenue is accepted, in that case, it will be creating the third category / ....