2017 (12) TMI 864

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....(22)(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern, in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any....

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....- to the assessee-Company. The Assessing Officer rejected the contention of both the assessees that there could be no taxation of the said amounts deeming it to be a dividend at the hands of the assessee, since the assessee is not the shareholder of the other Company. 3. The dividend could be taxed only in the hands of the shareholder, was the contention raised; which was rejected by the Assessing Officer. On appeal, the same was reversed finding favour with the contention raised by the assessee. The Tribunal also confirmed the finding in the two separate appeals by the Revenue. In I.T.A.No.258 of 2015, there was also a finding that John George Nechupadom did not have any substantial interest at the time of advancing the amounts. The Rev....

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....ation was considered insofar as the concern in which the shareholder had substantial interest was a partnership firm. The partnership firm was assessed and the objection taken was that the shares were purchased in the name of the partners and hence the firm, though the beneficial owner, was not the shareholder. Assessment could be made, according to the assessee under Section 2(22)(e) only if the shareholder was also the beneficial owner of shares. The Court held that a partnership having no independent existence as distinguished from its partners, the shares could be purchased in the name of the firm and the firm would be the beneficial owner; thus frustrating the very object of the provision in the case of partnerships. Relying on K.P. Va....