2011 (11) TMI 829

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....ess of manufacturing of modified sugar boiled candy and modified toffee. In its return the assessee showed loss of ₹ 1,92,07,679/-. The case was selected for scrutiny by issuing notice u/s 143(2) of the Act and assessment u/s 143(3) of the Act was completed on 31.12.2008 determining total income at nil after allowing set off of brought forward unabsorbed depreciation of earlier years. The Assessing Officer noted that the assessee company had taken unsecured loans from the following sister concerns :- i. Makson Health care P. Ltd. ₹ 66,87,858/- ii. Makson Ind.P. Ltd. ₹ 41.09,329 iii. Makpar Exports P.Ltd. ₹ 17,05,500 ₹ 1,25,02,687 The Assessing Officer treated the above amounts as deemed dividend in ....

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....ders of the authorities below. Special Bench of the tri in the case of Bhaumik Colour Lab (supra) after considering the issue at length held that the provisions of Section 2(22)(e) of the Act can be attracted only when the assessee company is registered and beneficial owner of shares in the lender company. Furthermore, in the case of CIT Vs. Indian Technocraft Ltd., ITA NO. 352 of 2011 order dated 11th May, 2011 the Hon'ble Delhi High Court by considering the decisions of C.P.Sarathy Mudaliar 1972) 83 ITR 170 and Rameshwarlal Sanwarmal Vs. CIT (1980) 122 ITR 1 (SC) held as under:- Page 46 para 22 " It is thus clear from the aforesaid pronouncement of the Hon'ble Supreme Court that to attract the first limb of the provisions of Section 2....

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....d shareholder. These provisions also do not substitute the aforesaid requirement to a requirement of merely holding a beneficial interest in the shares without being a registered holder of shares. The expression 'being" is a present participle. A participle is a word which is partly a verb and partly an adjective. In Section 2(22) (e), the present participle " being " is used to described the noun 'shareholder' like an adjective. The expression "being a person who is the beneficial owner of shares" is therefore a further requirement before a shareholder can be said to fall within the parameters of Section 2 (22) (e) of the Act. In the 1961 Act, Section has also to be beneficial owner of shares (not being shares entitled to a fixed rate of d....