TaxTMI 
TaxTMI 
2021 (1) TMI 460
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....ts appeal: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 13,97,50,223/- made u/s 2(22|(e) of the I.T.' Act ignoring the fact that the minor legally cannot enter into contract with the companies for purchase of shares and hence shares held by minor, who is not having voting rights cannot be treated as beneficial owner of shares. 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 13,97,50,223/- made u/s 2(22)(e) of the IT Act in the case of the assessee ignoring the fact that the minor's income is being assessed in the hands of guardian father and minor son has no independent source of income, and the alleged shares acquired by minor on behalf of guardian is a colourable device used by the father of minor. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 13,97,50,223/- made u/s 2(22)(e) of the IT Act in the case of the assessee ignoring the fact that the voting right in respect of shares held in the name of minor children is exercis....
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....on Private Limited and Veritas Pharma Private Limited. A search action under section 132 was carried out at the premises of assessee on 18th June 2013. Consequent upon a notice under section 153A was served upon the assessee vide notice dated 16th December 2013. In response to notice under section 153A, the assessee filed his return of income for impugned assessment year on 3rd September 2014 declaring return income of Rs. 86,28,400/-. During the assessment, the assessing officer on perusal of books of accounts and documents found in search took his view that assessee's group company Vapi Care Pharma Private Limited, had given loans to sister concern Veritas Biovention Private Limited and Veritas Pharma Private Limited. The assessee was having of stake of more than the prescribed limit in all three entities. On the basis of aforesaid observation, the assessing officer took further his view that the provisions of section 2(22)e is attracted on the transaction of loan. The assessing officer issued show cause notice to the assessee as to why such loan be not treated as deemed dividend. In reply to the show cause notice, the assessee submitted that loan given as a interoperate deposit ....
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....act that inter-corporate deposits given by Vapi Care Pharma Private Limited were out of its surplus funds available with it. And that the provision of section 2(22)(e) read with section 2(32) of the Act in case of Vapi Care two conditions should be satisfied simultaneously. The learned Commissioner (Appeals) after considering the facts of the case and considering the submissions of assessee deleted the additions under section 2(22)(e) by holding that the shareholding of assessee, as father and his minor cannot be added for the purpose of section 2(22(e) read with section 2(32) of the Act. None of the shareholders holding more than 10% of voting power in Vapi Care had more than 20% shares in Varieties Pharma and /or in Veritas Biovention. The source of shareholding of Master Yes Shah is independent and he is entitled to the benefit of ownership. The assessee does not have any beneficial interest in the Shares held by Minor son Master Yes Shah. The learned Commissioner (Appeals) also held that the issue for consideration was whether the share held on behalf of Minor child, who could not exercise voting power, should be excluded from the total share holding for ascertaining whether as....
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....on 2(22)(e), makes it clear that any payment by company by way of loans and advances to a shareholder, holding not less than 10% of voting power, or to any concern in which such shareholder is a member /partner and having substantial interest or any payment by any such company, to the extent of that company possesses accommodated profit, the provision of section 2(22)(e) is attracted. In this case, all those condition are fulfilled and the action of assessing officer in making the addition on account of deemed dividend in case of assessee was justified and the decision of learned Commissioner (Appeals) to delete the addition on relying of judicial decision, the ratio of which is not applicable, is not acceptable, especially in view of the fact that Minor son legally cannot enter into contract with the company for purchase of share and the father of minor has entered to contract with the company as guardian and the assessee is the beneficial owner of the alleged share being the legal and beneficial owner of the said share. It was further submitted that income of minor is clubbed with the parent while assessing income of the father and since son is minor and does not have any more vo....
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.... Shah, mother and natural guardian of Master Yes Shah on 12th October 2010, payment of which was made by cheques drawn on Axis Bank account of Minor Yash Shah and thereafter on 17th October 2010 i.e. in year 2010-11 and Minor Yash Kamal Shah was allotted equity share of Veritas Biovention. On the basis of aforesaid submission, the learned AR of the assessee submits that during the year under consideration, the assessee was not having more than 10% or 20% shareholding in Vapi Care Pharma and therefore, the provision of section 2(22(e) read with section 2(32) is not applicable. The provision of section 2(22(e) are deeming provision which must be construed strictly. 10. An alternative and without prejudice submission the learned AR for the assessee submits that the deposit of Vapi Care Pharma with Veritas Pharma and Veritas Biovention, the intercorporate deposits, cannot be treated as deemed dividend as held by Bombay Tribunal in Bombay Oil Industries Versus DCIT in ITA No. 2895 /Mum/2005, IFB Agro Industries Ltd versus ACIT in ITA No.1721 /Kol/2012 dated 12th March 2013. 11. In third alternative argument the learned AR for the assessee submits that additions made in the unabate....
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....estion whether the assessee has substantial interest in the company, from the total number of shares issued by the company. The ld Commissioner (Appeals) also relied on the following decisions; • CIT Vs C.P. Sarathy Mudaliar (1986) 83 ITR 170 SC, • Minnie R. Cama Vs ITO (1986) 17 ITD 139 (Ahd-Trib), • ITO Vs S.S. Barodawala (1983) 4 ITD 186 (Bom), • ACIT Vs Sanjay Mehra (2005) 149 Taxman 40 (Amritsar) 14. The Hon'ble Apex Court in CIT Vs C.P. Sarathy Mudaliar (supra) while considering the (corresponding section 2(6A)(e) of Indian Income tax Act 1922) held that the section speaks of "shareholder", it refers to the registered shareholder and not to the beneficial owner. 15. The coordinate bench of Ahmedabad Tribunal in Minnie Cama Vs ITO (supra) held that it is well settled that a deeming provision like section 2(22)(e) must be strictly construed. For determination of question as to whether the assessee had substantial interest in company, shares held by trust in which assessee was trustee, or held in joint names or held in name of minor children of the assessee could not be considered as shares held by the assessee. If so con....