TaxTMI 
TaxTMI 
2022 (6) TMI 799
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....year 2000-01 u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter the 'Act') vide order ated 28.02.2005. 2. The first issue in this appeal of assessee remains for adjudication is the ground raised regarding addition made by AO on deemed dividend by invoking the provisions of section 2(22)(e) of the Act. For this, assessee has raised the following grounds :- i. The L'd CIT(A) erred in holding that the provisions of section 2(22)(e) of the Income Tax Act, 1961 are applicable to the sum of money received by the Appellant from the M.Ct.M Corporation Private Limited. ii. The L'd CIT(A) failed to appreciate that none of the shareholders who beneficially hold more than 10% of the shares carrying voting rights....
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....sessee company as per the provisions of section 2(22)(e) of the Act. The assessee during the course of assessment proceedings stated that the provisions of section 2(22)(e) of the Act would not apply to loan amount of Rs.71 lakhs received from M.Ct.M Corporation P Ltd, as none of the shareholders who beneficially hold substantial interest holds also more than 10% in the lending company i.e., M.Ct.M Corporation P Ltd. The assessee filed complete details before AO in support of the claim of the shareholders who hold more than 10% beneficial interest in the lending company do not beneficially hold substantial interest and since none of the shareholders who own more than 10% beneficial interest in the lending company holds substantial interest ....
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....e loan received by the assessee company of Rs.71,00,000/- is held as deemed dividend u/s. 2(22)(e) of the Act. The action of the AO on this issue is therefore confirmed and the ground of appeal on this issue is dismissed. Aggrieved, assessee came in appeal before the Tribunal. 5. Before us, the ld.counsel argued that none of the shareholders who beneficially hold more than 10% of the shares carrying voting rights in lending company beneficially hold more than 20% of shares carrying voting rights in the assessee company. The ld.counsel stated that both the sections 2(22)(e) & 2(32) of the Act uses the beneficial ownership tests only. None of the shareholders who beneficially hold more than 10% shares carrying voting rights in the lendi....
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....of the Act at the hands of the concern. According to Hon'ble High Court any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to non-members. The second category specified under Section 2(22)(e) of the Act, viz., a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of deeming shareholder‖, then the Legislature would have inserted deeming provision in respect of shareholder as well, ....
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....w that this issue is covered by the decision of Hon'ble Supreme Court wherein it is held that as per provisions of section 2(22)(e) of the Act, the concern like the assessee which has received loan from M.Ct.M Corporation P Ltd., which is giving loan or advance is not a shareholder or member of the receiver company. Therefore, under no circumstances the assessee could be treated as shareholder, member receiving dividend. Hence, the assessment of this loan received by assessee cannot be treated as deemed dividend u/s.2(22)(e) of the Act. Hence, we delete the addition and allow this issue of assessee's appeal. 7. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in disallowing VRS pa....