TaxTMI 
TaxTMI 
TaxTMI 
2024 (9) TMI 783
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.... Act to the extent of accumulated profits in the companies at the time of advancement of loans to the assessee company. 2. Ld. CIT(A) has deleted the addition made in the hands of the assessee, ignoring the fact that Sh. Uday Karan Singh Dalal is a common share holder in both the entities i.e. the present assessee and the entities which are extending the loans therefore the conditions specified in section 2(22) (e) are satisfied and the alleged loans are nothing but the deemed dividend. 3. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,80,75,939/- as deemed interest u/s 56(1) of the Act. 4. Whether in the facts and circumstances of the case, the Ld. CI....
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...., as per the assessee, the chargeability of the deemed dividend is not on the assessee company but on the common share holder of the lending and recipient companies i.e. Shri Udai Karan Singh Dalal. The assessee submitted that the decision of Hon'ble High Court of Delhi in the case CIT vs. Ankitech (P) Ltd. is squarely applicable in its case, therefore, the Assessing Officer was legally incorrect to assess the loans and advances received by the assessee company in the hands of the assessee company. The assessee further submitted that the CBDT Circular No.495 dated 22.09.1987 which was relied upon by the Assessing Officer in the Assessment Order has been considered by Hon'ble High Court of Delhi in the case of CIT vs. Ankitech (P) Ltd. refer....
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....e 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, that has not happened. Most of the arguments of the learned counsels for the Revenue would stand answered, once we look into the matter from this perspective. 26. In a case like this, the recipient would b....
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....e deeming provision to be extended which is illogical and attempt is to create a real legal fiction, which is not created by the Legislature. We say at the cost of repetition that the definition of shareholder is not enlarged by any fiction. 30. Before we part with, some comments are to be necessarily made by us. As pointed out above, it is not in dispute that the conditions stipulated in Section 2(22)(e) of the Act treating the loan and advance as deemed dividend are established in these cases. Therefore, it would always be open to the Revenue to take corrective measure by treating this dividend income at the hands of the shareholders and tax them accordingly. As otherwise, it would amount to escapement of income at the hands of those sh....
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....the assessee and considering the legal position that dividend is to be received by shareholder only, the amount received by the assessee is not to be treated as deemed dividend in the hands of assessee. Moreover, this view is fully supported by decision of the Hon'ble Delhi High Court in case of Ankitech (P) Ltd. (supra)." 9. In the instant case, it is observed that the assessee company is not a share holder in the companies which have extended loan to it. Shri Udai Karan Singh Dalai is the common share holder having substantial interest in the assessee company as well as in the loan giving companies. 10. In view of the facts of the case and judgments of Jurisdictional High Court and Tribunal, we find that the deemed dividend is not taxab....