TaxTMI 
TaxTMI 
2025 (8) TMI 1100
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....ed the following grounds of appeal: "1. The Ld. CIT (A), NFAC, Delhi, erred in law and on facts in upholding an addition of Rs. 25,58,638/- made by the Assessing Officer under section 2(22)(e) of the I. T. Act, 1961, as deemed dividend in the hands of the Appellant wrongly invoking clause (b) of Explanation 3 to section 2(22)(e) of the I. T. Act which is not applicable in the Appellant's case. 2. The Ld. CIT (A) erred in law and on facts in ignoring the fact that all the loans received by the Appellant from Saraf Yarn Pvt. Ltd. were only when the shareholding of the Appellant in the said company was below 10% of the Total Shareholding i.e. below the threshold limit prescribed to attract the provisions of section 2(22)(....
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....d the loan amount of Rs. 25,58,638/- as deemed dividend under section 2(22)(e) of the Act. The relevant portion of the AO are extracted as below: "The share holding pattern is changed to 9% during the financial year 2012-13 The submission was duly considered but not found acceptable because it is seen that assessee's shareholding in the company is reduced to 9% from 22% during the F.Y 2012-13. However, as per explanation 3 of clause (b) of section 2(22)(c) 'A person shall be deemed to have a substantial interest in a concern, other than a company, If he is, at any time during the previous year, beneficially entitled to not less than twenty percent of the income of such concern.' Since the share holding of the a....
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....by the AO. 4. The ld. AR submitted that in assessee's case as per clause (b) of explanation-3 to section 2(22) cannot be applied since the said explanation is applicable only to concerns not being companies. The ld. AR further submitted that the AO has applied the said explanation to test the shareholding of the assessee at any time during the financial year relevant to the AY and said application is incorrect for the reason that M/s Saraf Yarn Pvt. Ltd. is a company. The ld. AR took the bench through the facts pertaining to the shareholding of the assessee wherein the assessee was holding 22.06% of the shares as a Financial Year 2011-12 has transferred 7,25,000 shares as on 01.05.2012 (page no. 38 & 39 of PB) during FY 2012-13 which....
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....al benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; Explanation 3.-For the purposes of this clause,- (a) "concern" means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company ; (b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern." 7. From the above provisions it is clear that when any loan or advances is extended to the shareholder having beneficial ownership of more than 10% then the same shall be deemed as dividend income ....